Strategy Planning

During this course, you'll learn some concepts that will help you scope a case and complete the "Strategy Planning" Phase.

How to think about competitors

Do You Know Your Competitors? The Cat in the Hat Knows A Lot About That!

Do You Know Your Competition? The Cat In The Hat Knows A Lot About That!

April 1, 2015in GeneralThing 1 and Thing 2

Who are your competitors? It’s not as simple as it sounds. How you answer the question can be the difference between a successful or a failed growth strategy.

 

There are a couple tricks to preventing this fatal strategic oversight. As someone with small children, I spend many nights reading Dr. Seuss. So, in the spirit of The Cat in the Hat, here are a couple of things to consider.

“I know some new tricks,” said the Cat in the Hat. “A lot of good tricks. I will show them to you… You will see something new. Two things. And I call them Thing One and Thing Two.”
– Dr. Seuss (1957)

Thing One: Your competitors might not be obvious.
There are likely multiple answers to the question “Who are your competitors?” Why? Well, competition exists at different levels. Which competitors are most relevant depends on the occasion in which the customer is purchasing or using your product.

Thing Two: Your customer decides who your competition is, not you.
You can do your best to influence your customer’s frame of reference, but ultimately she decides what your offering is good for and how it compares to everything else in her life. And it’s the customer’s frame of reference, not our own, which influences buying behavior and thus our financial success.

Just as the Cat in The Hat opens his “FUN-IN-A-BOX” to entertain on a rainy day, digging into customer insights can shine light on competition from your customer’s viewpoint. Recently, I’ve witnessed three Vennli clients surprised by customer insights related to their competition.

Example 1: Healthcare electronic diagnostic tool

A company developed a comprehensive electronic tool to help diagnose a particular set of conditions. The developers were confident there was nothing on the market quite like it – that it marked the beginning of a new category. The primary competitor was thought to be traditional pen and paper-based diagnostic methods.

However, when we surveyed physicians and practice managers, we found that the vast majority was aware of alternative electronic tools, and almost all respondents said that they were planning to use one. Digging deeper, we uncovered that several large technology platforms had a less comprehensive tool available. Therefore, in the eyes of their customers, this company’s product had many direct electronic competitors. Instead of focusing their attention on converting physicians from pen and paper methods, the company needs to understand its unique position relative to other electronic tools that come bundled with a practice’s existing technology platform.

Lesson learned: It can be tempting to believe that our product or service is truly unique. Sometimes we may be blissfully unaware of alternatives similar to ours. Talking with customers and prospects can quickly clear up our misconceptions.

Two questions I recommend asking are: “How would you define [product category]?” and then follow-up with, “What would you do if [your product] was not available?”

For example, “How would you define mobile wallet? What would you do if Apple Pay were not available?”

Example 2: Industrial packaging product

An industrial packaging market leader was concerned about the erosion of market share from smaller, aggressively priced competitors. They came to Vennli seeking to differentiate and restore profit margins.

However, the market for the product category is projected to shrink. This was confirmed by surveying customers, many of whom indicated that their demand for alternative packaging was increasing due to several perceived benefits.

Therefore, a two-pronged strategy is needed to address competition within and across the product category. Perceived benefits of the new packaging alternatives can be addressed through messaging efforts to customers. Changes to their product portfolio should also be considered in order to take advantage of growth in new alternatives.

Lesson learned: We can get so embroiled in the day-to-day battle with our direct competitors that we forget to look to the horizon. If the size of your market is stagnant or falling, you have a much bigger problem than winning market share, especially if you are the market leader.

When speaking with customers, I recommend leading with “What would you do if [your product] was not available?” Then, follow up with, “What are alternatives outside of this that could fulfill your business need?”

Example 3: For-profit private university
A for-profit university just opened a campus in a new location. They offer a degree program in a high-demand specialty. The market is crowded with other local for-profit universities, non-profit private universities, and public universities offering similar degree programs.

The university expected that it would have strong competition particularly from one popular for-profit university. While this was confirmed, it was surprising to learn that their current students did not commonly consider other for-profit universities in the area.

Of students who considered the for-profit program, it was surprising to learn how many students chose the local public university. This was contrary to some preconceptions about the target market of the for-profit university. It was also surprising to learn just how strong of competitors the large non-profit private universities were to this new for-profit university.

Lesson learned: We tend to buddy up in highly diversified markets. We identify the organizations most like ourselves (for-profit universities in this example), and we assume they must be our fiercest competitors. Even our most loyal customers may have a more liberal view of their alternatives in the market than we do.

Uncovering this information is as simple as asking customers or prospects, “What other alternatives did you consider?” or “What other alternatives have you chosen in the past?”

Top-line growth depends on customers choosing our offering over competing alternatives. Therefore, it’s vital that we understand which alternatives they consider. Those alternatives may not be limited to direct competitors, so it’s worth talking to your customers. You may learn something new.

“Have no fear, little fish,” said the Cat in the Hat. “These Things are good Things… And so, I will show you another good trick that I know!” – Dr. Seuss (1957)

Watch for a coming blog post on how to think about different levels of competition.

Bart Frischknecht, PhD

 

VP, Research, Customer Success and Strategy, Vennli 

Bart is passionate about using data and an understanding of customer choice to drive strategic decision making. At Vennli, Bart leads initiatives related to the customer experience. Prior to joining Vennli Bart was a Senior Research Fellow in the business school at the University of Technology, Sydney. There, he led projects that identified strategic growth opportunities, described a firm's competitive position, forecasted product demand, or combined engineering and market research for new product development.

Bart received his PhD and MS from the University of Michigan where he specialized in combined engineering and marketing design optimization. His BS in Mechanical Engineering is from Brigham Young University. During his career, he has worked at Johnson Controls, Happijac, Lockheed Martin, and the Compliant Mechanisms Research Lab at Brigham Young University.

Quiz: Do You Know Your Competitors?

What are two things you need to keep in mind when thinking about your competitors?

One of These Things Is Not Like the Other

One of These Things is Not Like the Other: 3 Steps to Recognizing Your Competition

June 2, 2015in General
Against The Current

As a kid, I loved Sesame Street – especially a game called, “One of these things.” The audience was invited to identify which of the objects in the set of four that was “not like the others.” Sometimes the objects were shapes; other times they were children doing different activities. Either way, the goal was the same— determine which were similar and the one that was different.

 

The answers on Sesame Street are always straightforward. As an adult, I sometimes find myself facing a similar challenge but with greater complexity. At Vennli, I often assist our clients in identifying their relevant competition in the marketplace. This is trickier than it sounds. If we don’t have the right level of focus, it’s easy to end up with a mixed up competitive set. Cracking this challenge ultimately leads to more actionable customer insights and better growth.

At Vennli, we break down a business’s growth strategy into narrowly defined “growth challenges” that focus on a specific customer making a choice between the company’s offering and competing alternatives. Growth depends on our customers choosing us rather than someone (or something) else. But which competition is relevant when we’re crafting our strategy?

To answer this, we need to understand how customers make choices. There are different levels of customer choices – from the brand she buys to the way she uses the product. First, we need to identify the specific choice being made, and then we need to identify the alternatives from the customers’ point of view. (My recent post discussed how the most relevant competitor preventing you from reaching your growth goal might not be obvious. Ultimately, it’s your customer who decides your competition, not you.)

For example, let’s pretend you’re a fat bike manufacturer. Who are your competitors? Clearly, other fat bike manufacturers are competitors. But wait, the fat bike is a relatively new bicycle category. (Raise your hand if you just Googled “fat bike!”) Not everyone is aware of fat bikes. There are probably few people actively in the market for a new fat bike. You would do better to focus more on growing the fat bike market as a whole than beating up on your nearest fat-bike-manufacturer neighbor.

Where to start? Consider a few customer purchase scenarios:

  • A child is looking for a bike, sees a fat bike at a big box retailer during a shopping trip with her parent and decides that is the bike for her.
  • An outdoor enthusiast sees a fat bike and is struck by the opportunity to add something new to his range of winter activities.
  • A resort town bike shop owner needs to refresh her fleet of rental bicycles. She thinks that more people might rent bikes if they had the opportunity to ride on the beach.
  • A cyclist lives in a cold climate and is disappointed about needing to stop cycling outdoors when winter comes around. He has heard about fat bikes on blogs and forums and is now curious if they could extend his biking season.

Each scenario involves a different type of customer, and, for each customer, potentially a different set of competing alternatives they would consider.

Consider the last scenario, which we can watch play out in the blogosphere:

Big Bikes
Let’s say we’re trying to grow sales of fat bikes by creating more value for cycling enthusiasts in the Northeast (like HcPhil) than other competing alternatives. We need to get inside HcPhil’s head to understand his decision-making. We can build a “choice tree” to represent factors impacting his fat bike purchase:

Choice Tree - Fat Bikes

Our choice tree includes four levels. Each level represents a different way to think about the decision to buy a fat bike.

Making the choice between various fat bike products is at the first level. However, a cyclist may be weighing the benefits of purchasing a new fat bike versus replacing one of his existing bikes within the broader bicycle category – the second level.

On the other hand, our intrepid cyclist may weigh the benefits of winter cycling compared to other alternative activities during the winter months. All choices ladder up to an allocation of resources, usually time or money. A fair weather cyclist may ultimately decide that his recreation dollars are better spent on other budget categories entirely instead of health and fitness.

Now that we have this, we can test it by talking to people like HcPhil. Our conversation should dig into both the level of the choice and the specific alternatives at each level.

After confirming the levels of choice with actual customers, we then need to identify the level at which we will focus our strategy. For example, if we focus at the level of product brand choice we will consider other fat bike brands and focus our efforts on improving our product, price, and distribution network relative to our direct competitors. If we choose to focus on the cyclingcategory, we may focus on building awareness among the cycling community, emphasizing the fat bike’s unique value proposition for winter and sand riding. Or we may find an effective strategy to be “intercepting” potential customers involved in other activities such as visiting the gym or buying home exercise equipment.

Limited time and resources prevent us from addressing all of these choice levels simultaneously. Instead, we need to pick the one we believe will have the greatest influence on achieving our growth goal.

Finally, once we identify the choice level that’s appropriate for our strategy, review the competing alternatives one more time. Does each of the alternatives reside in the same level on the choice tree? Play the game: are they all similar… or is “one of these things not like the other?” If so, remove the competitor that is out of place. An appropriate competitive set is a critical element to framing a growth challenge, obtaining actionable customer insights, and building an effective strategy.

Key takeaways:

  1. Build a choice tree to understand the customers’ decision-making process.
  2. Validate the choice tree by talking with potential customers about how they consider decisions related to your product.
  3. Select a level of choice and appropriate competitive set to build your growth strategy.

(And for all those Sesame Street history buffs out there, check this out for more background on “One of these things.”)

Bart Frischknecht, PhD

 

VP, Research, Customer Success and Strategy, Vennli 

Bart is passionate about using data and an understanding of customer choice to drive strategic decision making. At Vennli, Bart leads initiatives related to the customer experience. Prior to joining Vennli Bart was a Senior Research Fellow in the business school at the University of Technology, Sydney. There, he led projects that identified strategic growth opportunities, described a firm's competitive position, forecasted product demand, or combined engineering and market research for new product development.

Bart received his PhD and MS from the University of Michigan where he specialized in combined engineering and marketing design optimization. His BS in Mechanical Engineering is from Brigham Young University. During his career, he has worked at Johnson Controls, Happijac, Lockheed Martin, and the Compliant Mechanisms Research Lab at Brigham Young University.

Quiz: One of These Things Is Not Like the Other

What are three takeaways from the article you just read?

Types of Competition

  • Product
  • Service
  • Category
  • Activity
  • Budget
  • Bias
Please select the items that represent different ways to think about competition:

Growth Case and Context Statement

Growth Case

Please review the content on our support site about Growth Cases here:

http://support.vennli.com/customer/en/portal/topics/646684-growth-case/articles

Growth Case Quiz

What is a growth case?

Context Statement

Please review the following information about Context Statements:

http://support.vennli.com/customer/portal/topics/646685-context-statement/articles

Context Statement Quiz

What are the three components of a good context statement?