One of my Saturday morning rituals is to sync the iPod with the podcasts that have been captured over night, and the first podcast I listen to each Saturday morning is WNYC‘s On the Media.
Today I heard a story on a group of newspaper executives that are banding together to make the case that the newspaper industry is not suffering as much as some of us might believe from the coverage of this industry in the media in something called the Newspaper Project. Commentary by Philadelphia Inquirer publisher Brian Tierne makes a strong case for the value and potential of historically-printed journalism to make the transition to digital platforms. The real take-away for me as a CI guy was Tierney sharing this anecdote (not a direct quote from a transcript but written from my memory):
Somebody asked Lorne Michaels recently what was the competition to “Saturday Night Live” and he said “Guitar Hero.”
This highlights a case I try to make very forcefully when I speak to business people and CI professionals, with varying degree of success. That fundamental truth is that your competition is any entity that can deliver the same fundamental value to the customer that you do.
On the surface this sounds obvious. Most executives and even CI professionals I speak to still operate under the assumption that their competitors look like themselves. If we’re a capital-intensive, massively scaled, publicly-traded company then all of our competitors will also be capital-intensive, massively-scaled, publicly-traded companies. They’ll deliver value using the same technology and processes we use to deliver value. They will extract revenue from their customers the same way we extract value. The only questions for competitive strategy are “How do we compare in terms of technology features to their offering?” and “What is our price position?”
I have seen this mindset up-close. Several years ago I told a product manager at a capital-intensive, massively-scaled, publicly traded company that he needed to watch out for disruption to his pricing power from a rising band of capital-light (software-based), exponentially-scalable (peer-to-peer network effect and viral marketing), venture-funded start-up. ”Hell, we don’t need to worry about them,” he drawled. ”We deliver an enterprise-grade service with high levels of availability and quality they’ll never be able to meet.” That competitor now delivers a much higher-quality product that is feature-rich and benefits from considerable network effects that have enabled its platform to achieve massive scale. Did I mention it’s much, much cheaper than the “enterprise-grade” solution that now pales by comparison in terms of features and quality?
Your unseen competitor might be a private company funded by angel or venture capital– or even a bootstrapped entrepreneur. It could be a non-profit or an open source provider. Your competitor could be your customer deciding they can deliver the value they get from you themselves. Your latent competition could be other necessities that are higher-priority for customers’ in these difficult economic times. Executives and CI professionals need to expand their concept of “competition” if they are going to maintain or grow revenues and profits.
Jeff Jarvis has a new book out called What Would Google Do. I have not had the pleasure of reading this book yet (it’s on my Audible wish list). The premise is very intriguing: think of the Google model for disruption and innovation and ask yourself “If Google was going to enter my industry, what innovation would they use to disrupt the existing business model?”
- How would Google use IT to leverage customer activity such as search or service inquiries to actually generate value and create a self-reinforcing process?
- Is there a way Google could give away your product or service and generate revenue from advertising or some other revenue model?
- What sort of “ecosystem” would Google create by opening up parts of the business process to partners, customers and even potential competitors in a way that captures value of everyone’s efforts for Google and its customers?
These are just three examples off the top of my head. As I look at any number of industries I see ways to “Google-fy” their business. I also see the potential inside of companies to apply the same models to business processes to achieve greater efficiency and improve employees’ ability to do their jobs.
We’ve been able to become very complacent in recent decades, and there is a lot of waste and fat in our operations. Customers have been accepting of higher-cost enterprise-grade solutions that today pale in comparison to low-cost “prosumer” offerings. They’re going to demand pricing in line with their real needs or turn to disruptive providers. Companies are struggling to cut costs and are laying off employees and will need to find ways to make their remaining employees sufficiently productive. To do these things more companies should think like Google and other scary disruptive competitors and be ready to disrupt themselves.
The economic environment is going to force a change in the DNA of how successful businesses think, and it’s not going to be an option of executives to wait out the recession for a return to the equilibrium with which we have become so comfortable. These times call for bold, disruptive action if companies are going to come out the other side of the recession prepared for growth.
