Insights | By Howard Tiersky

How to Beat Your Digital Competition

Digital is the new competitive battleground and your competitors want to kill you; so you had better pay attention! 

It's essential to aggressively track what other companies are doing in order to be sure your strategy is optimized to win in both the current and the next wave of digital evolution. In our work at FROM with the Fortune 1000, we find that digital competitive intelligence is often limited in scope or frequency in a way that doesn’t set teams up to win. In this article we will look at the first and most foundational step in setting up an effective system for tracking the competitive landscape-- identifying your competitors.

Many companies think it's obvious who their competitors are. If you feel that way you need to look deeper. What do we mean by a competitor? We define a competitor as anyone who is selling a product or service, the success of which will reduce your business. While this includes of course the hot dog stand across the street from your burrito stand, it includes other scenarios as well. Here's a useful competitor analysis model to expand thinking-- consider three tiers of competitors.

Tier 1: Your Direct Competitors

Direct competitors are the most obvious.  They are the companies who are battling  to fill the same customer need as you are, and they are doing so in more or less the same way. Dominos vs Pizza Hut. Coke vs Pepsi. Chase vs Citibank.   And of course most companies have more than one major direct competitor. Chase also has Wells Fargo, Amex, PNC, etc.  Since these competitors are often selling something mighty similar to what you are selling, most are working right now to figure out how to differentiate by better serving their customers (and your customers) via digital channels to give them a superior experience, lock them in and eat your lunch.

What to do? You need a structured program in place to maintain constant awareness of their digital competitive moves-- new features in their apps, usability changes to their web sites, new social strategies. In addition, at any given time there may be smaller digital competitors who may not be impacting your sales in a substantial way due to their size, but who may be using that smaller size to be more nimble and implement innovative ideas faster. Pay more attention to these companies than their size might seem to justify because they may be the incubator of the next great idea and you want to jump on that before your larger competitors do.

Tier 2: Disruptive Competitors

Disruptive digital competitors are focused on solving the same problem you are solving for customers, but potentially doing it in a very different way. AirBnB is competing with Marriott, but not in the same way that Hyatt is. Uber is competing in a different way with traditional taxi and limo companies but they are also competing with car rental companies;  studies show more and more business travellers are using Uber rather than renting cars. When eMail started to become prominent it was major competition  both for Fedex and also for companies making fax machines. Digital cameras decimated the film camera market,  and then phones with cameras substantially diminished the digital camera market. DVDs disrupted movie theater business, and now streaming media has disrupted the DVD business. Kids are now spending a lot more time on their mobile devices playing games and socializing and that has impacted  the physical toy market.

Large companies often initially dismiss new disruptive competitors because they feel their customers are "looking for" the familiar solutions.  While it is true that it often takes some time before consumers adapt to new ways to solve old problems, they do adapt.  It’s important for companies to have a competitive analysis model so they may pay more attention to those completely new ways of solving old problems that come to market, often enabled by digital.

What to do: Start by getting really clear on what problem or problems you are solving as a business--- not what "services" you provide.  Fedex wasn’t in the "transporting pieces of paper" business; it was  in the "fast delivery of business documents and correspondence" business.   When looked at in that way,   it becomes more obvious that eMail is solving the same problem, albeit without airplanes.  Once clear on the underlying problem you are solving it is far easier to look out to the market to see who is innovating in that space and to  start tracking them.  Since these companies may not see you as a direct competitor, you may be able to gain valuable insight directly from them and potentially even embark on partnerships.

Tier 3: Need Obliterators

Tier 1 competitors solve the same problem that you do in more or less the same way. Tier 2 competitors solve the same problem you do but in a very different (often innovative) way.  Tier 3 competitors make the problem you are solving irrelevant or less necessary, at least to a segment of customers.

The Kindle is not solving the same problem as a bookcase (it’s an eBook, not an eBookcase!). But bookcase sales have decreased since ebook sales have skyrocketed. Similarly, over time, the increase in digital textbooks will probably impact the sale of backpacks.  Social media tools like LinkedIn have caused conference attendance to drop. Skype and similar technologies disruptively compete with teleconferencing systems while also reducing  the need for travel services for face-to-face meetings. As digital payments disrupt the physical credit card and we can prove our identity via microchips rather than a driver’s license, will men still need to carry a wallet?

What to do? All businesses must fill a need. If the need you fill is going away, you need to find a new need to fill.

Digital not only destroys needs; it  creates new ones. The massive industry for mobile phone cases is a good example. Apparel companies are starting to create clothing that are specifically designed to accommodate wires or even that charge mobile devices.  The first step is to maintain awareness of new innovations or customer trends in areas that might not seem competitive but that threaten to obliterate a need your product or service fills.  It’s usually impossible to stop waves of innovation so you may not be able to "compete" with this force,  but you can at least use the early warning time to figure out how to pivot.

In summary, there are many steps to effectively beating your digital competition, but the first is to identify whose competitive activity you need to maintain an awareness of, put a structured competitive analysis program in place to monitor the marketplace,  and to socialize the insights with the key people within your enterprise so that they can take appropriate action.

Contributors to this article include Sam Kang, Heidi Wisbach, Michael Moore, and Dan Willig

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