As the recession has deepened, most businesses have been keeping an ever closer eye on their competition. And understandably so: it can be a cutthroat environment, when fierce competitive moves like the willingness to substantially cut prices—all the countervailing expert advice notwithstanding—can send a company reeling with the loss of major customers.
There are, however, more intelligent, and ultimately, more successful approaches than wild price cutting. Some of them include the following recent recommendations: (And since company blogs are one of the hottest things around, they all come from the blogs of leading business publications.)
• Fast Company blog, April 2009: “The Outthinker: Mavericks That Out Innovate the Competition” by Kaihan
…innovative companies are not innovative just in the area of their products and services, but they are innovative in everything they do!Build a culture of innovation….You don’t have to limit your innovative thinking to cool new products and services. You know, the stuff the media seems to exclusively focus on when they discuss “innovation.” Instead, ask yourself the questions below to see if you can build a better tool kit for yourself and your business.
1. What is in MY tool kit?
2. What stories or patterns have I identified within my industry or business?
3. What examples of innovative behavior can I share with my company?
4. How can I unlock new patterns for myself and my employees?
• Harvard Business Review blog, March 2009: “Why Small Companies Will Win In This Economy” by Peter Bregman
We simply don’t trust companies anymore. We trust people. And in big companies, it’s transferred to another menu whose options have changed.
That gives small companies a huge advantage.
Small companies with low overhead, reliable owners, a small number of committed employees, personal client relationships, and sustainable business models that drive a reasonable profit are the great opportunity of our time.
Small is the new big. Sustainable is the new growth. Trust is the new competitive advantage.
• “Freakonomics” blog in The New York Times, March 2008: “Using the Minimum Wage to Beat the Competition” by Daniel Hamermesh
Germany is considering a new government-imposed minimum wage — a price floor in the labor market — to apply to postal carriers and related workers.
One of the major proponents of the plan has been one of Germany’s biggest employers — its privatized postal service, Deutsche Post.
One might wonder why a big employer is pushing a plan that might raise its average variable cost. The reason is that the German Post, which is a high-wage employer, faces increasing competition from lower-cost carriers. If the minimum wage is imposed, it will not raise Deutsche Post’s average variable cost by much, since most of its workers already make more than the proposed minimum wage; but it will raise its competitors’ costs.
That will give Deutsche Post an advantage over its competitors — or at least reduce its disadvantage. It will be able to compete more successfully against its formerly lower-cost competitors.
Deutsche Post is thus proposing to help workers — and help itself!
• Financial Times blog, March 2009: “Upwardly mobile—Huawei” by Kathrin Hille and Andrew Parker
(Chinese telecom hardware maker Huawei) has made…speed and flexibility the backbone of a strategy that has helped distinguish it from its rivals…. Notably for a Chinese company, 75 per cent of Huawei’s revenue comes from overseas. It has achieved this by being both low-cost and nimble, and by successfully melding its natural cost advantages with advanced management techniques…. a culture of perseverance…is deeply rooted in the company. High performance/price ratio products and highly efficient services are Huawei’s primary advantages. These have also become the primary competitive weapons in Huawei’s international strategy
Alternatively, another innovative path toward beating the competition is simply to go where they’re not: Blue Ocean Strategy, by W. Chan Kim and Renee Mauborgne, was published in 2005, and in the short time since has become one of the most influential business books in the world, with translations into 41 languages.
The basic idea driving Blue Ocean Strategy is to leave the red ocean of competition behind, and to create a new, blue ocean, thereby making the competition irrelevant. And it is not merely an idea or theory, but covers both strategy formulation and strategy execution through a comprehensive set of methodologies and tools designed to create new market space.
The ideas and work are based on the simultaneous pursuit of differentiation and low cost, built on Blue Ocean Strategy’s three key conceptual building blocks:
• value innovation
• tipping point leadership
• fair process
Perhaps Blue Ocean Strategy could make a major difference for your company.