Friday, March 5, 2010

The Competition Isn’t Who You Think It Is

Every industry has a tendency to become insular, with each company obsessing over the tactics of its category competitors. However, too much time staring inward tends to blind people. They start believing the dogma and worshiping the sacred cows, which leads to groupthink. Categories become more and more myopic. The competitors become more and more alike. And they all become more vulnerable.

For all of the energy expended wrestling for leadership within a category, it is usually an outsider who reinvents it. Honda moved into outboard motors with ease. Target jumped into grocery with minimal effort. Apple made a splash when it introduced the iPhone. And now Google wants to enter the telecommunications fray. None of them had category experience, yet all of them have left/will leave indelible marks on the categories they entered.

An internal point of view has two limitations. First, those with an internal focus tend to place a higher value on executional competencies, like making a phone, than on intangible competencies, like inventiveness. External threats reverse the priority. By definition, “outsiders” lack the executional competencies of the category. So, it’s an outsider’s intangible competencies that enable it to enter new markets. (Understanding Competency—a future post.) Second, those with an internal focus tend to value experience over objectivity. They hire from within the industry and select partners with category experience. The result: an increasingly limited point of view. It’s an outsider’s objectivity that enables it to reinvent categories.

Intangible competencies can trump executional competencies. Objectivity can cure stagnancy and uncover opportunity. Navel-gazing produces lint. So while you’re busy plotting against the competitors in your category, be advised to keep an eye on the periphery. A bully from another playground may be coming to eat your lunch.