The Competition is Not Who You Think It Is

By: Klaus-Peter Speidel / Michael Bonner

It has become extremely difficult to foresee competition. But this isn’t cause for alarm. It’s now far more important to forge ahead with innovation, allowing a product or service to evolve in new ways, than trying to crush or outsmart perceived competition.

All business people know that they have to compete with someone. Conventional wisdom suggests that a company’s competitor is simply another company in the same business. Toothpaste brands compete with one another, as do car manufacturers, as do airlines, and so on and so forth.  But this is not the full story. In many cases, competition is not a question of services, offers, or functions of a company, but rather the use of the product that is produced.

Companies selling very different products can often find themselves in competition. Whatever you are offering, the portion of people’s time, attention and money you want to capture is now already being spent on something. And, whether they know or not, there are people going after the resources that are now being spent on your products and services. Let me start by taking another look at some recent cases.

Competition for Television

YouTube may well be the greatest competitor with television media nowadays. But what each offers is different:  YouTube is by no means a broadcaster in the traditional sense. Not only is the YouTube “broadcast” totally decentralized, but is also involves a shift from push to pull, which, I believe, is a major reason for its success. Users decide when they want to watch what. They pull the content instantly rather than only receiving a program. Nevertheless, like television, YouTube is a source of visual and auditory information.

So a lot of the spare time people used to spend watching TV is now being spent watching videos on YouTube. But here the news can be made and broadcast by anyone, and here reality television is far more ‘real’ and feels more ‘authentic’ than it could ever be on network television.  A good illustration of this has not only been seen in the Iraq War and the still-developing Arab Spring: traditional news outlets simply can’t keep up with the speed at which thousands of people with cameras in their phones post videos of uprisings and demonstrations. Because of this we can see YouTube (and perhaps also Twitter) as a vehicle by which every single individual can come into competition with established media outlets.

Competition for Record Companies

While video didn’t actually kill the radio star, there is competition for the radio too: Spotify or Deezer compete with more traditional broadcasters over listening time. But conventional wisdom also says that Spotify similarly competes with record companies. In this case, however, the level and kind of competition is surprising.

Record companies continue to produce music at a high standard—at a higher standard perhaps than most independent musicians could ever achieve.

Spotify, however, does not make music, it only makes music available. So the main ground which traditional record companies have ceded is in the realm of distribution.  This may well be a great deal of territory in fact, but it doesn’t mean the end of record companies forever.

Arguably, the Internet has redefined what a record is. As it turns out, a record is completely independent of support.  And it is in the interest of both parties to cooperate to ensure that music recorded at a high standard is readily available.

So record companies would be wise to see Internet distribution as a cheaper and easier alternative to the production of CDs—at least in principle. Record companies, and bands for that matter, might do well to work closely with Spotify to get pricing right.

Similarly, Amazon.com (as a distributor of old-style books) preferred to become its own competitor to being outsmarted by some other Ebook platform. The Kindle was the result of this. As a manufacturer of electronics, Apple went in the opposite direction and became a distributor of media—in fact the largest music distributor in the US—which implicated an important change of perspective.

Competition for Mobility

Similar to Apple’s shift into distribution, Peugeot has recently redefined itself as a mobility company rather than just being an automobile manufacturer. This change allowed Peugeot to come up with Mu, a rental service offering a variety of different vehicles, but which promises to deliver mobility rather than just trying to sell a car. Among other things, this allows Peugeot to compete with car sharing and car rental agencies.

But now there’s even more competition for mobility. Skype now satisfies important portions of grand-parents’ need to see their grand-children grow up without even leaving the house. With the more sophisticated offering of Cisco systems, telepresence becomes a reality and many business trips are now considered unnecessary. In this sense, Skype and Cisco not only compete with Peugeot, but also with airlines.

Given these developments it can seem hard to foresee where competition may come from—some might even say that it’s impossible. This is why many people emphasize forecasting and cross-disciplinary expert-sourcing.

Get there before competitors do

Forecasting aims to predict which trends are likely to continue, which are likely to change, and what innovations are coming down the pipeline. Part of this discipline seeks a systematic and pattern-based understanding of past and present, and to determine the likelihood of future events and trends.

In a sense, though, most of these things tend to have more to do with the present than with the future, because our vision of the future is shaped by our understanding of the past. What has sold well before, for instance, can probably be expected to continue to do so in future. But of course, our predictions are sometimes totally wrong.

The future may actually be less easy to predict than to create.

So the future may actually be less easy to predict than to create, and to this end staying on top of present trends and developments is the most important thing we can do.

Expert-sourcing is a far more useful and productive way of dealing with competition. Milan Stankovic’s recent study of keywords (research.hypios.com) suggests that interaction between unrelated fields, separated by ‘cognitive distance’ are more likely to lead to innovation than interaction between more closely related ones.

What this means is that the never-ending quest for new development and problem-solving can often be more fruitful if pursued outside the company which is in need of innovation or a solution. This may sound counter-intuitive, but it isn’t really.

Just because one company cannot meet its own challenge or solve its own problem does not mean that useful information or a feasible solution doesn’t exist. But the more a firm looks in environments similar to its own, the more likely it is to encounter people who have been repeating the same procedures and encountering the same problems.

So how do we avoid repeating old, unsuccessful solutions? How do we move beyond our own company or sector and gain that fresh perspective? One possible approach is to broadcast problems to experts in various fields, commonly called Open Problem-Solving, will make it more likely that solutions from other fields emerge.

The rationale is that asking people of very diverse sectors if they can come up with a solution to your problem is a way to let the target sector emerge, rather than trying to identify it a priori. If the problem is formulated in a way which allows people from other sectors to understand your problem, this approach can eliminate preconceptions which can otherwise bias your solution search.

Frank Piller, an Open Innovation guru, defines Open Innovation as a way that allows to find “unobvious” sources for solutions. As Frank recently explained, “unobvious solutions” simply means that solutions are coming from people you didn’t know before you started looking. So don’t worry about outsmarting the competition, focus instead on innovation.

By Michael Bonner and Klaus-Peter Speidel