HOW TO SPEND IT — PART 10
Strategy: How to Deal With Competitors
According to Roger Martin, “Strategy involves making choices under uncertainty, constraints, and competition”. It looks like competition will play a role sooner or later. In recent decades, competitive pressures have increased dramatically. Regional boundaries have become irrelevant, niches are being filled by companies from outside the industry, and the barriers to entering a particular business have fallen in many cases.
There are two ways to stay ahead of the competition: either you create a new market and not just a product or service, or you are great at what you do.
How to be great
Let’s start with how to be great. In 1993, Michael Treacy and Fred Wiersema published the article “Customer intimacy and other value disciplines” in the Harvard Business Review (№71, pp. 84–93). I still find it extremely helpful when talking to startup founders about their strategy and market positioning. The authors distinguish between 3 basic disciplines on how to win a market with a compelling value proposition.
- Operational excellence: Lean management of the value chain leads to low costs, stability and the best prices in the market (price leadership).
- Customer intimacy: Cultivating a close relationship with customers with a profound understanding of their needs, precise customization and high loyalty (customer leadership).
- Product leadership: Offering the best product in the market.
When I explain the model to founders, their reaction is often: Yes, that is what we want to achieve.
Unfortunately, this is impossible. Companies can only develop one of the two disciplines to peak…