To develop a winning strategy, know who you are fighting

This Blog is written by Mr. Sohail Arif, Senior Associate Audit and Assurance Services. Please read this blog and provide your valued comments.

To develop a winning strategy, know who you are fighting

Business strategy is all about using uncertain information to make unalterable choices that best create and capture economic surplus. A successful strategist must find and exploit opportunities that establish and protect a sustainable advantage. Otherwise, the economic surplus will be snatched up by other industry players such as competitors, suppliers, channel drivers, and customers.

This is about beating the competition as military strategy most vividly demonstrates. It doesn’t mean you need to become the No. 1 player to succeed (although such a goal can inspire organizations more than a profit target), but you must be better at something so that you can offer the best value to a defined set of potential customers.

Here are five practices that can improve your competitive readiness and your organizational culture and agility.

  1. Understand your rivals’ economics

Consider how often you and your management team formally and informally talk about competitors’ economics. Compare that with the depth of data some use to discuss sports: game results, detailed player statistics and so on. Further, I bet that someone on your team is heavily engrossed in Fantasy Football. Now, imagine that energy focused on analyzing competitive data and potential moves.

Insight into how your rivals’ competitive economics differ from yours is one of the hardest and most important things to understand.

  1. Look forward, not backward

Your competitors will not stand still. They will improve their value proposition by the time you upgrade your products or launch a new service offering. While you consider an attack on their best profit pool, think whether they are likely to attack yours and ask how strong of a defense you can mount. Look for supporting evidence once you have a hypothesis about where a competitor may be headed.

  1. Put yourself in their heads

It is just as common to see companies overestimate the risk and speed of competitive responses as it is to see them ignore the risk. The most vivid example is when you are considering a price change relative to a direct competitor. Will it follow? Understanding its economics will give you part of the answer to whether it could or should follow suit. You may have better margin to afford a cut and have deeper pockets to sustain a price war. Or your brand may have higher loyalty that allows you to increase prices with lower volume risk. But rational game theory is not enough because behavioral biases may thwart rationalism. A competitor may not match a price cut due to pressure to meet short-term targets, difficulty to align internally or dismissiveness about risk. They may react strongly if their managers’ incentives are heavily influenced by market-share target improvement.

  1. Synthesize into threats and opportunities

Most large companies have a competitive-insights function that collects data on competitors, provides regular reports and helps achieve some benchmarks. Senior managers follow competitors’ results and announcements, and they hear titbits from suppliers and customers on what competitors are doing or planning. But they are slow in putting that all together to identify opportunities and threats. This is even harder when the competitors have new and disruptive models.

  1. Be willing to act more boldly

Even in fairly extreme cases – when a competitor may have a massive setback like a product-safety scandal, product fraud, massive service failures or loss of customer data – the response tends to be timid. This is not to suggest that the response should be to poke directly at a competitor by goading about their shortcomings. Rather, by applying the combined practices, understanding the impact on their economics and anticipating their ability to respond could mean now may be the time to go after prized key accounts or channel partners, launch an aggressive marketing campaign. or offer a bold service guarantee.

One of the greatest strategists in history, Sun Tzu, is quoted as having said “If you know yourself but not the enemy, for every victory gained you will also suffer a defeat.” He is also credited with saying “If you know your enemies and know yourself, you need not fear the result of a hundred battles.” I bet Sun would’ve done well in Fantasy Football.

Sohail Arif