The Competitive Environment
It has been said that the essence of strategic thinking is the constant scanning of the environment in order to spot and respond to potential disruptors to your business. The ONFs (Obsessive Neurotic Freaks) of Jim Collins’ 10Xers in “Great by Choice” are renowned for looking for disaster around every corner – and being prepared for it by having already crafted a response. Think of being described as an ONF as a roaring compliment and something to which all business leaders should aspire.
We have looked at the broad external environment (STEEPLED) in the previous article. In this one, we are interested in the competitive environment. Once again, being able to analyse this environment requires that we are well-connected, well-informed and curious. What we don’t know can hurt us.
In analyzing the competitive environment you will consider the following:
You know that you are in a very favourable competitive environment when:
But it is relatively rare to find your organisation in this position – and if you are in this position you can be certain that it won’t last long.
In surveying your competitive environment you are trying to establish the opportunities and threats that exist for you in the competitive environment. Where do you have the edge? Where do your competitors have the edge over you? What do your customers yearn for that no-one is giving them?
In the next article, we will start to work with the insights gained from your analysis in order to begin crafting a plan of action that is a well-crafted response to “what is going on”.
It has been said that the essence of strategic thinking is the constant scanning of the environment in order to spot and respond to potential disruptors to your business. The ONFs (Obsessive Neurotic Freaks) of Jim Collins’ 10Xers in “Great by Choice” are renowned for looking for disaster around every corner – and being prepared for it by having already crafted a response. Think of being described as an ONF as a roaring compliment and something to which all business leaders should aspire.
We have looked at the broad external environment (STEEPLED) in the previous article. In this one, we are interested in the competitive environment. Once again, being able to analyse this environment requires that we are well-connected, well-informed and curious. What we don’t know can hurt us.
In analyzing the competitive environment you will consider the following:
- Who is your competition? Consider not only who competes in the same space as you, but also who else competes with you for your customer’s money. So, for example, in the mobile telephony industry, you are not only competing with others in the same industry. You are also competing with the entire entertainment industry – and vice versa. Has your competition changed and how? How may it change in the future? On what basis do you compete? Has this changed and how might it change further?
- How difficult is it for new entrants to come into your competitive environment? The easier it is for new entrants to join your environment, the more critical it will be that you differentiate in such a way that you clearly stand out from the herd.
- How have your competitors changed their behaviour? Why has their behaviour changed? What are the indicators that their behaviour is likely to change? How is it likely to change? If you were a competitor to your own company, how would you take your organisation on?
- What substitutes or alternatives are there to what you have to offer? This might not be a directly competing product offering – but it could give your customers the emotional experience they are after. Are there other ways to get the emotional experience of what you are offering?
- How powerful are your buyers? Do they have a choice about who they purchase from? Can they choose how they purchase? Can they simply decide not to purchase at all? Or are they pretty much over a barrel?
- How do your buyers feel about your products and your organisation? What do they love? What do they loath? How do they feel about your competitors’ organisations and products? What do they think your competitors do much better than you do?
- How is the behaviour of your buyers changing? Why? How might it change further?
You know that you are in a very favourable competitive environment when:
- There are few players in your competitive space;
- There are few substitutes for what you have to offer;
- It is difficult for new entrants to join your competitive space;
- Your buyers have little choice but to buy what you have to offer and/or to buy from you.
But it is relatively rare to find your organisation in this position – and if you are in this position you can be certain that it won’t last long.
In surveying your competitive environment you are trying to establish the opportunities and threats that exist for you in the competitive environment. Where do you have the edge? Where do your competitors have the edge over you? What do your customers yearn for that no-one is giving them?
In the next article, we will start to work with the insights gained from your analysis in order to begin crafting a plan of action that is a well-crafted response to “what is going on”.
