All markets are competitive – increasingly so. But sometimes, competitive actions can have such an impact that they bring to mind the words of legendary anchorman Ron Burgundy: “Boy, that escalated quickly. I mean, that really got out of hand fast.”

In the past three months, we have worked on three different challenges in three different sectors, each on behalf of a multinational business looking to respond to extraordinary competitive pressure.

Commonly, competitive pressure is characterised as uneasy co-existence and at-a-distance observation, like sharks on a reef. Even in markets with a limited number of players – for example, duopoly markets like credit cards, soft drinks or beer – players can compete without knocking lumps off each other by pursuing alternative market participation approaches. Head-on confrontation is avoided by each focusing on different category sub-sectors, geographies, target audiences and so on. A combination of self-preservation and a fear of mutual destruction seems to preserve the peace, even if that peace only ever has a sense of transience about it.

What we found interesting about these three recent projects is that each represented a different type of competitive challenge – and in all of them, planning a coherent response seemed quite tough. The three scenarios can be summarised as follows:

Type 1: The Classic Match-Up (big player vs big player)

In this instance, the uneasy peace was broken by one big player aggressively going after an emerging market opportunity by deploying a new technology. When things are finely balanced, a big sudden move like this can mean that all hell breaks loose. The race to be first and biggest means the usual rules go out of the window. The challenge for the slower of the two behemoths is how to best tackle the faster counterpart – go head to head, or try to disrupt via alternative ways to participate and get ahead? Disruption can look attractive here but is often harder to do than to say.

Type 2: David vs Goliath (big global player getting attacked by a smaller specialist local player)

Here our global client was being turned over by a specialist, smaller and highly aggressive player – a local company or more focused business that has to win this particular battle. These sorts of companies can have different margin expectations and are often family- or privately-owned, giving them the twin advantages of swift decision-making and aggressive pricing, and sometimes a lower cost base. In more than one instance, we have seen these structural differences coupled with aggressive sales and commercial practices – trash-talking the big corporate for being greedy and distant, combined with very aggressively priced deals and even morally questionable business practices. Big companies are often quite vulnerable to this type of attack. Like Goliath, they can be confused, slow to react and feel they are not in a fair fight. The response choices are: copy the tactics of the smaller competitor, crush or even buy them, or rise above it all and hope that the benefits of scale and reputation win through.

Type 3: The WTF?! (big player surprised from left field)

Big dominant players can be caught cold by a new-to-market entrant. This is the scary one. It happens less often but the impact can be catastrophic, as outsiders ignore the orthodoxies and often bring a different kind of asset base or world view. Think Uber, Airbnb and Spotify. It can be argued that in this scenario, prevention is better than cure. Businesses that lose sight of their customers’ needs and frustrations are most susceptible. Disruptors gain ground because they deliver something which customers want and which incumbents are failing to deliver. It is always better to disrupt your own business than have someone else do it for you.

Being prepared

Planning for and responding to these different types of competitive threat is core to our Stretchonomics framework. We regularly conduct Competitor Teardowns to help ensure the actions of others do not disrupt the Stretch plans of our clients. Being prepared requires:

  • The right strategy – one that can be adapted and flexed based on the changing competitive landscape
  • The right amount and type of resource to support the response plan
  • The necessary curiosity and external focus to ensure threats are detected early enough
  • The intelligence and insight to fully understand the nature of the threat
  • The creativity to out-think the competition rather than just out-muscle them
  • The courage and hunger to take on the fight in the first place, and then stick with it until the threat has subsided

Because things do have a habit of escalating quickly, planning your response in the heat of the moment is usually difficult and delays your reaction. Much better to have a plan up your sleeve to deploy as soon as the threat is detected.

Our book, Stretchonomics, is available to buy on Amazon.

Justin Wright
Managing Partner
Mangrove