Competitive Idea Book

Turning Tables Twenty proven techniques to change the competitive equation

Summary •  There’s inﬁnite variety in competitive strategies, but they almost all have one thing in common: They change the rules –  Attack from an unexpected direction –  Turn an asset into a liability •  Almost all are business strategies, not just marketing or engineering strategies –  You have to adjust everything you do to align with the strategies •  Sometimes the hardest step is coming up with new ways to look at your business –  Thus this presentation… ©2010 Rubicon Consulting, Inc. Page 3

1. The Innovator’s Advantage •  Use your critical mass to add features faster than others can copy –  Spreadsheets: Lotus vs. Visicalc –  Word processing: Text wrap around irregular graphics •  Why it works –  Leader has more money available for R&D, and can use PR to set the agenda for everyone else –  Leader picks the battlefronts, doesn’t announce them until shipment –  Requires secrecy, heavy marketing of new features each year ©2010 Rubicon Consulting, Inc. Page 4

2. Bundling and tying as a weapon •  Tying purchase of one product to purchase of another –  …to commoditize a competitor’s cash cow –  …to create barriers to defection –  …to shift pricing to something people don’t watch •  Examples –  Most famous in Gillette razors –  Cell phone purchase tied to service plan •  Forces competitors to also oﬀer subsidized phones •  Enables exclusive bundling deals (AT&T iPhone) –  Netscape: Give browser away as a carrier for a software platform (HTML) •  Make money from services, etc. –  Microsoft: Bundle browser into the OS •  Won the battle but lost the war •  HTML was still established as a platform – led to Google ©2010 Rubicon Consulting, Inc. Page 5

3. Get help from partners •  MySpace was the dominant social network •  Facebook made two critical changes –  Opened up membership: September, 2006 –  Facebook platform: May 2007 ©2010 Rubicon Consulting, Inc. Page 6

More on partners… •  …as an extension of your core –  Intuit Marketplace –  Third party extensions/ applications for vertical market accounting and general business management •  …as an integral part of your core –  Salesforce.com App Exchange –  “The premier hub for enterprise cloud apps” ©2010 Rubicon Consulting, Inc. Page 7

4. Redeﬁne the product •  Yahoo search: Gateway to content –  Use the search page to attract readers •  You actually want to distract them from searching –  Works best with display advertising (brands building image) –  Like a free soup kitchen run by a church •  Google search: Performance advertising –  The search is the content –  After they engage, get people to click on paid links relevant to the search results –  Driven by performance advertising (pay per click) •  The same function (search) transformed by a completely diﬀerent context and monetization model ©2010 Rubicon Consulting, Inc. Page 8

5. Redeﬁne the business you’re in 3,000 •  Cable TV news 2,672 •  CNN: We’re in the news 2,500 business 2,000 –  Respected, digniﬁed: The TV 1,500 news network of record –  Shining moment: Collapse of 1,000 728 694 694 the Soviet empire 500 177 •  Fox: We’re in the 0 entertainment business –  Shining moment: Geraldo Rivera with the Marines in Iraq Cable news viewers, December 2009 ©2010 Rubicon Consulting, Inc. Page 9

6. Commoditize a luxury •  Southwest versus the airline industry •  “The Romance of Flying” vs. “Greyhound of the Skies” •  Works best when people are being charged for things they don’t value –  The question is not whether they like premium services; it’s do they like them better than money ©2010 Rubicon Consulting, Inc. Page 10

7. Luxury-ize a commodity •  Change the context of the product –  Change the standard of what’s “good” –  Apply a national brand to a formerly local product •  Starbucks: Not selling coﬀee, selling an experience –  An aﬀordable indulgence –  Personal image (I am tasteful) –  Meeting with others ©2010 Rubicon Consulting, Inc. Page 11

8. Innovation in completely commoditized markets •  The more commoditized the market, the more impact a small diﬀerence can make –  Make it easy to understand and advertise “A cup that doesn’t buckle” “No more twist ties” ©2010 Rubicon Consulting, Inc. Page 12

9. Segmentation as a weapon (part 1) •  GM versus Ford 90 years ago 1918 Cadillac •  GM: Different BUs focused on different segments of the market –  Plus central corporate infrastructure for efficiency and accountability 1918 Chevrolet •  Devastating success against Ford’s one size fits all 1918 Ford Model T ©2010 Rubicon Consulting, Inc. Page 13

10. Segmentation as a weapon (part 2) •  Nintendo vs. Microsoft and Sony •  You don’t have the money to compete head-on, so carve oﬀ a segment •  Family gaming –  Unique controller that makes games accessible to children and parents –  Created a new segment of the console industry ©2010 Rubicon Consulting, Inc. Page 14

11. Attack a bystander •  Early 1980s credit cards –  Visa and MasterCard: the middle class cards •  MasterCard taking share from Visa; cards are frequently confused –  American Express: the elite travel and luxury card •  Visa attacks American Express –  “It’s everywhere you want to be” •  Results –  American Express shoots back, increasing Visa’s visibility –  Visa share increases from 44% to 51% –  MasterCard is the third wheel ©2010 Rubicon Consulting, Inc. Page 15

12. Matching product to market •  Amazon vs. eBay •  eBay: an online ﬂea market –  Caters to deal-seekers and adrenaline junkies •  Amazon: an online department store –  More comfortable buying process, but more expensive •  Neither one kills the other, but one is a much larger market –  Think about the future when you plan your product ©2010 Rubicon Consulting, Inc. Page 16

13. Differentiating at the bottom •  Target vs. Wal-Mart •  Target started by Dayton department stores in the 1960s –  Discount department store •  Target logo to make it look very different from parent –  Parent company renamed Target in 2000 –  Upscale, trend-forward goods at discount prices •  No PA promotions, no music, drop ceilings, wider aisles •  Target profitable but only 1/10 the size of Wal-Mart –  Gets much more attention that you’d expect given its size •  Wal-Mart doing better in the recession –  Target goods are more discretionary ©2010 Rubicon Consulting, Inc. Page 17

14. Who’s your top priority? “It's almost like Lowes and Home •  Lowes vs. Home Depot Depot have switch •  Home Depot is newer and bigger (1978, places... Lowes used 2,193 stores) to be an almost –  Lowe’s is number two (1946, 1,616 stores) contractor-centric •  Lowe’s is more focused toward hardware store, and homeowners rather than contractors Home Depot was for –  More emphasis on customer service (oriented nice, single-moms, toward women, commission vs. ﬂat salary) yuppie condo •  Home Depot failed to go upscale with owners, and people Expo of age who might –  Higher prices need assistance, now, the opposite is true.” ©2010 Rubicon Consulting, Inc. Page 18

15. The Japanese model •  Work up from the bottom –  Cheap products sold on price; gradually climb up the quality and price curve •  Usually viewed as a death sentence –  Innovator’s Dilemma ©2010 Rubicon Consulting, Inc. Page 19

16. Who needs quality and innovation? •  Harley-Davidson vs. Honda –  Japanese motorcycles were superior in features, quality, pricing •  Harley realized: Sell a lifestyle, not a product –  You don’t look like a tough rebel when riding a reﬁned Japanese motorcycle –  Turned all the advantages of Japan, Inc. against it •  The perfection of the product devalues it ©2010 Rubicon Consulting, Inc. Page 20

17. Out-commoditize the commoditizers •  Optimize your business to produce high volumes •  Tie up critical components •  Put your manufacturing in low- cost regions •  Create a strong global brand •  Nokia vs. the phone industry –  Beat Motorola, the Koreans, and China Inc. ©2010 Rubicon Consulting, Inc. Page 21

18. Force the competition onto your turf •  Challenge competitors to compete in ways that are difficult for them (and easy for you) •  Apple vs. phone industry –  Phone industry advantages: Scale, distribution, parts suppliers –  Had killed dozens of new entrants; Apple was broadly expected to be roadkill as well •  Apple redefined the product –  Different form factor, with touchscreen hardware the others didn’t dominate –  Heavily integrated software, leveraging MacOS –  Integration with iTunes music economy –  A single model where others produced dozens (offset some of their volume advantage) ©2010 Rubicon Consulting, Inc. Page 22

19. Transform distribution •  Don’t change the product, change the way people obtain it –  Cut out middlemen –  Increase availability –  Reduce prices –  iTunes is the current favorite example •  Amazon Kindle –  Publishers take 85% of book revenue; e-books could return 80% of it to authors –  At what point is it more proﬁtable for an author to publish exclusively through e-books? ©2010 Rubicon Consulting, Inc. Page 23

20. (Your idea goes here) •  Put yourself in the shoes of your biggest competitor –  What assumptions have they built into their strategy? •  Can you invalidate them? –  Are they taking any customers or partners for granted? •  How can you appeal to them? –  What do they fear the most? •  Can you make it happen? –  What changes in the market would destroy their business? •  Can you make those changes happen? ©2010 Rubicon Consulting, Inc.

Questions to ask •  Which of these strategies could help us the most? •  What are the barriers to us adopting it? –  “We wouldn’t do that.” –  “We can’t coordinate our work that way.” –  “It’s too big of a change.” –  Talk to us; we’ll help you manage change. Because if you don’t… •  What if someone used it against us? ©2010 Rubicon Consulting, Inc. Page 25

Win Markets Helping high-tech ﬁrms transform their visions into strategies, strategies into plans, and plans into results. www.rubiconconsulting.com Deﬁne / Deliver / Defend / Optimize ©2010 Rubicon Consulting, Inc.

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Competitive Idea Book

by Nilofer Merchant

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