Many companies, as good as they may be, engage in self-destructive behaviors. Some companies that seem to be doing well and are on top of their industry can, in a very short time, spiral downward into a disastrous cycle. These companies may possess top leaders and managers, have a proven track record of success, an excellent competitive position, and equally outstanding products and/or services. Why, then, do companies such as these go wrong? This question is one that has plagued academia for ages.
Companies suffer from “competitive myopia” when they define their competition too narrowly and acknowledge only direct and immediate competitors. It can stem from a loss or lack of peripheral vision that would notice less obvious challengers (those who are not on the radar screen but who nevertheless are present and dangerous).
1The Self-Destructive Habits of Good Companies … And How to Break Them AUTHOR: Jagdish N. Sheth PUBLISHER: Wharton School Publishing 2010
Things that lead to the habit of competitive myopia:
- The natural evolution of the industry. Once the evolving industry has completed the shakeout phase and most of the companies who initially joined have dropped out, only a handful of serious competitors will have survived. These will only look to themselves and ignore both niche players and newcomers until it’s too late.
- The clustering phenomenon. Companies cluster in one location because of the availability of resources (natural, labor and the like). It becomes too easy for companies to focus on the competition in their backyards.
- When #1 is also the pioneer. A company that’s on top of its industry, one that it pioneered, can find it all too easy for it to focus only on the one or two players coming up from behind.
- The opposite scenario, when #2 chases #1. When a company is gaining and has #1 in its crosshairs, it’s only natural and inevitable for it to ignore everybody else.
The warning signs of competitive myopia:
- A company allows small niche players to coexist with it. The focus is the big guys and the niche companies aren’t seen as a threat.
- The loyalty of a company’s supplier is won by a nontraditional competitor, and the company fails to recognize that the supplier can become a competitor.
- New entrants, especially those from emerging economies, are underestimated.
- The company becomes helpless against a substitute technology.
How to break the competitive myopia habit:
- Redefine the competitive landscape. The company needs to check the entire competitive parameter to see where it is vulnerable.
- Broaden the scope of the product or market. The company must diversify by expanding the market for its existing products or expanding existing product lines.
- Consolidate to squeeze out excess capacity. Buyers’ bargaining power must be decreased.
- Counterattack the nontraditional competitors. Attack their home turf.
- Refocus on the core business to concentrate limited resources in the most successful area. (Just be mindful of the dangers of doing this.)
How to prevent the habit of competitive myopia:
- Put together a stand-alone business intelligence team.
- Invest in alternative competing technologies.
- Acquire peripheral or niche companies that are potential paradigm shifters. Target an emerging market where future competition is likely to come from