Competitor Strategy Metrics That Matter in the Post-COVID-19 Era

Competitor Strategy Metrics That Matter in the Post-COVID-19 Era

In the current crisis, the success of a company’s strategy usually depends significantly on its competitors’ policies. For instance, Boeing’s commercial jet’s terminal success will depend on the way Airbus positions, markets, and sells its novel and competing A380 and A350. This strategic interdependence indicates that the capability to predict your competitors’ strategies is crucial. Few companies truly know what its competitors and their decision-makers worry about most, how they regard their assets and capabilities, and what this implies for their strategies. In a credit crunch like the one we are encountering now, such a company would acquire economic and nonfinancial assets at attractive valuations if it understood that poorly capitalized competitors would shun new risk and, consequently, not bid for them. In this post, I outline competitor strategy metrics that matter in the post-COVID-19 era.

Getting inside your competitor’s head is challenging because companies (and their decision-makers) typically are not similar. So if you need to anticipate rather than react to strategic moves, you must dissect a competitor at two levels: organizational and individual. At the corporate level, you have to examine like your competitor’s strategist by seeking the ideal strategic fit between its revenues and its dynamic market environment. At the individual level, you have to consider the competitor’s decision-makers, knowing who among them makes which decisions and the influences and considerations guiding their choices. This strategy leads you past the data-gathering exercises of most competitive-intelligence functions to a thought process that assists apply competitive intelligence into competitive acumens. 

Competitor Strategy Metrics 1 – Analyze like your competitor’s strategist

When your competitor matches you, possibilities are to pursue related strategies—what we term symmetric competition. When firms have diverse assets, capabilities, and market positions, they will respond to the same market opportunities and threats in separate ways—what we term asymmetric contest. One of the clues to prognosticating a competitor’s future strategies is knowing how much or little it matches your company.

Companies can decide whether they face symmetric or asymmetric competition applying the resource-based view of strategy: the idea that they should defend hold, stretch, strengthen, or acquire resources and capabilities that are relevant, rare, and unique and that can get vigorously utilized. Resources come in three levels: tangible assets, intangible assets (brands, fame, and experience), and dominant market positions (access to clients, economies of scale and scope, and skill). Abilities come in two categories: the capacity to recognize and utilize opportunities better than others do.

In the video-game-console business, Microsoft and Sony’s strategies, to control next-generation systems, are mostly predictable—based on each firm’s tangible and intangible assets and dominant market position. 

For Sony, which has relevant businesses in consumer electronics and audio and video content, it is necessary to establish the PlayStation as the living-room hub, so that any cannibalization of the company’s consumer electronics businesses arises from within. 

Microsoft has restrained hardware and content businesses but rules personal computers and network software. Setting the Xbox as the living-room hub would further defend and extend its software businesses. 

Sony and Microsoft, consequently, have distinct motives for fighting this console contest. The current market situations, tangible and intangible assets of both firms, imply that they will fight aggressively to succeed. They would design consoles that are better technologically to earlier systems and interconnect seamlessly with the wide variety of devices and price their consoles below cost to instantly build an established base in the world’s living rooms. 

In contrast, Nintendo is principally a pure-play video game company and an asymmetric competitor to Microsoft and Sony. The resource-based view of strategy emphasizes why Nintendo’s console, the Wii, concentrates principally on the game-playing experience and isn’t placed as a digital hub. The Wii’s most innovative specialty is, consequently, a new, easy-to-use controller appealing to new and hardcore gamers. 

Employing the resource-based view of strategy to competitors in a meticulous, methodical, and fact-based way can help you identify the options they will presumably deliberate for any strategic issue. However, if you need to obtain better insight into which of those alternatives your competitors are most inclined to exercise, you have to propel beyond a conventional analysis of their information, performance, assets, and abilities and study the motives of their decision-makers.

Competitor Strategy Metrics 2 – Think like the competitor’s decision-makers

As corporate decision-makers’ goals seldom align effectively with organizational purposes, firms usually operate in ways that seem contradictory to their established strategic plans. Therefore, if you need to prognosticate the subsequent moves of a competitor, you must regularly examine its decision-makers’ choices and incentives.

The answer to getting inside the head of a competitor executing any decision is first recognizing who is most inclined to make it and then estimating how the goals and motivations of that person or group may affect the competitor’s actions. In most businesses, owners and top managers make divestment decisions. Strategic pricing and service judgments are usually executed, within extensive corporate guidelines, by frontline sales staff and managers.

Owners and additional relevant stakeholders

The person or group’s goals with a controlling interest in your competitor presumably have a vital impact on its strategy. Sometimes, personal choices are especially relevant: it’s plausible that Virgin’s exploring venture into the commercial space travel industry partly echoes the adventuresome tastes of its charismatic patron, Sir Richard Branson. In the case of family-owned controlled companies—public or private—family values, past, and connections may drive strategy. A competitor controlled by a private-equity firm is likely to concentrate on near-term performance enhancements to generate cash and get the company more attractive to buyers. While every private-equity firm is diverse, you can usually anticipate the tactics any given one will exercise by scrutinizing its history. Many such firms often replicate their successful strategies.

Other stakeholders may further profoundly impact a company’s strategy, so it frequently pays to get inside their heads. You can’t assess any meaningful strategic moves GM or Ford might make without examining the interests of the United Auto Workers and how they might halt or expedite such actions. The consequence of nonowner stakeholders in propelling a company’s strategy changes by country of origin too. If you compete with a Chinese firm, the Chinese government is usually a crucial stakeholder. In Europe, environmental organizations and other nongovernmental stakeholders exercise more control over corporate decision making than they do in the United States.

Top-level executives

As the partners of companies hire top-level management to pursue the owners’ strategic objectives, many might assume that management’s decisions reflect those concerns. Most of the time, this is not true. Hence you must analyze your competitor’s top team. When the owners do top-level hires, they try to replicate the approach that succeeded in their previous company to the new company. Most of the time, this approach will fail as the new company’s culture is different, which may lead to many senior-level exits.

Senior executives aren’t eternally ideal “agents” for a company’s owners, whose individual interests and motivations may vary from theirs. Such agency predicaments usually bother even companies with the best governance systems, so it often pays to concentrate on senior leaders’ objectives.

Managers and frontline workers

Competitors of a decentralized company must concentrate not only on the goals of its owner and corporate officers but also on business unit leaders, middle management, and even frontline personnel. 

For specific decisions, frontline agents and managers are likewise critical, mainly if they make pricing, marketing, service, and operational decisions that significantly impact a company’s competitive edge. Even if decision-making is centralized, frontline employees’ incentives may get misaligned with the goals of a company’s owners or senior leaders. Agency problems may urge the front line to undermine these objectives.

For instance, please assume that the head of a division at one of your competitors needs its commissioned sales force to push a new product. If the sales force is experiencing robust sales from installed products, reps may delay risking their compensation to support the new one. Information on such agency intricacies—which can usually get discovered through the chatter between your frontline sales force and the customers you share with competitors—can have significant strategic value for your business. In this instance, agency problems will delay the duration when the new product obtains substantial sales. You could utilize that time delay to boost your presence in the market and perhaps preempt the competitor’s latest offering.

Competitor Strategy Metrics 3 – Arrive at a point of view

What follows once you have a more positive understanding of the options, your competitors may examine and how they may assess those options?

Let’s say that your company’s market environment is comparatively stable and that you have valuable information about your principal competitors and their decision-makers. You can then employ game theory to ascertain, with significant confidence, the strategies your competitors will presumably pursue to maximize their objectives and how your own decisions may affect those strategies. Assume, though, that even your best attempts don’t provide you a precise picture of your competitors’ resources or their decision-makers’ goals. It is usually best to skirt attempting to predict the competition’s particular behavior and instead use scenario planning to test your company’s strategic opportunities.

In the current COVID19 crisis, for instance, even the most reliable competitive-intelligence exercises may present inadequate, extremely convoluted, or contradictory information on the competition’s strategies and thus fail to establish a game theory or scenario planning. An alternate method of creating a point of view in such circumstances is to conduct “war games.” Each team, depicting a specific competitor, gets a fact pack about that company and its decision-makers in these exercises. The teams then present crucial strategic decisions for the companies they symbolize. Through many rounds of competition, every team can enact on its strategies and respond to other organizations’ moves. The war game pushes the players to link incomplete, and possibly conflicting, information on competitors to develop a point of view about which steps make the most and most limited sense for them and are consequently the most and least likely moves for them to execute.

No matter how meticulous and insightful your analysis, possibly, two things are nearly certain to result: your competitor will execute some moves you thought unlikely, and some of your data will soon become out-of-date. When a competitor acts in unanticipated ways, your company has a critical learning moment. Why were you incorrect? Did you drop a vital agency problem that weakened the execution of the strategy you conceived the competitor would ensue? Did the market environment shift, generating new threats and opportunities for the opponent? You must diagnose your blunders, learn from them, and use the latest data to refine your point of view.

Learning from your blunders means handling these competitive-insight exercises as a continuous process for real-time strategic planning and decision making, not as a year-end or half-yearly event in a bureaucratic planning process. Especially in changing markets, companies continuously have to execute decisions; information about competitors must get refreshed as soon as possible.

One solution to making this continuous process more insightful is tapping into the latest competitive intelligence scattered throughout the frontline workforce. An e-mail address, a blog, or a shared database could give sales reps record on the latest pricing, promotion, negotiation, and sales tactics that competitors exercise with crucial customers or customer segments. It is critical to building a process to capture and synthesize it meaningfully.

Final Thoughts

Especially now, no company is an island. Those that genuinely comprehend the competitive landscape as it is and are inclined to be in the future have a definite competitive advantage. The rewards are immense: fewer shocks from competitors and more possibilities to develop markets to your benefit.

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