Has a disruptor entered your market? Turn this into good news.
In nearly every industry, companies are confronting new types of competition.
The leaders I talk too are worried about new technologies. They’re worried about new competitors, and the new business models that are sprouting up everywhere.
One pointed out to me “We’re the ‘incumbents’— we’ve spent decades investing in infrastructure to do what we do. It’s hard for us to change anything without a major investment. And, any change we make risks causing an upset in service. We deal with thousands of customers every day, so any change is a big deal. These new upstart competitors can turn on a dime, and they attack our most profitable customer segments. We’re struggling to stay viable.”
When this happens in your industry, what should you do? Before you take action, here are three questions to ask yourself:
1. How, specifically, might the new competitor affect our business?
The first thing to do is to take stock of who the new competitor is, what they offer customers, and how they might impact your business.
Take the example of Airbnb, the hotel alternative that got its start in 2008 and now has more rooms listed than the major hotel chains. For years, hotel chains downplayed the threat of Airbnb to their businesses, and it’s true that Airbnb doesn’t much impact the hotel’s most profitable customer segment, corporate travelers. The impact to hotel chains is more subtle than simply siphoning off customers. For example, the availability of Airbnb lodging tends to reduce hotel prices during “peak” times such as holidays and conventions. By zeroing in on specific problems, such as peak pricing, hoteliers are more likely to be able to combat the Airbnb threat.
A company I know spent months in unproductive worrying about a new competitor that threatened their core business. When the team spent a day detailing specifically how the new market entrant was likely to affect them, however, they realized that only five percent of their customer base was going to be impacted. Once they understood the nature of the threat, they took quick and capable action to stem their losses within that one, narrow customer segment.
When a disruptor enters your industry, take the time to explore and understand the real nature of the threat. That way, you can avoid taking an ineffective broad-brush response, and instead, respond in a more targeted way.When a disruptor enters your industry, take the time to explore and understand the real nature of the threat. That way, you can avoid taking an ineffective broad-brush response, and instead, respond in a more targeted way. Click To Tweet
2. What do we, or could we, offer that they don’t?
Hotels have a number of distinctive capabilities that are difficult for Airbnb to replicate, like modern, high-tech security features, great loyalty programs, and consistent comfort and cleanliness. Further strengthening these features, and communicating them to customers, has been key to the hoteliers’ success in surviving the growth of Airbnb.
When you are confronted by a disruptor, take stock of how your capabilities, assets, partnerships and brand equity differ from theirs. Consider what their customers love about them, and what your customers love (or could love) about you. Seek to offer something dramatically different than what the disruptor offers, so you can claim your own turf on the competitive battlefield. You might just find that the disruptor strengthens, rather than diminishes, your success, by serving as a contrasting option that makes it clear to customers just how distinctive you are!When you are confronted by a disruptor, take stock of how your capabilities, assets, partnerships and brand equity differ from theirs. Click To Tweet
3. What can we learn from them?
Among the reasons that travelers chose to stay at an Airbnb, rather than a hotel, is that it’s adventurous. It can be fun to get to know the hosts, who often help you find off-the-beaten track activities, sights, and restaurants. You really get to know the area you’re staying in. Hotel chains have noticed how appealing this is to some customers, and have sought to increase their own ability to create adventure and interaction for their guests.
For example, Kimpton, a 65-location chain of boutique hotels owned by IHG, has incorporated surprising service components, like providing a pet goldfish to guests upon request. Each Kimpton location has a distinctive, quirky style. The onsite restaurants are upscale and trendy, providing a bit of food adventure. And, I’ve noticed that the Kimpton common areas are more conducive than a typical hotel to guests interacting with each other, and with the staff.
When a disruptor enters your industry, consider what you can learn from them. Often the disruption provides just the nudge or shakeup you need to become something even better than before.When a disruptor enters your industry, consider what you can learn from them. Often the disruption provides just the nudge or shakeup you need to become something even better than before. Click To Tweet
Answering the three questions above can help you turn the threat of extinction into an opportunity to learn, differentiate and grow. Try it, and let me know what you think!
Amanda Setili is president of strategy consulting firm Setili & Associates. She is author of Fearless Growth: The New Rules to Stay Competitive, Foster Innovation, and Dominate Your Markets, and The Agility Advantage, How to Identify and Act On Opportunities in a Fast-Changing World.