How a Competitive Stance Blocks Innovation

While doing some web searches, I came across a reference in the Noise Between Stations Weblog to a marvelous article entitled Think For Yourself - Stop Copying a Rival. While it's not new, I thought the advice it contains would be very valuable to share here. his excellent article describes how the majority of companies have become too obsessed with benchmarking and imitating their competitors.

“Companies (have) placed competition at the centre of strategic thinking, where it has remained ever since. But should organisations be motivated in this way? Our research suggests not. Focusing on building competitive advantages detracts from reshaping old industries, driving young industries to new frontiers and building entirely new industries. It blocks creativity… The standards and actions of the competition implicitly guide what companies do. Businesses expend tremendous effort but often achieve no more than incremental improvement.”

In 15+ years of counseling industrial companies in public relations and marketing issues, I saw this focus repeated again and again. Inevitably, the firms I worked with were obsessed with what their competitors were doing, rather than what their customers really needed. Often, my clients needed to implement costly marketing strategies designed to help “shove” poorly-conceived line extensions (new, incremental variations on existing product models) down through the market channel. Discounts, rebates and other incentives were the order of the day. Yes, they moved the product, but they usually eroded profit margins, too!

The solution to this common problem is value innovation — placing the customer at the center of the company’s focus, and creatively developing low-cost but exceptional value products and business models.

“Think of Home Depot, Intuit, Borders Book Stores, Starbucks, Bloomberg or Ikea. The innovative ideas fuelling these companies’ highly profitable growth are not the result of benchmarking the competition or building advantages. None of the creative ideas behind these companies would have been possible if they had got their cues on what to do from the competition. Rather, they are the result of a push to offer something of exceptional value to buyers with a low-cost business model.”

To help companies to move their thinking in the direction of value innovation, the authors recommend focusing these key questions:

  1. What factors should be eliminated that an industry has taken for granted?
  2. What factors should be reduced below the industry standard?
  3. What factors should be raised above the standard?
  4. And what should be introduced that the industry has never offered?

The answers to these questions will help to illuminate new opportunities for value innovation that will help to fuel improved growth and profitability.