Time to Ignore the Competition

One of the first questions businesses ask- especially when sales are down, when the markets are tough, when customers are lost - is, "what is the competition doing?"  Many innovation projects start with researchers and consultants probing the market to understand what competitors are up to. Marketing is analyzed, products are investigated and former employees are often questioned - all in an effort to understand what the competition is up to, and what should be done to compete with them.

It's almost as if companies are trying to innovate by asking what was done in the past.

Unfortunately, this kind of research never leads to innovation.  When the focus is on what a competitor is doing, one is condemned to follow what a competitor does. Even if one improves on something that a competitor is doing, only small increments of change are possible. Innovation that changes markets, creates new customers, and delivers high margins and profitability does not come from the competition.

Would Edison have created a business around electic lights and electric distribution if he had paid too much attention to the gas light competition?  Could telegraphs have been developed by trying to innovate a better horse and rider?  The personal computer was developed - not as a competing super computer to the mainframes - but as a completely new path, use and user for a smaller, cheaper, more flexible computer.

Instead of listening too much to competition, perhaps it's time to listen more to customers. Customers may not always know what they want, but they can tell you what bugs them, what they want to do with their lives, with their businesses, with their families.  Customers can give you opportunities, challenges, and new ideas - but only if you are willing to listen to them.

And by listening, I don't mean researching them...that's what the competition is doing right now. Instead, try sitting down and talking with them.  Throw out some ideas and see how they react. Ask them why they disagree with you. Try to find out what makes them laugh.  

The competition always has the same old ideas.  Customers have all sorts of new ones - if you sit down and talk with them. 

If you want to innovate, try ignoring the competition for a little while.

Can you afford to innovate now?

During difficult economic times,  many ask, "can't innovation wait?" It seems a reasonable question - companies are facing catastrophic losses, reduction in demand for their products and services, and uncertainty in debt markets, legislation, and fuel prices.  Why engage in the risky practice of innovation - or change what you are doing - when there is so much danger, uncertainty and change in the world around you?

Isn't it better just to hold on and wait for this storm to pass?

No.

Consider the following list of companies:

General Electric

Hewlett-Packard

Jim Henson Company (the Muppets)

Hyatt Corporation

Fed Ex

Microsoft

Apple

CNN

What do they have in common?  

When they began they all challenged the accepted business model of their time.  They were all innovators. 

They also all started during recessions. 

General Electric created entire industries that didn't exist before - even though it started during the financial panic of 1873.  Hewlett-Packard started during the great depression, but created technology that helped to win wars and build entire industries.  During a recession in the late fifties, Jim Henson transformed puppetry and in the process created a massive global entertainment platform while Hyatt Hotels  began to build a global portfolio of hotels.  Microsoft and Apple were started during a time (the 1970's) when multiple recessions had convinced most experts that American business was no longer able to grow. Fortunately, those experts were wrong - in great part, thanks to the innovations of personal computers and the Internet.

How is that possible?

There are many reasons for a recession to happen, but whenever an economy is in one, the rules for success change dramatically.  Capital becomes scarce, raw materials unreliable, customers reluctant to buy.  What was easy before suddenly becomes more complicated.  Products that everyone had to have at any price before, suddenly lose their value.  But as long as there are still people living their lives, there are ways to create something they need, want and will pay for - it just might be a little different than it was before.

As an example, during the year-long recession in 2008, innovative on-line retailer Amazon had a 28% increase in net income. At the same time, retailers that did not innovate such as Circuit City are facing diminished market share, lost sales and even bankruptcy.

Companies that perceive and understand the new rules in a recession are able to innovate and thrive, while those that continue as they did before risk losing everything.  

Most people's natural inclination is to continue doing what they did before - even when it doesn't work as well as it used to.  Innovators change what they are doing, how they are doing it and even why they are doing it in order to succeed in a new environment.

Strangely then, the most dangerous strategy is to avoid innovation during a downturn.

It's times like these that the imperative for every company, every leader, every manager must be to challenge all assumptions based on a rising market.  Every process, every service, every product must be looked at from a fresh perspective - and changed to fit the new reality of a down market.

In a recession, can you afford not to innovate?