By Mike Cook
Courtesy to The Bellingham Business Journal
“Competitive people have energy; they’re interesting and so forth. But they’re so focused on the competition they fail to see what they’re doing. They just want ‘better, bigger, stronger, longer,’ and they miss the periphery. And that is where you find things you don’t even know are there.”
– Red Burns, Professor, NYU Interactive Telecommunications Program
What is it about our seeming obsession with competition in business?
The common mythology would have us believe that, in a capitalist economy, we favor free markets.
In theory, it makes all players better. In practice, upon close examination, we find that often the ostensibly fiercest competitors don’t really like competition themselves.
Here are a few examples:
– The automobile industry’s history of suppression of advances in non-fossil fuel vehicles.
– Technology companies’ practice of limiting access to their platforms or forcing choices on consumers.
– Tariffs that penalize imports that allegedly threaten domestic production.
– Fossil-fuel producers clinging to government subsidies.
– Unenforceable but legally cumbersome and expensive “non-compete” agreements.
The mythology surrounding competition obscures an underlying belief that opportunity is scarce, and demand is limited. This has led many business owners who might otherwise thrive by focusing on improved products and processes to become engaged in useless price competitions or hide behind legislation that leaves consumers having to choose among mediocre offerings.
Here’s the truth about us as consumers. We like having choices, and choice grows market size.
A case in point is the hardware stores in my town of Anacortes. There are two, and both carry the basics: nuts, bolts, light bulbs and plumbing and electrical supplies.
However, there are critical differences.
One store clearly addresses the needs of the customer concerned with yard and lawn issues, plants, mulch, mowers, seeds and the like. The other store focuses on rentals that assist in bigger jobs like digging trenches, taking down trees with chain saws and building fences with post-hole diggers.
While you can get the basics at both hardware stores, customers seem to make their individual choices more on the stores’ specialties than what they have in common. Did the owners work out these differences (collaborate) between themselves?
I don’t know the answer, but it would have been a smart strategy, as both stores thrive despite the presence of large national chain stores in the surrounding vicinity.
Occasionally hard times drag the practicality of mutual self-interest center stage from its normal location on the periphery of market activity. When times are good and demand exceeds supply, any recognition of mutuality may not be apparent, though it is ever present.
If the going gets tough or demand shrinks, the temptation to either bail out or compete only on price becomes mighty appealing. It is at times like this when some business owners may realize there is always opportunity in collaboration.
In 2009, when the entire economy was upended, local impacts were varied. For instance, there was a dramatic decline in tourist trade in Napa Valley. While wineries definitely are an attraction to the area, part of the allure for many tourists is also the opportunity to dine in some of the finest restaurants in the country.
If you’ve been to Napa Valley, you know there is usually a wait to get into some of the better-known establishments. When the economy cratered, that was no longer a problem.
Faced with laying off highly trained and experienced wait and cooking staffs, many of the local owners got together and came up with a collaborative strategy that made perfect sense. But it would not have been visible if they had tried to compete for the limited demand then available.
Tourists expected varied menus and high prices for unique dining experiences. The residents of Napa Valley enjoyed these restaurants, as well, but not enough to regularly pay high prices.
The new strategy: cater to the locals, and create a new marketing approach.
Restaurants began offering more limited menus, smaller portions and lower prices. It worked! The locals turned out.
Many restaurants that might have otherwise closed now remain and special nights for the locals to feel appreciated have become the common practice.
If you are a business owner, especially a small-business owner, consider these actions:
– Visit other product or service providers in your industry to find out how they differ from you and what you can offer to be different yourself.
– Gain an understanding of demand for the service you are, or are thinking of, providing. It may be cheap to open a pizza shop. But will your neighborhood support one?
– Invite some of the other providers (collaborate) in your industry to get together and talk about how you can collaborate to grow the market for everyone’s offerings.
– Talk to your customers (collaborate), and ask why they do business with you, why they are there that day and not someplace else. You’ll learn something if you really listen.
Mike Cook is a management developer who lives in Anacortes, Wash. He publishes a weekly blog at www.heartofengagement.com.