End Game Techniques

In the previous two Musings, I defined five competitive scenarios that also generally align with phases of a company or product life cycle:

1)     There is no direct competition.

2)     There is direct competition but they are rarely seen at the sales level. 

3)     Competition is fierce and comes from many different angles.

4)     Competition is fierce but has narrowed down to one or two other players.

5)     Competition is unseen.

In these same Musings, I discussed the issues and strategies appropriate for (1), (2), and (3) above.  Now I’d like to continue on to Scenario (4).

Scenario 4 –Competition is Fierce But Has Narrowed Down To One Or Two Other Players

Congratulations.  So far you have played the game well. You have avoided the myriad of land mines, pitfalls, and bear traps that can cause a product or company to fail and have emerged from a long list of aspirants to be one of two or three recognized market leaders. 

To get here, you simplified your market messages and clearly your approach to simplification struck a chord.  But the other guys’ messages struck a chord as well.  They have their customers, analysts, channel partners, and disciples, and you have yours. 

What do you do now?  You’d like to think that you are in fat city; that as a market leader your future is assured and the best thing to do is to continue to do the things that got your there.

Wrong and wrong. 

There is still danger afoot.  The game can still be lost.    After an extended period of usage of a technology, customers figure out what is really essential.  They are no longer impressed by the latest and greatest feature, or speeds and feeds that go well beyond their needs.  Now they are more into stability and support.  In other words, buying criteria shifts from the “best” product” to the “safest” product, which really means the safest vendor.  And usually when that happens, small differences in market size and momentum get exaggerated by a “flight to quality” with the result being that a market gorilla arises who leaves the other aspirants, recently thought of as “hot,” in the dust. 

If you aren’t that gorilla, you rapidly become old news.  And in a very real sense, you are in worse shape than the aspirants who fell out of the race earlier.  At least when they fell out, they may still have been perceived to have good technology and been bought by someone who believed that in their capable hands they would be able to manage the product to success (read “strategic premium to acquisition price”).   Or maybe they just closed up shop and moved on to something else.  But you’ve poured more years into your business, have increased employee counts and costs – but are now perceived to be a loser!  Between that impression and the spreadsheet impact of higher costs relative to flattening or reducing revenues, your exit potential value can actually be less than if you had fallen out of the race earlier.  If somewhere in there you became public, you could easily be voted “least likely to succeed” overnight by the public markets.  In financial markets, being considered stale is often worse than being considered poorly baked. 

To increase the probability of being the gorilla and enjoying the rewards that come with that, you’ll need to change your marketing strategy significantly from what got you to this point.

Now is the time for three things:

1. Feature wars
2. Focusing on market leadership messages
3. Changing the rules of the game

Of these, (1) is a necessary battle to fight, but (2) and (3) are where the real opportunity for separation lies.

It might be counter-intuitive to emphasize fighting feature wars at this stage of market maturity.  But it is very important. Customers want to hear a story of completeness, which is related to safety.  So, for the 1^st time at the market level (you will already have been doing this at the sales level for years), you’ll be highlighting long tables of feature requirements with columns for yourself and your key competitors.  You will select the titles of the rows such that your column shows full support for almost all items.  Your competitors, however, will have several features that they don’t support or they only partially support. This table will slowly evolve as your points of differentiation evolve. 

However, your competition will also have similar tables with different rows – ones that highlight things that they have that you don’t.  Up until now, you’ve been able to ignore small-to-medium features or characteristics that you lacked relative to your competition because when the race was crowded and the marketing noise was at a peak, the market was focused more on your positive differentiating which you were doing a good job of proposing as critical to the buying criteria.   But as the market consolidates down to a few strong competitors, such “free passes” start to get withdrawn.  It’s kind of like progressing in baseball from Little League to high school to college to the minor leagues to the major leagues.  You have some great physical skills that give you the opportunity to rise, but as you go from level to level you start competing with a higher concentration of talent who also possess great skills in some areas. At some point those skills become relatively equal and further advancement depends on who has fewer weaknesses. 

This effect isn’t just about product features.  It’s also about channel coverage and alliances and market perception and a whole bunch of other things. But relative to product development, now is the time to identify the more important trailing edge features and functions that you were able to ignore in the past and burn off your most visible warts.  I would include cost reductions in this category as well, although the motivations are a little different.  It won’t be fun.  Such items are usually not considered sexy by Engineering.  But it has to be done.  It also has to be timed right.  You don’t want to get into this mode too soon when there are too many competitors or you’ll be pulled in too many directions and dissipate your energy. 

Assuming you’ve got that blocking and tackling in hand, the real job is to win the propaganda war about who is the market leader.   One time tested way to do that is to actually be the market leader.   If you can’t do that, you need to try to re-define leadership around some other reasonably valid parameter, such as rate of revenue growth, units shipped, customers captured, or consumption of the freshest capability (feature, speed, whatever) introduced in the market space.  Metrics of momentum are often more important than absolute numbers in determining market leadership perception.  So if that is where your strength lies, go for it. 

An important factor here is that it doesn’t matter a whole lot what you say about your market leadership status. For it to be believed, others have to say it, either directly (analysts, press, taxi drivers) or indirectly, by pattern recognition of who buys your product and who partners with you. You will be measured by the company you keep.  If your customers and partners are themselves deemed to be leaders - that can be more important than their numbers (although quantity certainly helps as well). 

This is also the time to advertise outside of the normal channels that influence your customers. Think Super Bowl or NASCAR hoods. 

The next critical tactic to consider can be executed on in this phase or the next phase (when you are the clear market leader), or in both at regular intervals. 

This tactic is to declare the race over and at the same time announce the start of a new one.  This takes guts because you basically have to imply that what you’ve worked on for years and established a leadership position in is passé. Now it’s all about something new.  Usually such messages are coordinated with a major acquisition or new product launch.  This approach works best if you can then tie the new thing to the old.  But you don’t want it to be too tightly coupled because then the new thing will seem old and incremental. 

When evaluating this tactic, you’ll also want to consider Wall Street. As the market you participate in matures and consolidates, it is going to be harder and harder to project future growth for you doing the same old same old.  Re-defining yourself around a significant new market opportunity can not only help establish your leadership position in the old area, but provide the promise for sustained growth as you dominate the new market which presumably is considered to still be in a high growth phase.  Cisco has done all of this fabulously well over the years, as they have layered in LAN switching, service provider infrastructure products, VoIP, storage, security, and wireless into their corporate messages and product lines.   

With this Musing I’m going to suspend my series discussing competitive strategies and move onto other things.  Early next year, I’ll address the final stage or scenario – unseen competition.