Wednesday, July 25, 2007

Competitive Strategy: Play to Your Strengths

Fighting battles that leverage your assets and competitive position rather than your competitors is common sense.

Too often, however, underdogs choose to compete with the market leader on the leader's terms; ie mimicking their strategy and business practices. Rather than seeking to shift the terms of the battle, companies seek to match the products, pricing, and delivery best practices of the industry leader. Think MSFT's current strategy vs Google - ie let's out Google them by focusing on search and text advertising.

The WSJ recently ran a great article on HP's PC business and its battle with Dell.

The article focuses on HP's new PC chief, Todd Bradley, and his decision to change the battlefield and basis of competition.

Prior to Bradley's arrival, HP took on Dell at their own game; HP focused its efforts on battling Dell in direct sales over the Internet and phone.

Bradley's epiphany was to realize that fighting Dell on their terms put HP at a disadvantage and that the HP should instead focus on its core assets, namely the retail channel and retail stores.

A quick inventory found that HP's obsession with Dell's online advantage had left the core retail channel under served and under utilized. Bradley's audit of the channel found HP lacking in on-time shipments to retail, shoddy retail and wholesale account management, and poor supply chain controls.

He actively courted large retailers and committed HP to on-time channel shipments, improved account management, and marketing and product design campaigns to help retailers market the in-store buying experience and custom product offerings.

In one year, HP's market share grew from 14.9% to 17.6%, while Dell from 16.4% to 13.9%. In-store PC purchases went from 54% to 61% over two years.

I found the article compelling and an excellent reminder that head-on competition with market leaders will likely lead to large losses and that it pays to play to your strengths rather than theirs.

2 comments:

  1. A similar point was made by Jeff Nolan over on Venture Chronicles about MS changing the rules under Google by talking about Privacy the whole time....

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  2. Nice article!

    Shades of Michael Porter who believes competitors succeed by:

    - Having the best product
    - Serving a niche better than the leader
    - Being the low cost provider

    Porter will say you have to pick one and not spread yourself across more than one.

    I like to consider a 4th approach:

    Open up and ally yourself with others in the head-on struggle.

    This is an option we started seeing with Open Source and Linux. I've written about it as it pertains to search engines and web hosting providers on my blog:

    http://smoothspan.wordpress.com/

    Cheers,

    BW

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