Changing the Way the World Thinks about Strategy

When most people are traveling on a highway, stopping for fuel or food involves an interesting decision making process. We often exit the highway and look for a restaurant or gas station that will meet our needs. Naturally, a strong brand preference may cause us to choose one exit over the other, but, without a strong preference, many people will simply look for the store that is closest to the exit. Because of this, being closer to a highway exit makes a store more convenient for many of the travelers who are driving through an area.  This geographic proximity is an example of dimensions of competition.

Dimensions of Competition
This decision making process is important because it shows us the effect of dimensional competition in a very physical way. Look at any interstate exit and you will likely see one or two gas stations and one or two fast food restaurants. These businesses have correctly identified convenience as a key dimension of competition, and the ones closest to the traveler are likely to be more successful. When measuring convenience, the customers of these businesses assess distance to the highway as a key criteria, so the Wendy’s that is near the exit will be seen as more valuable that the Bob’s Burgers a little farther away. Thus, the successful stores will cluster around the exit, and most customers will factor that into their choices.

We see this effect in strategy all the time. Price is the most easily perceived dimension in most markets, so there is a cluster of businesses pushing to be at the lowest price. This is one of the main reasons why the commodity strategy is far more difficult than it looks. Just as there can only be one restaurant that is the closest to the exit, there also be only one lowest price competitor. In general, when two or more competitors start to cluster around a single dimension of competition, one can succeed by being a clear leader in that dimension, and the others can only succeed by standing out in other dimensions.

This dimensionality is most apparent in consumer products, where brands can sift through data and identify small subgroups of customer behaviors driving millions of sales. Because of this, there are paper products that target latinos, airlines that target business travelers, and television networks that target white men over 50. One key concept we need to understand for strategic planning is that large groups of customers can be targeted through multiple dimensions, while smaller groups will sort out differently.

If you are in business-to-business sales, you are likely working with smaller groups of customers. Selling to auto manufacturers gives you a pool of ten to twenty customers, not ten million. This is why the b-to-b equivalent of products targeting single women in their 20s doesn’t exist. Instead of nuanced style differences, business to business markets often boil down to competition on price, quality and speed.

In strategic planning, it’s vital that you understand the dimensions of competition in your markets. Customers that consider price the primary dimension will be commodity customers, of course. But what about the other dimensions? Do your customers want to look smart, be safe or have multiple choices? Each of these can be a competitive dimension, and there will be a successful player for each dimension that supports enough sales to sustain a supplier.  While we use specialty strategy and commodity strategy to represent competition built around one dimension – price – there are many other dimensions that can be important when creating a specialty strategy.

If you want to successfully identify the dimensions of competition that can lead to your success, a good understanding of market behaviors and your strategic competencies will make you far more successful. Contact us to find out how a structured, data-driven strategic planning process will drive up both profitability and market share for your business.

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