By Denise A. Harrison, Senior Consultant
Previously published in Compass Points July 2006
Many readers are confronted with 800 pound gorillas in their market place – how should they compete? Should they follow the leader or devise a strategy that capitalizes on their unique capabilities?
Choose the Road Less Traveled
Many readers fondly remember Piedmont Airlines. When airline deregulation looked Piedmont in the face Piedmont knew that in this new competitive environment they would face challenges from larger, better financed airlines. How could they compete?
Larger airlines chose to compete in the busiest airports. This head to head competition led to inevitable price wars. Piedmont, on the other hand, continued to build its network in the southeast servicing many airports that other airlines would not even consider. This strategy paid off as the company was voted ”Best Airline”, clearly differentiating the airline as the high quality service provider in the industry. Next, US Airways purchased them, and you know the rest of the story!
Market trends are some of the key factors to look at when developing a strategic plan. But in addition to looking at the market attractiveness a company must also look inside and assess its own strengths and weaknesses. Compete on strengths and avoid areas of weakness. All of the airlines developed their respective strategies by evaluating the markets, looking at demographics and transportation trends. Piedmont chose to avoid competing with better-financed airlines in popular hubs. Instead it looked to service the area where it was already well established and an area that was less attractive to its larger competitors.
During the 90’s many companies saw the Internet expansion as a key trend to enhance growth. Pundits argued that the new economy was immune to business cycles – the new management mantra was ”get big fast – or go home”. Webvan embodied that mantra – to what end?
”Webvan Group, Inc. said it shut down its online grocery-delivery service and will file for Chapter 11, marking one of the most spectacular and expensive failures of the Internet era…. Webvan poured …$830 million… into high technology warehouse facilities and a 26-city expansion plan that most observers have since said was too ambitious.”(Wall Street Journal, July 10, 2001)
This is only one example of how companies assumed the Internet was the ”land of opportunity” pouring millions of dollars into plans that were ill-conceived and based on invalid business models.
Intelligent Information Systems, Durham, NC
During this dot.com boom Intelligent Information Systems (IIS), a software-consulting firm, was evaluating different potential growth strategies. IIS was clearly differentiated by its high quality standards and its commitment to total customer satisfaction. To many, ”quality” and ”total customer satisfaction” are just buzz words, but to the team at IIS these phrases are driving principles. While many technology firms in the Research Triangle Park were taking advantage of the lucrative public offerings, the senior management team at IIS knew that a public offering would cause the team to lose its focus on customer satisfaction and zero defects. After a public offering, associates would be imagining what they could do with their newfound wealth, watching the stock price daily, hourly, assessing minute to minute his or her net worth. This myopic self-interest would cause the company to lose its competitive advantage. A difficult decision to make during a critical time frame, but 20/20 hindsight shows that the IIS team chose the optimal course and direction for their firm by focusing on the key areas that set the company apart from the competition.
When developing your company’s strategy look for ways your company can capitalize on its unique mix of assets and capabilities. Do not follow the leader; choose the road that works best for your company – often the road less traveled.
For more information on how to take your strategic planning to the next level please listen to our webinar: Why Isn’t My Strategic Planning Working?
Denise Harrison is a senior consultant for the Center for Simplified Strategic Planning, Inc. She can be reached at firstname.lastname@example.org.
© Copyright 2014 by Center for Simplified Strategic Planning, Inc., Ann Arbor, MI — Reprint permission granted with full attribution.