Competitive Advantage or Less Competition?

Which one are we looking for? Are we looking for a competitive advantage in the industry we are operating or are we looking for industries and value propositions that will lead to less competition at least for some time?

When we go through most part of the business literature, competition and gaining competitive advantage are focal points of many discussions, articles and books. It is always mentioned that gaining a competitive advantage in a certain field and sustaining that advantage through investment and optimization are vital in success in a given industry. On top of that selecting and building a competitive advantage that is hard to replicate is another huge plus to be considered in any industry.

However, the problem is that this approach rests on the assumption that replicating or countering competitive advantages takes some time which will allow the owner of that particular competitive advantage enough time to harvest benefits from it. In today’s highly digitized and ever-accelerating business world, this is not always true. A competitive advantage gained in one area can be replicated by a competitor in a time frame which nullifies most of the planned benefits and higher ground position considered for the future. In today’s world, data is more abundant than it was ever before, more and more devices are getting intelligent and producing more data. Moreover, industries and businesses are gaining enough awareness as to how to develop competitive advantages. With the short-cuts coming with the digitalization, it is becoming increasingly easier for companies to counter competitive advantage positions of other companies.

One questions at this might be “what do we do, should we abandon seeking competitive advantages?” Obviously, the answer is not the abandonment of competitive advantage search, however we need to change and enhance this objective with additional factors. When we look at today’s competitive landscape, we see blurring in industry boundaries and the rise of the ecosystems where different industries and players come to compete and collaborate in the same space. Mobile technology-based industries, B2B industries and ecosystems like healthcare can be counted among prime examples of this change. And this change is not simply an increased collaboration among industry partners or companies, it is the creation of different industry setups with its own set of rules.

In the light of these changes, obtaining a true competitive advantage lies in finding places where there is less competition compared to focusing only on developing competitive advantages in the existing industry. As the digitalization increases and almost everyone is digging harder to find sweet spots in their existing industries, sometimes it is better to change position and find another industry niche to develop the prospects of the organization. This is something that many global brands like Apple achieved in the past and companies like Google and Facebook are continuously investing their cash in finding and developing such areas. Finding an area with less competition is like restarting the competition chronometer with a head-start and if exploited efficiently, it might provide the company with resources that can be utilized in the exploration and exploitation of the next area with less competition. As you might guess, no competitive advantage is permanent and companies following this approach should also understand the dynamics of timing as to when the new area and the approach are no longer providing a competitive advantage.

The approach we mentioned above might sound a bit obvious at first look. Although the idea itself is pretty clear, the execution of the idea and the capabilities to be developed at the background can be a bit complex and counter-intuitive. Below, I am summarizing few thoughts on how to position:

-         It is critical to think in terms of cross-industry dynamics. In today’s world, the industry boundaries are shifting rapidly and seeking a competitive advantage just within the boundaries of a given industry will not yield the desired results. Take the example of Apple or Amazon, they developed great products and achieved widespread use and adoption. However, they did not achieve this just by staying in their defined industry. They looked beyond the horizon, they connected the dots coming from different technologies and industries and they came up with novel solutions. And one critical aspect of this approach is that when the new product gains widespread use, it creates an environment where there is limited competition (since the product is new, novel and people are just understanding potential use-cases). Although this limited competition situation is temporary as other companies understand and develop similar offerings, it gives the creator a huge advantage in terms of timing, market-gain and know-how.

-         Creating the area with less competition requires more than trivial ideas. As you might guess, it is not possible to create new areas without developing novel solutions involving the integration of non-trivial ideas. In the hindsight, many innovations brought by the iPhone concept seem to be obvious. However, creating a new type of touch-screen, non-browser based apps, a new type of operating system and an architecture to put them all together were not trivial concepts. This approach also gave Apple the head-start and strong market position, which are fundamental principles in exploring and exploiting areas with less competition. At the time when people thought that the mobile phone market was saturated, this move and this new area re-defined the whole market.

-         Related with cross-industry dynamics, it is also important to locate niches. What I mean by finding the niches is that finding areas, where big players are not interested due to cost, market potential or prioritization, can be a foundation block for locating the area with less competition. Again, this is not a trivial idea but if executed carefully, it can be the stepping stone to finding a new market. One prerequisite for this is to have a strong diverse team able to reach out to different industries and disciplines. This way they can detect subtle changes in markets and inform their teams to zoom in on that specific area.

-         Moving into an area with less competition necessitates the respective muscle strength. In other words, companies must have the necessary resources and capabilities to move into these areas quickly and efficiently. In the case of start-ups, this refers to the capabilities of founders and the financial power provided by venture capital. As I mentioned above, when you explore an area with less competition, there is almost always an expiration date written on that area. To move there and to gain a position before the expiration date comes require considerable strength and speed to deliver the required value propositions. Without the muscle strength, the identification of the potential area remains only as a good idea.

-         One other building block we need to consider is the design thinking approach. Idea generation, testing and scaling out will be important tools in exploiting the new area. In finding and implementing ideas, achieving success in the first trial is an illusion, but achieving success in well planned number of trials can be a sure way of achieving desired results.

Finding competitive advantages in existing industries are the thing of the past. Having unique value propositions in markets with less competition and turning this statement into a method are the twin-engines of the new competitive advantage. Understanding this new dynamic and gearing organizations towards this will be critical for success.

The views expressed in this article are the views of the author only. This article provides general information and point of view, and should not be considered as professional advice.