UK: TECH KNOW - The people and products shaping your future - Survival rules. Rule 2.

UK: TECH KNOW - The people and products shaping your future - Survival rules. Rule 2. - Rethink your industry to spot the competitors.

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Last Updated: 31 Aug 2010

Rethink your industry to spot the competitors.

By HUNTER MADSEN.

A stable business strategy used to serve as the gyroscope of every successful enterprise, helping to sustain balance in the face of shifts in environment. At the core of the strategy was a plain and enduring definition of one's industry and its competitive threats, a definition limited mostly to 'the group of firms producing products that are close substitutes for each other,' as expressed by the guru of competitive strategy, Michael Porter of Harvard University. Factors from outside the industry, such as broad changes in society and technology, were ordinarily of secondary import when compared to the industry's interior dynamics.

Alas, gyroscopes and other vehicles sustained by inertia wobble badly in the new economy. The emerging world is a fast-growing web of boundary-hopping networks and digital applications that confound conventional definitions of industry and push aside traditional barriers to competition from outsiders.

Suddenly, big software companies are playing in the travel and real estate arenas. Online credit card companies, investment firms and even supermarket checkouts are supplanting bricks-and-mortar bank offices. Web sites are upending the computer industry by selling hardware at a loss ... because they're essentially media companies that earn their profit from on-site advertising. Telephones are doubling as secretarial services and small business centres. Cable TV entertainment companies are now internet service providers. Five years ago, few of these interlopers would have even entered the wildest imaginations of the industries which they have since invaded with Hun-like success.

The new economy whips up all four of the classic competitive forces to an unprecedented degree - the threat of new entrants, the threat of substitute products or services, the bargaining power of suppliers, and the bargaining power of buyers. In response, astute executives now redefine - regularly and often - the industry in which they compete, and then successively revise the boundaries of their companies - and the bases of their competitive advantage.

The pure-play online sector has pioneered this protean practice. Thus AOL started out as an online subscriber service, evolved quickly to compete as a net portal, then as an internet service provider, then grew into a cyber shopping mall, and most recently, into an entertainment company greedily eyeing traditional broadcast competitors. Amazon.com, Netscape and others have shown a similar adroitness at seizing new opportunities and abandoning defunct ones without skipping a beat.

In all of this scrambling for musical chairs there is a lesson for late arrivals: paranoid vigilance. Ask yourself whether, and how, your enterprise might leverage the tools of the new economy strategically to alter its definition of its industry. More to the point, how might competitors - from both near and far - use these tools to alter THEIR definition? Now ask yourself these questions again ... every five minutes or so.

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