Fooling the competition

Companies can throw curveballs (a ball with a forward spin used in baseball to disrupt the hitter's timing) at rivals to lead them into making strategic errors.

by World Business
Last Updated: 23 Jul 2013

Ecolab, a US cleaning chemicals firm, threw one curveball when it lured its rivals out of the profit zone. By allowing them to win a large share of small, independent customers, a group who seemed to be attractive because they were prepared to pay a high premium for the service, Ecolab was able to focus its energies on bigger customers where it achieved greater efficiencies and economies of scale.

In 1999, Andy Hornby, who had moved from retail chain Asda to run Halifax Building Society's retail division (which later became HBOS, following the company's merger with the Bank of Scotland), threw another type of curveball when he employed unfamiliar techniques to win business. Hornby used retail methods not previously seen in banking, and aimed to give customers the 'best deal on the street'. The large banks did not want to offer similar stand-alone products, such as aggressively priced credit cards and loans, because they felt it would damage the business they had built up through cross-selling.

Managers can also cloak their success to throw off their competitors. A medical diagnostic equipment firm did this very effectively by assigning full-time service technicians to hospitals where it did not have a big sales base. Eventually, its rival discovered the practice, which did not make sense on a pure cost basis. But it later found out that service-contract renewal rates and new equipment sales at hospitals with a full-time technician were roughly twice the national average. The technicians not only helped to do on-the-spot repairs to faulty equipment, but they also helped the hospital make purchasing decisions.

A fourth curveball employed by managers is to let rivals misinterpret the reasons for their company's success. A classic case occurred in the airplane industry where new budget airlines such as Southwest Airlines used a production-oriented approach to scheduling, with the aim of keeping the planes in the air as much as possible. Traditional carriers focused more on the customer and were prepared to stay on the ground for 20 minutes longer to wait for connecting passengers.

Southwest's higher asset utilisation method enabled it to lower fares and keep fuller planes, leading to even better asset utilisation. Most traditional airlines, with the exception of Australia's Qantas Airways, failed to spot the importance of asset utilisation.

The way to find new curveballs is to look beyond the averages. Look, for instance, at industries where practices are different, or drill down deeper to find unusual trends in a company's service or account, rather than accept the average figure.

Curveball: strategies to fool the competition
George Stalk Jr
Harvard Business Review, September 2006

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