Presents

Surviving SaturationHyper Competition and Your Choices

by Will Phillips
To download presentation and supporting materials: See Presentations on home page REXonline.org

Wills UK Cell: 787 208 3361

Why Hyper Competition?

#1 reason for joining? Knowledge sharing Brand convergence Quick niche copying High quality is the norm Decline of brand loyalty Success attracts new entrants Rising tide of medical-health information Investors attracted to recurring income Market segmentation AND little increase in ww demand
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What You Can Do

A. Sales Machine: Powerful, Successes System B. Specialty niche
A. 60 + year olds, Kids Performance, Squash

C. Differentiate: Blue Ocean

A. -25-35, Family

D. Hard ball E. Shrink F. Die

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A. Sales Machine
1. 2. 3. 4. 5. 6. CLUB GENERATED LEADS: 60%. SELF GENERATED LEADS: 40% RECRUIT-SELECT-HIRE PIPELINE NEW SALES PERSON ORIENTATION CORE TRAINING: Sales; Product SALES MANAGERMENT: Manager, tracking, daily training, daily meetings. 7. EFFECTIVE INCENTIVES-MOTIVATION
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C. Blue Ocean Strategy

All industries today! Focus is beating the competition.

Focus of all strategy work for 25 years

Insufficient to sustain high performance

How To Create Uncontested Market Space and Make the Competition Irrelevant

Capacity to Create New Industries

Discount Retail Express Delivery Minivans Snowboards Home Videos Cell Phones 24 hour news Gas Fired Electricity Plants
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The Track Record

14% of new business launches are They produce 61% of the profits 80-20 Rule rules!

 For example: The Circus

Declining industry Kids wanted Play Stations Animals Rights Uncomfortable tents

 Cirque du Soleil
For Adults No Animals In Theaters

Uncontested market space 5x the ticket price

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Respond To Competitors

Value Innovate

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1st Principle
Value creation without innovation is incremental. Innovation without value is tech driven or futuristic. Value Innovation aligns :
Utility Price Cost Avoids value-cost trade offs

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Cirque
Dropped

Animals: expensive and offensive Star performers: expensive and turnover Aisle concessions: high priced add on Three Rings: confusing
Sophistication Story line Original scores Multiple productions: Four in Las Vegas now!
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Added theater

Cirque
Drove Costs down where industry competed Drove Value Up in new areas

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Principle #2
Compete in existing market space Beat the competition Exploit existing demand Make value-cost tradeoffs Align organization with its choice of differentiation or low cost Create uncontested market space Make competition irrelevant Create and capture new demand Break value-cost tradeoffs. Align organization to pursue differentiation AND low cost

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Principle #3 - Factors
Assignment What are the factors you compete on:
Products and services Costs Delivery

Consider what is on the agenda of

Industry publications Industry conferences Industry gurus, consultants and advisors.

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Principle #4: Four Actions Framework

REDUCE COST:
Costs Down 1-Eliminate industry factors 2-Reduce over designed industry factors

CREATE NEW VALUE:

3-Escalate compromised industry factors 4-Create new factors
Value UP
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RED BULL
Double the caffeine of Coke 2/3 the size of Coke can More than twice the price 1.9 billion cans sold in 2004 Spends 30% of revenue on marketing
Not super stars, but 500 fringe athletes, hip kids Sponsors extreme sport contests and cultural events 14 Red Bull airplanes for air shows

Coke spends 9%
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 Market share is 40% to 80% per country A new market: ENERGY DRINKS PS Market research showed people hated
The Name The Taste The Logo

Coke, Pepsi and Anheuser-Busch have all joined the new market
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D. Play Hardball To GROW

Defenders best hope is not to loose.

Aggressors can win. CHOOSE!

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Whats Hardball Look Like?

Single minded Relentless Ruthless Playing to win Willing to hurt competitors Willing to get hurt DONT cheat
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Softball ?
Make money Run a good business Focus on soft skills
Leadership Marketing Teamwork Customer service

80% of management books and consultants

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Soft Ballers
Complain about competitors Want restrictions against competitors Complain about unfair advantages Hard ballers call all this WHINING

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Hardball Strategies
1. Deep understanding of your profit model? 2. Deep understanding of their profit model? 3. Avoid head to head attacks
-SWA flys to secondary airports

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4-The Will to Win and a Sense of Urgency Takes Priority Over:

Complacency Cockiness Bureaucracy Status Hierarchy Petty conflicts Greediness Blindness to opporthreats
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5-Play the Edges -Legally -Financially -Industry Wise -Edges are Blurry -Dont break the laws

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6-Devastate Rivals Best Profit Centers -Promotional flooding -Price cuts -Surgical focus -Based on real knowledge of costs/profits of competitors

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7-Plagiarize with PRIDE -Steal any good, unprotected idea -Improve it -Suck away their uniqueness

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8-Deception -The beloved sports fake -Vaporware -PR -Rumors

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9-Unleash Massive and Overwhelming Force

-Do not act until fully ready -Hammer blows -Focused -Direct -Swift -Repeated -Relentless

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10-Raise Competitors Costs -The super low price offer-one day -When they dont understand the true costs -Know and then cede the unprofitable clients and sectors

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Assess Your Strategy

1=Unequivocally Yes 2=Sometimes 3= Maybe 4=Rarely; its not me/us!

1. 2. 3. 4. 5.

Will to win? Willing to get hurt? Willing to hurt? Play the edges? Know your competitive advantage? 6. Dont complain and cry unfair.

7. Deep understanding of your profit model? 8. Deep understanding of their profit model? 9. Have a hardball team? 10. Havent played a lot of soft ball?

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Total Your Score and Divide by 10

1.00 to 1.49 Hard ballers. 1.50 to 1.99 Junior hardball teams. 2.00 to 2.49 Part time hard ballers. 2.50 to 3.49 Softballers; beware of hardballers entering your league. 3.50 to 4.00 May be earning good money mowing the grass; not competitive players.
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New Format Invasions

Strategy and Business Issue 40

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New Format Businesses

Assemble common assets in new ways At 20% to 40% lower costs While maintaining or improving quality DO NOT rely on new tech Change multiple functions at once Often reach into vendors and distributors All this works only when done all at once.
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Old Format Success

Focus on the killer app
Minivan Ipod Viagra

New Format Success killer app is

Massively lower costs

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Gas Station
Gas and repair bays Gas and convenience store Gas ATMs in Scandinavia
50% less margin needed for nice profits

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Zara
Retail fashion clothing loses margin in
Unsold clothes; markdowns

Zara
sells 80% = twice the normal

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 Stage 1
Strips out amenities Focus on bare bones Quality Honest Reliable Attracts penny switchers

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 Stage 2
few patents lots of copiers Successful copiers move into
new geography new market segments

Old format businesses

Move down and die Move up but are anchored by the low priced comp.
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 Incumbents mistakenly ascribe

new formats success to
paying less for labor or materials In reality this is true but they also use far fewer resources. lower quality

No cases of an incumbent responding successfully unless they adopt the new format.

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New Format Survivors

Have a clear and accurate view of how new format competitors deliver value at low cost. i.e. how the new format works They adopt the whole new format and dont fiddle with pieces. Adaptations to the new format do not compromise the low cost advantage. Make the new format their core business not a side offering
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What You Can DO

1. Scan market for new format invaders 2. Understand the new format 3. Look at the new format as an OPPORTUNITY 4. Design your moves from the market back 5. Be very careful of adding costs 6. Make the new model your mainstream 7. Avoid mergers
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Stay Alert.Be HumbleAdapt

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Strategies for Fighting Low Cost Rivals Three Questions Six Strategies
From Nirmalya Kumar HRB Dec 2006

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1-ASK: Will competitor take any current or future customers? Yes

No

Watch, dont take on !

Dont launch price war! Mine your data on numbers and customers. Increase differentiation.

2-ASK: Will enough No customers pay more for what I offer?

Scale down size. Learn to live with it. Merge. Acquire similar companies.

3-ASK: If I run a low cost business, will it synergize with my high cost business?

Become a low cost player. No Sell custom solutions.

Yes
Step up differentiation. Differentiate on many aspects. Reduce costs.

Yes
Attack with a low cost business of your own. Danger

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Follow Up Reading Books

The Art of Profitability by Adrian Slywotsky Profitable Growth Is Everybodys Business by Ram Charan How To Grow When Markets Dont by Adrain Slywotsky Confronting Reality by Larry Bossidy and Ram Charan Blue Ocean by Kim and Mauborgne Hardball Strategies By Salk and Lachenauer
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E. When Not To Grow/Shrink

Owners lifestyle is good. Staffs lifestyles are good. Owners ego is dormant. Your desire for contribution/meaning is full. Your business is not growing for a while You have tried everything you can. Competition is strong
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Barriers In Responding To Competition

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7 Habits of a Highly Defective CEO

1. 2. 3. 4. 5. 6. 7. Arrogance. Wishful Thinking. Insecurity. Denial. Control. Distancing. Isolation.
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Thank You Will Phillips

To download presentation and supporting materials: See Presentations on home page of REXonline.org

Wills UK Cell: 787 208 3361

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