Competition, Disruptive Innovation and Total Recall

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A key part of any product marketing role is analysing the competition for your product. Put simply, when your potential customers are looking to solve a particular problem or take advantage of an opportunity, what are the options that they see, one of which (hopefully!) is you?

Sometimes this job is easy when you have direct and obvious competitors (presumably Sony see Samsung as a competitor for TVs and vice-versa), sometimes not. However I think it’s worth breaking the problem down in to different types of competitor, most of which are relevant regardless of product category. I’ve listed these below (well, the ones I use anyway), ending with perhaps the most dangerous competitor of all – disruptive innovation.

Following on from an earlier post, I’m going to use the product category of “Holidays”, and try and work out what Eurocamp’s competitors are in this space.

Types of Competition

1. Not buying anything

Though it seems strange to talk about “not buying anything” as a competitor (who exactly is the competitor!?), this is an important group to consider if one of the biggest impediments to people purchasing your product, is people not purchasing anything.

I think there are actually two sub-divisions here – people who don’t buy anything because they don’t want to, and those that want to, but can’t.

1a. People who don’t buy anything because they don’t want the product category

It’s hard to imagine who wouldn’t want a holiday, so I think this is a small group in this category. However, if the category was pet food, then this is simpler – I don’t have a pet, so you’re never going to convince me to buy pet food. This group isn’t really competition at all of course, so forget about this segment.

1b. People who don’t buy anything because they can’t

A very different group to the above. In the area of holidays, there are many reasons why people don’t buy a holiday at all even though they want one. But you can often do something about these problems as a way of “Beating the competition”. For example:

Don’t buy because can’t afford it – offer much cheaper alternatives, out of season, last minute offers, cut cost-base and so on.

Don’t buy because don’t want hassle of foreign travel – offer holidays in home countries, or take away all of the hassle of getting to the sun (think “Costa del Sol”).

Don’t buy because no-one to go with – offer holidays targeted at singles, either for mixing with other people, or aimed at adventurous independent spirits!

Don’t buy because too busy with work – offer weekend breaks

And so on. There are ways of addressing this sort of competitor, as long as the desire for the product category is there.

2. DIY

Rather than buying a holiday, why not just get in the car, put a tent in the boot, drive to the south of Europe, set the tent up and hey presto – a holiday without paying a penny to any provider! This is a group who want to take a particular opportunity/fix a problem (in this case, taking a holiday), but don’t want to buy anything from anyone to do it. An example in the world of software – instead of buying MS Word to write documents, why not just use Notepad, or Write that comes free with Windows?

There are various reasons why people prefer to do it themselves, rather than pay you for your product or service. Sometimes this is price – they can’t afford to buy your product. Sometimes though this is on principle – why pay for something you can get for free, or build yourself with a little effort? I don’t remember my parents ever buying a sandwich from a sandwich shop – they would always go home and make something instead, it was cheaper and nicer (i.e. for them quality outweighed convenience).

If the reason for not buying something is price, then see above for possible solutions – can you offer something which is really not far from free (perhaps selling just part of the service) which the customer can afford? If the customer has to go my ferry or plane, then you could offer this limited service. With campsites as well of course, you could still profit from the holiday, by selling pitches in a variety of sites.

If the reason is principle, then the only way to address this is to really honestly think about what value you can add. This sort of customer isn’t going to buy your product just because you have a shiny website and an easy purchase process. Can you offer better pitches than could be obtained otherwise? Faster check-in? Flight availability the customer couldn’t get otherwise? Can you genuinely take away all of the organising hassle that goes with a holiday? Offer facilities, tours and activities that they couldn’t get otherwise?

3. Direct, obvious competitors

This bit’s easy. If you’re Eurocamp, there are a series of direct and very easy-to-find competitors which, give or take, offer more or less the same product at a similar price with similar service. At the sites I’ve been to, Eurocamp, Canvas Holidays, Keycamp and others all offer the same accommodation and at similar prices.

There are all sorts of strategies for competing against direct obvious competitors – brand? Price? Key differentiators? It depends on your market of course, but at the very least you should have, for these direct competitors, key “killer lines” for why you’re a better purchase than them. If not to display externally, for your sales and marketing teams to use in competitive situations, when pushed.

4. Same product category, different market

This can mean a lot of things, but what I’m really thinking of, are the competitors in the same category (here “Holidays”), but that are addressing a completely different market. For example, a week on a campsite for £300 is a “holiday”, and a week at the Hôtel de Crillon in Paris for 10 times this much  (at least!) is also a “holiday”. Similarly, if you’re selling a piece of word processing software for £100 and someone else is selling a something for £300, that does an awful lot more then yes, both of you are in the “Word processing software market”. However, you’re addressing a very different market. In the latter example, Microsoft sell MS Word for less than £100 and it’s sufficient for most people. However, a lot of academics pay a lot more for Nota Bene, primarily because of its advanced citation and bibliography functionality. Are these the same market? Similarly, when someone is looking for a £300 holiday on a European campsite, are they going to be looking at 5* hotels in Paris as well?

For these reasons, although it’s good to identify these different competitors, and make a judgement call on how close to you they are, I don’t believe they’re as important as the others listed above. The exception to this is when they start innovating and moving in to your space – the last category of competitor:

 5. Disruptive Innovators

This is the hardest group to track and the most dangerous. Clayton Christensen coined the term “Disruptive Innovation” in the classic book The Innovator’s Dilemma, and there are lots of sites showing some good examples of disruptive innovation, for example:

  1. http://www.slideshare.net/Christiansandstrom/5-examples-of-disruptive-innovation
  2. http://mashable.com/2011/10/09/7-disruptive-innovations/

I like the infographic on the 2nd link, with some good simple examples:

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A few themes come through here – often the disruptive technology somehow fulfils the same need for value (e.g. computing power for entertainment and other needs) in a cheaper, more portable way (the iPad). Also of course, and most dangerously, these innovations often come out of the blue and can completely undermine your business model (pity the poor netbook providers).

Really your only protections against these disruptions are to both keep an eye on what “the market”/your competitors are up to (keeping up with market trends, looking for new ideas that are bubbling up, new releases from current and potential other competitors, talking to analysts)  and also investing in innovation yourself. You should be actively trying to undermine your own business by looking for new approaches to solving the same problems – you should, after all, have the expertise!

Back to the world of holidays – what would be the disruptive innovation in this category? The best I could think of was the use of memory implants in the film Total Recall (the classic original of course, with Arnie, not the dull remake). Instead of having to actually go to Mars, they could implant the memories of going instead, presumably at a fraction of the cost.

But like all disruptive innovations, it wasn’t without technical glitches, and as far as I’m aware, we’re not quite there yet…

0 thoughts on “Competition, Disruptive Innovation and Total Recall

  1. Hey Ben, good post. Really like the categorisations.

    Coincidentally I’ve been re-reading some of Clay’s stuff recently as well as some of his newer stuff. He claims that industries can only be disrupted if they have what he calls a “technology core”. For instance his classic example is the TV/radio industries where the silicon “core” (transistor) was able to disrupt the incumbent “core” (vacuum tubes). A counter example he gives is hotels – they have no technology core. To compete you must emulate and therefore Holiday Inn can never disrupt Hilton because the core is brand and lifestyle. But the creation of a new technology core called “internet” allowed AirBnb & Co to disrupt both Holiday Inn and Hilton.

    Interestingly, in your holiday example you could say that the disruptors have been the airlines. “Old” holiday companies where based on a technology core of ships and trains. Then a new industry emerged wrapped around a new technology core: planes. Low-cost airlines further disrupted by innovating around the same technology core.

  2. Thanks for the comment. For the holiday example I was only thinking of “from now on”, but it’s a good point about the holidays and how airlines did disrupt the old way of travelling. the point about the “technology core” might be at the heart of the issue, and why holiday firms have survived as pretty much the same types of company for many decades. Sure they’ve found different channels (good old days of Teletext being one 😉 ), but the basic offering and business model hasn’t changed in a long time.

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