Who should you be watching? (Part 1)Posted: April 1, 2013
April 1, 2013
Bloomberg BusinessWeek recently featured a major profile of the Korean electronics giant Samsung. In discussing its strategy for entering new product categories, the article pointed out the step-by-step approach Samsung takes:
First, start by making a key component for that industry. If possible, select one that requires a substantial investment, since this also creates a barrier to entry for your own direct competitors.
Second, sell the component to several companies in the market, not just one. Over time, this will provide your firm with insight into how that marketplace operates.
Third, once you decided to expand your operations and to begin competing with the companies for whom you have been a supplier, make “massive investments in plants and technologies, leveraging [your] foothold into a position that other companies have little chance of matching.”
In other words, your current supplier can become a future competitor.
This strategy is not new. In fact almost 25 years ago, our CI training courses featured a look at this very strategy – from Japan, not Korea, and involving engines, not electronics.
What this means is that you should devote some of your competitive intelligence efforts beyond merely direct and indirect competitors. Now, you only have so much time and other resources available, so you cannot try and study everything and everyone. In the case of suppliers, look for suppliers that have the characteristics of the Samsung strategy, that is occupying a key position as a supplier, but having history of moving from being a supplier to being a competitor. Now admittedly their ability to move will not be as fast as one of your competitors, but the long-term threat may be as severe.
The same holds true dealing with customers, particularly if you are in a business to business marketing niche. Just as you may look at integrating downstream operations to improve your competitive position, be wary of key customers who may be thinking of integrating backwards, that is replacing you. Again you cannot spend the same time and effort on this as you do on direct competitors, but you have to understand that you cannot just look at competitive activity for today and tomorrow. You have to look 1,2,3, even five years ahead.