HYPERCOMPETITION

HYPERCOMPETITION

The essence of competitiveness is liberated when we make people believe that what they think and do is important, and then get out of their way while they do it. ~ Jack Welch

Hypercompetition is a situation in which there is a high degree of competition among companies in a rapidly changing market where, it is easy to enter a new market, so that it is not possible for one company to keep a competitive advantage for a long time.

Traditional competitive strategies are unsustainable as they involve complete ignorance of profit margin just to get higher market share. Hypercompetition involves changing dynamics of factors such as price-quality-positioning, protect or invade established product and geographic markets, deep pockets (financial capital), and creation of even deeper pocketed alliances. Instead of jumping into unsustainable strategies of survival, companies, irrespective of their size or scope, should implement their strategies based on finding and building temporary advantages through market disruption (D’Aveni).  Hypercompetition means winning at all costs.

As per Rplant’s article Hypercompetition and Differentiation, a company must have innovation as its USP to stay competitive and continually deliver unique and highly advance products and services for which is little or no equal in the marketplace. However, such a claim is difficult to buy as innovative products and services have been successfully copied in the past and present within a small amount of time, thus ruining the monopoly of a great company. So what’s actually the winning strategy in a hypercompetitive market? The answer is a simple word: Agility.

Agility is the property by which a company can create and deliver value faster than its competitors. So it’s not just about innovation but it’s the ability to innovate and deliver faster than any other firm is what gives the company its edge in the market.

According to Richard D’Aveni, competition escalates across four arenas of competition.

The four arenas are:

1.       Cost-quality advantages

2.       Timing and know-how advantages

3.       Strongholds from erecting entry barriers

4.       Deep pockets

Hypercompetition Arena 1 – Cost-Quality Advantages

Firms can compete at particular points along the value curve or along the full length of it from a low price, low quality product all the way through to a high price, high quality product. However, in hypercompetitive markets, companies are forced to create product differentiation by giving out a high quality product at the lowest possible price.

Hypercompetition Arena 2 – Timing and Know-How advantages

It is all in the timing of product launch that makes a company either to reap profits or run into unforgettable losses. Also, by quickly imitating the first mover, some companies get an edge by saving their costs of innovation. So a company must also possess the know-how for bringing in rapidly changing innovative ideas.

Hypercompetition Arena 3 – Strongholds from erecting entry barriers

Industries erect their own barriers to prevent any newcomers from entering into the market by utilising their stronghold over the existing market. Specific skill and resource building is required to penetrate through these barriers.

Hypercompetition Arena 4 – Deep Pockets

Sometimes some companies are too wealthy to be beaten in competition. Smaller firms can avoid any disadvantage in this area through joint ventures and strategic alliances.

The new 7-S model of Hypercompetition

The new 7-s model by D’Aveni addresses all the four arenas as discussed earlier.

It is based on factors such as:

·         Stakeholder satisfaction.

·         Strategic soothsaying.

·         Positioning for speed.

·         Positioning for surprise.

·         Shifting the rule of the game.

·         Signalling the strategic intent.

·         Simultaneous and sequential strategic thrust.

Example of the impact of Hypercompetition on mobile phone giants:

Nokia led the wireless revolution around the millennium and set its sight on ushering the world into the era of smartphones. The Nokia Communicator was one of the first mobile phones that combined business optimized functionality with a QWERTY keyboard and an LCD screen. However now in 2012 when the smartphone era truly had arrived, Nokia was racing to roll out competitive products as its stock price collapsed and thousands of employees lost their jobs.

In  same year, 2012, Nokia ended a 14-year-run as the world´s largest maker of mobile phones, as rival Samsung Electronics took the top spot and makers of cheaper phones, ate into Nokia´s sales volumes. Nokia share of mobile phone sales fell to 21% in the first quarter from 27% in 2011, according to market data from IDC. Nokia´s share of the market had peaked at 40.4% at the end of 2007.

The iPhone had been launched by Apple on January 9th 2007, and it had changed everything. Nokia lost ground despite spending $40 billion on research and development over the past decade, which was nearly four times the amount spent by Apple in the same period.

When the iPhone was launched, Nokia failed to recognize the threat. Consumers loved the iPhone and by 2008, Nokia executives had realized that the threat was not the hardware but the software and the app store business model, and that matching the iPhones slick operating system IOS was their biggest challenge. By then it was too late.

Internet of Things

Internet of Things (IoT) in simple terms  is the interconnectivity between things using wireless communication technology (each with their own unique identifiers) to connect objects, locations, animals, or people to the internet, thus allowing for the direct transmission of and seamless sharing of data.

Communication is the key in concept of Internet of Things. In IoT, everyday devices will be able to automatically exchange information over a network. IoT will also impact on our everyday lives by changing how we monitor traffic, weather, pollution, and the environment, and how we collect relevant data. However, with an influx of connected devices, we will also see an influx of data, where every device will be programmed and tracked. The question is: how can marketers use the data to enhance the performance of their business?

The internet of things brings about an opportunity to measure, collect and analyze an ever-increasing variety of behavioral statistics. In theory, the cross-correlation of this data could revolutionize the targeted marketing of products and services.

Here are 5 ways that IoT will improve marketing ROI:

1.      Easy Exchange of Sales Data

Accurate sales data is the key to any successful business. By having access to information regarding how, where, and why the products are being purchased and used, and the companies can better tailor their marketing efforts towards specific clients.

Smart devices that can gather this data and supply it back to in real time, without the need for IT professionals to direct or monitor the interaction, will allow businesses to create informed marketing strategies and improve ROI on future sales. More importantly, customers will be able to provide useful feedback instantaneously. So, if a specific product isn’t living up to expectations, the company will instantly know the reason behind it and take corrective action accordingly.

2.      Smarter CRM: Instantaneous Customer Analysis

customer relationship management (CRM) tool will help to efficiently and accurately analyze gathered data and provide actionable results regarding consumer base.

For marketers, this can be invaluable, given that the buyer’s chain of command is often long, and decisions take more time to be made. IoT devices can streamline this process by helping understand where the prospect is in their buying journey so that issues are resolved faster and help them serve the right information that will nurture them to ultimately close a deal.

3.      Devices That Know They’re Dying

One of the more promising aspects of smart-enabled products is their potential ability to perform their own regular maintenance and diagnostics. With the power of IoT, every component is “smarter” so the ability to identify the problem, as well as the solution, will be lightning-fast.When it comes to conventional items and devices, often the first sign that anything is wrong comes when the device abruptly stops functioning altogether. When this happens, there’s not much that can be done, aside from getting it repaired or ordering a whole new device and waiting for it to arrive. IoT devices could eliminate that downtime by constantly monitoring their own functions and contacting technical support when necessary. And should a major, irreparable problem be detected, the IoT device could easily order a replacement for itself, so that when it finally does shut down, the new model will already have arrived and be ready to be put into service. The same goes for upgrades. Many users put off upgrading their devices out of fear that the new upgrade will be buggy, time-consuming to implement, or that something will go wrong. Unfortunately, failing to upgrade software often leaves the devices open to security compromises or known problematic issues. IoT devices would take feet-dragging users out of the equation by searching for, downloading, and installing new upgrades completely on their own (Forbes-Sales force voice, Aug-2014).

4.   Predictive Social Media

We all know how social media sites such as Facebook and Twitter contributed to increase in web traffic. Today, 74% of brand marketers report that they see a noticeable increase in web traffic after investing a mere 6 hours a week in social media marketing efforts. The IoT is already optimized for use with social media, allowing automated posts and shares to be regularly generated by the devices themselves, and preparing the way for new online communities to develop centered on users of particular devices. Marketers, who are able to predict the development of these social communities, and target their efforts towards these communities, will be able to reach potential customers that may not have previously been available. Likewise, IoT devices, when coupled with social media, will allow marketers to identify and take advantage of new emerging trends.

5. Imagine a 100% CTR (Click through Rate)

As increasing numbers of our once-unconnected devices and objects are being fitted with sensors and given constant network accessibility, the face of advertising will change for both the marketer and the consumer. No longer will marketers rely on banner ads or popups based off a website you visited on Tuesday; most IoT devices will be completely unable to process or even display such crude ploys. As a result, the age of the interruptive commercial will finally come to an end for consumers. In its place will be a new world in which advertising must be beneficial and completely relevant—where no prospect is served an advertisement that doesn’t align perfectly with their interests, behaviors, and past purchases.

Not only will the consumer save time by only being served relevant ads, but marketing will no longer waste thousands of dollars on irrelevant advertising. Marketers would need to have a detailed understanding of their consumers in order to take advantage of the new opportunities being made available, but those who are able to make the transition will find that the IoT allows them the opportunity to stop being marketers, and finally start being valued business resources.

Sensemaking

Sensemaking is the process by which people give meaning to experience. According to Klein et al. (2006b), Sensemaking is a set of processes that are initiated when an individual or organization recognizes the inadequacy of their current understanding of events. But how is Sensemaking relevant to the world of marketing? What lies ahead in this blog, is the answer to this very question.

The concept of sensemaking (Weick 1995) offers a holistic explanation of how organizations make sense of informational signals by defining how people in organizations place stimuli into frameworks for understanding. It has emerged as a concept used by many researchers in diverse fields, particularly organization learning and knowledge use (Dougherty, Borelli, Munir and O’Sullivan, 2000) in organizations.

The boundaries of marketing discipline are no longer restricted to advertising in print media, TV broadcasts, guerilla and other traditional marketing techniques. Today market research has become the most important aspect of marketing. The common models of marketing research do not suggest how we arrive at the definitions and interpretations we do. Nor, do they shed light on why we make the decisions we do. They do not explain, for example, the behavioral factors drawing researchers to particular target markets, sample determination, and particular interpretation of data. Any research work should be logically followed by decision making. Sensemaking involves use of specific rules, preferences to frame and order the information selected and gathered for decision-making.

Sensemaking gives a collective view of the outcome of the research rather than each one interpreting it in a different manner.

Triggers of Sense-making

Weick (1995; 2001) has suggested seven characteristics of sense-making including: (1) social context; (2) personal and organizational identity; (3) retrospection; (4) salient cues; (5) ongoing projects; (6) plausibility; and (7) enactment. These seven characteristics can be applied in the marketing research process.

Social context evolves out of the conversations among the members of the marketing research team. As researchers talk among themselves, the emergent social context influences the direction, quantum, and the significance of the research effort.

Personal identity and organizational identity are formed from the process of interaction associated with sense-making (Weick,1995). Personal identity and sense-making are closely aligned. The research group forms a group identity. That identity will influence the research process.

Retrospection opens up opportunities for sensemaking. The important point is that retrospective sense-making is an activity in which many possible meanings may need to be synthesized. The problem faced by the sensemaker is the ambiguity of meanings.

Salient Cues: The research group will look at cues and try to interpret the meaning by allowing data to drive the theory as opposed to theory driving data. Sense-making suggests that we cannot know the pattern and we make sense of the pattern using cues and past knowledge.

Ongoing Projects: Sensemaking is an ongoing process where individuals simultaneously react to the environments they face.

Plausibility: The marketing research team chooses the most plausible theory or explanation out of many others so that it is in sync with their beliefs or organizations practices.

Enactment: It is a form of self-fulfilling prophecy in which the people in organizations have a tendency to produce a portion of the environment they face much in the way that legislators do. Market researchers tend to approach their research from pre-conceived notions. In part, this will guide them to seek and obtain the results that they want.

BLUE OCEAN STRATEGY

BLUE OCEAN STRATEGY

Blue Ocean Strategy is a buzzword quite prevalent among the corporate circles in various organizations. The evolution of this term is infact from a book published in 2005 and written by W. Chan Kim and Renee Mauborgne, Professors at INSEAD and Co-Directors of the INSEAD Blue Ocean Strategy Institute. The entire book is based on a research and study of 150 companies and their strategic decisions to face the competitive environment. The findings of the study lays down a success strategy that companies should create their own market space instead of fighting out with competitors to gain market share.

To understand the blue-oceaned market space, let us first understand the meaning of ocean. The entire market universe is divided into red and blue oceans (metaphors).

Red Ocean

Red oceans define an existing market space with well-defined boundaries. The rules of the competition are known to all and the companies fight really tough to gain a higher market share by outperforming others. The higher the number of competitors, the lower is the share of market and profits. This makes the market space blood red with cut-throat competition and hence the term ‘Red Ocean’.

Blue Ocean

Blue Oceans widely denote the non-existent industry and an unexplored market space. Blue Ocean is an analogy to describe an industry untainted by competition and an opportunity to grow rapidly as well as profitably.

The concept which is most widely discussed within the blue ocean strategy is the concept of ‘Value Innovation’. It comes with an aim to make competition irrelevant by having a fresh strategic move to raise and create value for the market along with elimination of less valued features or services. It tries to create product differentiation as well as achieve lower costs and hence create an uncontested market space in order to achieve a sustainable competitive advantage.

An example of Blue Ocean Strategy

A good example of a Blue Ocean Strategy is Apple’s iTunes. Apple not only entered digital music space by – and signalled the end of the previous inn cutting edge gadgets but also became a distributor by creating iTunes, an online service where people could download high quality songs for a very reasonable price.

With the technology available to digitally download music free instead of paying for a CD, the trend toward digital music was clear. Apple launched its own online music store, a concept which was unique as well as affordable. No wonder, that for a long period of time, Apple was in Blue Ocean without any competition whatsoever.