Why Challengers' Strategic Planning Must Be Different From Market Leaders'
Yankee Reliever Tommy Kahnle by Elsa/Getty Images)
A basic tenant of strategy is that market leaders must diverge to keep their lead while close challengers are generally better off converging to take share from the leaders. On the other hand, distant challengers are better off playing in the niches. As the old saying goes, when the elephants fight, the grass gets trampled. This leads to three suggestions for distant challengers:
- Start by reverse engineering the leader’s strategy so you know what you’re diverging from.
- Be explicit about the current and future capabilities and culture required to implement your strategy.
- Be ready, willing and able to adjust as the leader changes.
Reverse engineer the leader’s strategy
Coca-Cola’s Taiwan and Hong Kong teams had a joint meeting. Each team presented their strategic plan to the other. Then each team thought through what they would do if they were facing those plans as Coca-Cola’s main competitor, Pepsi. In each case, everyone agreed that the proposed response by Pepsi would lead the original Coca-Cola plans to fail miserably.
In general, it’s not that hard to reverse engineer a market leader’s strategies. As a challenger, you face the same customers and conditions they face. You generally know their collaborators. And you know yourselves, their competitors, better than they do. You can figure out their capability strategy by looking at investments their making and jobs they are posting.
Armed with that, you can generally create a reasonably coherent assessment of their strengths, weaknesses, opportunities and threats. Cross strengths and opportunities and you get key leverage points. Cross weaknesses and threats and you get business issues. A sound strategy is built off those.
Armed with that, you can figure out where you’re going to play (where they are not) and how to win in those areas.
Be explicit about current and future capabilities and culture
At the most recent CEO Connection Mid-Market CEO Convention, Oliver Wight’s Eric Deutsch and Dancker CEO Steve Lang led a workshop on Strategic Planning for Mid-Market Companies Battling Giants. In addition to keeping the giant’s strategy front and center, they argued the importance of focusing on your “internal strategy”, building the culture and developing and recruiting talent.
It’s generally best to take a phased approach to future capability building. If you wait too long to build your capabilities, you’ll miss opportunities. If you move to fast, your costs will outpace your revenue and you’ll run out of cash. The timing of when to bring in capabilities is a critical strategic choice.
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