March 17, 2010

Barriers to ENTRY or Barriers to EXIT?

The Business 101 Strategy Building discipline focuses on erecting barriers to competitive entry. This doctrine doesn’t go far enough and it certainly doesn’t create a BE DiFFERENT position for your organization.

Here are the issues I have with this traditional approach:

- its not DiFFERENT; everyone follows this very common method of strategic analysis.
- it tends to be rooted in a more theoretical perspective and lacks the dimension of showing people how to do it.
- while everyone is spending time trying to keep the competition out, not enough attention is given to the existing base of customers.
- it diverts attention away from investing in value based Offers for the existing customer base.
- its futile; you will never keep a hungry competitor out or restrict its natural market activities.
- it tends to focus on artificial non-market tactics to prevent more competition such as regulation and law rather than beating them with better customer value.
- it represses customer obsession in favor of dealing with non-market factors.
- it creates the illusion that competition can be restricted.
- it spawns an unhealthy culture that is preoccupied with preventing market activity rather than doing whatever is required to beat the competition in the trenches where the customers are.
- its a waste of valuable resources with an outcome that is inevitable. The telecom industry spend an enormous amount of money trying to prevent competitive entry into traditional monopoly markets through a time consuming and expensive regulatory process. The competitive tsunami wasn’t deterred, however, and they should have been paying more attention to creating better customer service and a marketing engine that provided compelling and unique value.

I am not suggesting that you shouldn’t pay attention to the competition, existing and potential. But don’t get obsessed about preventing them from doing what is reasonable given free market conditions. If they have an opportunity with your customers, expect them to make a play and respond by shielding your loyal customers from the onslaught of their competitive value proposition.

If you feel that a certain non-market response is necessary, go ahead and do it. But don’t let it be all-consuming. Don’t let it gobble up all of your resources. And don’t let it drain the effort in executing a customer response to the threat.

Observe your competitors; ACT for your customers.

BE DiFFERENT. Make it so difficult for your competition to attract your customers away from you - by providing them with constant unmatched VALUE - they will be frustrated and will have to endure so much pain, they will decide its not worth it. And they will retreat.

Create barriers to customer exit. The BE DiFFERENT way.

Cheers, Roy Osing

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Posted 3.17.10 at 08:40 am by Roy Osing | Read Comments (0) | Leave a Comment