Businesses are often established and over time grow to become very successful on a competitive posture established by the founding leadership team. But often that competitive posture is not recognised nor retained in its corporate memory. And there starts its decline.
Think of some companies that were once very successful and now are no longer with us or ones that faltered and then regained their footing. Some easy examples in the latter category are Starbucks and Apple, both of which saw their founders returning to refocus the businesses.
So why does this happen and how do you make sure it doesn’t happen to you?
No matter how large or small your business is, no matter how young or old, understanding how you compete in your chosen marketplace is critical. Two key words here: ‘compete’ and ‘chosen’. The market you chose to compete in, how you define its boundaries and traits, and how you decide to position yourself in that market are – or should be – conscious decisions. You position yourself to win, to be able to out-compete anyone else in that market.
“Positioning is dynamic and not static, and therefore your ability to compete turns upon the capability of your business to respond proactively to change; to, in fact, lead change, lead the market and not be a follower.
Remember, the term ‘competitive posture’ describes the way in which a business has chosen to dynamically position itself within a market to give it the greatest competitive strength possible. The ability to bring so much to bear on customer value that no one can withstand your strength – like a hundredweight crushing down on any competitors’ offering. Your competitive posture creates a shared and clear identity. Your competitive landscape will be changing faster than you can plan but your competitive posture will allow your business to step forward and compete with certainty.” – An extract from Strategy Play – Crafting Undefeatable Business Strategies.
Let’s take a quick look at one of the examples mentioned above, Starbucks. There was an article published in January of this year in Strategy and Business, written by Thomas A. Stewart and Patricia O’Connell, which crystallises the challenge. The authors speak of Starbucks having “an angel on one shoulder and a devil on the other”. The angel guides the business toward its founding purpose and vision, whilst the devil “whispers of the temptations of growth”. Growth, code for more profit, often comes at the expense of purpose, vision and customer value.
The authors go on to cite the following example. Howard Schultz returned to Starbucks as CEO and chairman in 2008, after an eight-year absence, when growth and profits were tailing off. In retaking control he refocused the business by highlighting that “his successors had gone astray in a bid to streamline store design to meet financial goals. In fact, he wrote, the focus on financials had hurt the company because its shops ‘no longer have the soul of the past and reflect a chain of stores vs. the warm feeling of a neighbourhood store’. The demands of the devil had drowned out the advice of the angel.”
So the new leadership team at Starbucks adopted a strategy of growth to drive profits without having a clear eye to what made their business successful. Starbucks lost its focus on giving customers a place to “slow down and smell the coffee and immerse yourself in the experience”. They forgot what their competitive posture was in their chosen market and brought a focus on profit to the surface, which typically means cost reductions and a drive to lift sales.
I am a firm believer that businesses compete around customer value and only by focusing on that value will profit follow. Once your mind places profit first, customer value tends to diminish and the path to declining profits has commenced. It seems to be inevitable that declining customer value erodes enduring profitability, and short-term measures of reducing costs and forcing sales up, are only temporary reprieves.
Your business should exist for a purpose, that purpose being to meet a specific need in the community. You position yourself in that chosen market to draw your strengths to the surface and allow your products/services to deliver greater value than any competitor. Your eye is to customer value and you are constantly focused on customer need, how that is changing and how you may lift the value you deliver. Opportunities for growth also come from this focus.
You step into the market with a competitive posture that allows you to out-compete anyone else and you evolve, re-invent and add value. You lead change and are not led by it. The entire business knows your competitive posture; it is your shared and clear identity. It allows you to deliver on your purpose.
Active Knowledge Questions:
- What is your chosen market, its customers and their needs?
- Can everyone in your business clearly state how your business competes?
- Does everyone, therefore, understand what are the non-negotiable traits of your business? Those traits which if you changed them would alter how you have chosen to compete?
- Are your growth strategies built around creating more value to meet more needs, or are they led by cost reductions?
Do you need to reconnect with your competitive posture? Take a look at Strategy Play – Crafting Undefeatable Business Strategies.
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All the best in the success of your business,
Richard Shrapnel
