3 Keys to Competing

Feb. 2 2011 - 11:33 am
FORBES
By AUGUST TURAK

When we consider “the competition” as other companies offering similar products we are only partially right. There are three levels to competition and our direct competitors are only the first and most obvious.

The second level of competition is indirect competition. In the early days of spreadsheets, VisiCalc and Lotus 123 were first to market. A Wall Street Journal article at the time argued that both companies were so busy competing with each other that they failed to notice that most people still didn’t think they needed any electronic spreadsheet. The challenge for both companies was not being the best spreadsheet, but generically selling the category “spreadsheets.” VisiCalc’s competition was not just Lotus, but everything else besides spreadsheets that a client could buy.

Selling a category in order to sell a specific product into that category is what I call a “two step sale,” and though this indirect competitive challenge is most acute for new ideas it never goes away. Long after becoming a huge company, Campbell’s was still spending millions of dollars touting “Soup is Good Food.” Campbell’s realized that the real competition was not the soup made by Heinz or Progresso but everything consumers eat instead of soup. Campbell’s spent big dollars generically competing for soup despite the fact that this also benefitted its direct competitors. When I worked for MTV, our competition was not merely our direct television rivals, but anything that indirectly competed for the consumer’s leisure time.

Indirectly competing for “budget” is as important as getting the deal once the budget has been allocated. Indirectly moving a category from “nice to have” to “must have” is critical even if once in a while it means losing a deal to a direct competitor piggybacking on all our work.

The third level of competition is the most insidious, most often neglected, and hardest to overcome. In most cases we don’t lose the deal to direct or indirect competition. We lose deals because the client does nothing at all. Our number one competitor is procrastination and procrastination is just another word for fear of change.

Despite the fact that many self appointed “change agents” think there is something inherently irrational or even pathological about the fear of change, there are damn good reasons why it has survived the incessant pruning of natural selection. All change is not good, and this is why the adage “No one ever got fired for buying IBM.” has persisted for so long in the mythos of business.

We started our business on a few thousand dollars and a shrink wrap accounting system. Seven years later an Israelis company acquired us and that same $149 accounting system for millions of dollars. Despite the fact that we rapidly outgrew that accounting system, cursed it daily, constantly looked at wonderful alternatives, and even allocated budget, we never replaced it. Why? Fear of change.

We were terrified that something would go wrong during the transition that would bring our business to its knees. We were afraid to find ourselves with the worst of both worlds: an old accounting system no longer functioning and a new one not yet on line.

All authentic change goes through three stages:

1) Anticipation

2) Regression

3) Consolidation

Anticipation is the exciting stage of change where we anticipate the benefits and make our transitional plans. Regression is when things get worse before they get better. Consolidation is when we turn the benefits of change into business as usual.

The problem lies with the regression phase, and our fear is that this regression will become permanent. When we quit a good paying job to start a business we anticipate that owning our own business will mean more fun and more money. However we must be prepared for a regressive stage where we initially make less money and have less fun than we did at our old job. Our greatest fear is that if the business fails this regressive stage will become permanent. We end up with the worst of both worlds; no job and no business.

It is not change per se that people fear but more specifically the fear that the regressive stage will become permanent. As a result, we try to ring out the risk by looking for an evolutionary change model that skips over the regressive stage. However this is like expecting to change your golf swing without getting worse before you get better. Taking a step backwards in order to take two forward is an essential aspect of authentic change.

The reason why all those accounting system sales reps vying for our business never got a sale is that they never addressed our fear of the regressive stage of change. Instead the salesmen repeatedly discounted their products.

As an old salesman, running a sales driven company, nothing infuriated me more than watching salesmen discounting perfectly good products because it was easier than uncovering and addressing the real objection. Yet even when I explicitly told these reps that they were wasting my time and their money discounting, they never addressed our fear of change and consequently never got the sale.

Fear of change is the number one competitive challenge. Offering the kind of hand holding services that guarantees a successful transition from anticipation through regression to successful consolidation is the only way to overcome the procrastination that kills the vast majority of potential deals.

Whether you are in sales, marketing, or management take an inventory: Does your strategy take into account all three levels of competitive pressure? Are you planning for direct, indirect, and fear of change based competition? It is not enough to have great product in a compelling category. Our challenge is making sure that our company takes its rightful place among that pantheon of elite companies that never cost a buyer his job.