In This Issue:
Is Your Business Getting Distracted by the Wrong Competition?
Distraction can impede progress. Steps that might otherwise be taken to work toward success might not happen if distraction gets in the way. Yet, despite the potential for damage, it is not unusual for companies to let distraction interfere with growth. And, that’s a shame, because avoiding the distraction and instead concentrating on what really matters can bring far better results.
In business, a relatively common major distraction involves too extreme a focus upon the competition, especially when a company broadly defines competition to include entities with strengths and strategies markedly different from its own. And, although competition should not be ignored, it is important not to let a focus upon the competition turn into a major distraction.
Such a distraction can easily occur in today’s economy because, with so much change taking place in the business landscape, and with the potential disruption that might occur, new competitors can emerge from anywhere—even from outside a company’s industry. Thus, companies do need to pay attention to competition that might originate in organizations far different from their own. But, while taking note of what’s out there can be valuable, imitating it may or may not be appropriate. That’s why companies need to make strategic choices about where to concentrate their efforts.
Furthermore, even players in a company’s own industry can have different characteristics, different cultures, and different strengths. So, a strategy that might be brilliant for one industry player may not be at all appropriate for another. And, getting too wrapped up in what a strong player in the industry is doing can easily become a distraction when that star player’s strategy is not a fit for other companies.
And, sometimes, a star player’s strategy may not be as solid as it seems. For example, Chipotle was often portrayed as an industry star that slower growth businesses in the fast food sector were pressured to imitate. Yet, what had been a major strength for Chipotle turned into a weakness when its fresh food approach led to problems with bacteria, shifting the company’s status from star to troubled.
A more recent example comes from the consumer packaged goods sector in foods. This example looks at imitating what might be perceived as competition at the ownership level, as opposed to competition for specific product categories. Private equity firm 3G Capital, which has been very successful as a cost cutter well known for its use of zero based budgeting, has been acquiring major packaged goods food companies (Kraft, Heinz). Another key player in the consumer packaged goods food sector, General Mills, took note of what 3G was doing and decided to do those things as well. According to “General Mills Loses the Culture Wars” by John Kell in the June 1, 2017 issue of Fortune magazine, General Mills cut costs and even implemented zero based budgeting.
Cost cutting, if done prudently, can be quite appropriate in mature industries. And, private equity firm 3G has been very successful with it, implementing cost cutting in acquired companies. Yet, even in the mature packaged goods food sector, changes are unfolding that create new opportunities for growth. Being too focused upon mature industry techniques like cost cutting can easily distract a company and hamper its efforts to pursue what might be valuable growth opportunities. As a result, the company’s position in the marketplace can erode.
According to the Fortune article, that is what happened at General Mills. General Mills put its efforts into emulating 3G. But, at the same time, General Mills missed growth opportunities in the yogurt business, where its Yoplait brand was a prominent player. As a result, according to the Fortune article, Yoplait sales declined at a time “when nine of the top 10 yogurt brands enjoyed rising sales” as new trends in yogurt fueled growth in the market. As Fortune points out, imitating 3G seemed to become a distraction for General Mills.
As I see it, of course, one could make the case that General Mills’ strengths are closer to the strengths of the packaged goods companies owned by 3G than to the more entrepreneurial players that gained market share in the yogurt business. But, in trying to emulate 3G, General Mills may very well have become distracted away from monitoring yogurt business trends and from being in a position to productively act upon them.
In any industry, huge mature players can only sometimes dominate as a late entrant. Other times, because they may lack key strengths an upstart has, huge established players may have a tough time competing in a changed market, and are unable to use their size to successfully jump in late. Regardless, becoming distracted emulating others can take time, resources, and emphasis away from what really matters for growth. It is important for companies to be paying attention to their markets, evaluating where they fit, assessing what industry trends to move upon and making those moves. The moves they make should reflect their own characteristics, culture, strengths and strategies, not merely strive to emulate the success of organizations which may or may not be like their own.
In conclusion, although paying attention to the competition can be worthwhile, overemphasis upon the wrong aspects of it can distract from more important endeavors. So, why dwell on what the competition does that might not necessarily fit when you could be doing something that’s so right for your business?
La Grange Park, IL