Competition, without it we lose

The best competitor an organisation can have is itself. If the organisation is in the business of selling goods and services, cannibalising the sale of its own products and services is the best way of making sure the external competitors do not. If the organisation is in the business of providing services to an internal customer, developing new, cheaper and faster services ensures relevance beyond today.

Many organisations and leaders of organisations fear competition. They fear what the competition may do to their current market share, and hence, their revenue streams. In many cases when the organisation has market power, the fear leads to spending management time and money restricting competitor’s access to the market.

In some cases, this results in unscrupulous, predatory market behaviour or even worse, cartels.

Organisations that thrive through tough economic times have at least one thing in common, the love of competition. When the external competition is not driving them to innovate, they build means of competing with themselves.

In the domain of private enterprise, this includes developing a separate team to look at new technologies or new markets or even as simple as new emerging channels for the distribution and sales of existing products.

In my role some 11 years ago as the marketing manager for Shell’s lubrication products and services in Australia, I inherited an organisation persisting with a strategy to protect the existing market framework whilst customers voted with their wallets to change the market framework.

Shell had attempted for ten years to attract customers back to the service station channels by discounting as they continued to opt for the convenience and all round lower costs of major diversified retailers such as Kmart.

The end result was a loss in revenue from discounting and a greater than ten percent market share loss every year, tumbling from number one to number three in sales. After completing a minor review of existing marketing data we were able to convince the board that the new channels were here to stay and a belated move into channels such as Kmart staunched the flow of red ink.

Other examples abound. In the global telecommunications sector, organisations around the world ranging from government or semi government and fully private entities resisted the introduction of broadband internet services fearing it would cannibalise their existing dial up revenues.

The result has been, through a combination of frustrated customers and opportunistic competitors, a loss of share in an emerging technology market where the major telco should otherwise have dominated.

Even worse in Australia, it has meant that as a country, falling from being in the top five of internet users in the early internet days to now being outside the top 20. The implications for the relative productivity of that economy are at best, of concern.

In the domain of public enterprise where the organisation has a monopoly, it is even more important to be at the forefront of developing competition against existing services. Although there is no external competition, there is the prospect of fading into irrelevance as the stakeholders come to a position where they refuse to tolerate ongoing poor to mediocre performance.

The stakeholders in this case include politicians and the public who vote for them. They measure performance of course, based on what they experience in their daily lives where competition exists. The view for example, of what is good telephone service is not from the public service alone, but what they get from their bank, their insurance or telephone company.

“Best Practice” benchmarking is often touted as a means of public enterprises providing themselves with a means of competition. In practice, I find this rarely works except at the most aggregated level, where it can be a good tool to get some commitment for change. The reason why it does not work is that it is so difficult to be sure we are comparing like for like.

Firstly, defining terms the same way between different organisations is no simple task. Secondly, having the same environmental factors such as economic cycle, goals and objectives apply is necessary for a true benchmarking exercise at a detailed level.

What I do know that works is to ask customers what they value. To understand their business and the impact the organisation has on them. Working out cost effective ways to significantly improve the business of the organisation’s customers is a simple way for public enterprises to instil a sense of competition.

Of course, that means for each public enterprise, knowing who their customers are and what they value. This requires a change in attitude and capability for many public enterprises.

If public enterprises are able to create their own internal competition, to not be satisfied with the status quo and desire to improve their customer’s business then we might all win.

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