Could your perspective be affecting your business success?

gigcmo
20/09/2022

Someone once told me that the most successful business leaders tend to know an enormous amount about a very small or specific area. In knowing an industry, a sector or a part of a sector that well, you can see what others can't; you can spot the gaps in the market, the opportunities and the pitfalls.

For all of us, however, we can sometimes be too close to a situation. We can be so close that we can't see what's in front of us or what's on our tail. Business leaders are invariably the experts in their specific sectors. However, an outside perspective can provide that more expansive vision, surveying the landscape, seeing the industry disruptor at our backs and/or providing the specific marketing knowledge to drive a business forwards.

This article explores how firms view their competitors and how this process contributes to their success. We study an insightful paper from Sruthi Thatchenkery at the School of Management at University College London and Riitta Katila from the Department of Management Science and Engineering at Stanford University.

Businesses do not innovate in isolation

Mark Twain famously said, “There is no such thing as a new idea."

We're not entirely sure we agree with that. Still, Thatchenkery and Katila note that research "in organisational learning suggests that firms can reduce innovation uncertainties by monitoring competitors and then using the information gleaned to guide product development and technical innovation".

The key is to know which competitors you need to be aware of. Sometimes you need to take a step back to see the bigger picture.

Business blindspots that reduce your competitive edge

Thatchenkery and Katila highlight that "research argues that this selective attention can result in competitive blind spots, allowing firms to be caught off-guard by competitors, such as firms that were originally in a different industry."

In the past, we have written about anticipating industry disruptors. The odds are that your greatest competitive threat isn't the business immediately behind you - it's the one you don't yet know exists. Hertz cars didn't find their market share threatened by Avis - the second in the car hire market, but while they were busy watching them, they never saw Uber coming.

Some critical areas of assumption limit business awareness of competitors or potential competitors. These also limit a firm's potential for innovation and market share retention and growth.

Some of these areas include the following:

  • Restricting competitors to firms in the same product markets
  • Studying only businesses of equivalent size or maturity
  • Only looking at companies that are currently leading the market
  • Keeping your awareness within your traditional market boundaries
  • Basing assumptions on your own previous experience as a business or business leader

Do you know who your most significant competitor is?

Your competitors and your business strategy

Thatchenkery and Katila raise an interesting question about competition networks.

The challenge when it comes to looking at our competitors is that not only do we tend to be limited by our own bias and knowledge base, but we could well be competing with someone who is not competing with us. Firms differ widely in their perceptions of relevant competitors.

They say: "How is the firm’s position in perceived competition networks associated with its product innovation? The key takeaway [...] is that seeing competitors differently than other firms can confer a competitive advantage by spurring innovation."

This perspective can provide a competitive advantage by:

Firms with an unusual view of competition are more innovative

Observing those who are not perceived as direct competitors can help differentiate your organisation by creating the space for product innovation.

Your perception of your competitors influences your position in your industry

Thatchenkery and Katila's research looks into the emerging concept of perceived competition networks, considering how firms perceive competitive threats and the impact that has on how they then choose to position their business.

Collaboration networks vs competition networks

Collaboration networks hinge on the benefits of being well-connected to a core network. However, competition networks hinge on "the unexpected benefits of unusual positioning such as tracking competitors on the periphery of the network". While neither is right nor wrong, they have a direct impact on what your strategy will be for business growth.

Your perception shapes your business reality

Ultimately, the research used empirical evidence to show how a business's perspective on its competition in the market shapes its capacity for innovation and, as a result, its business success.

A clear and distinct specialist knowledge of your business and sector is essential for becoming a market leader. However, it's not enough to stay a market leader. Without an outside perspective that can take in the merits of other organisations in seemingly unexpected spaces, you may not only be missing the next disruptor, but more importantly, you could miss out on unseen opportunities for your own business.

The alchemy is in the meeting of specialist knowledge and the broader outlook, which is almost impossible for one individual or even one organisation to have all on their own. This is where the merits of an external perspective can pay dividends if they have your organisation's best interests at heart.

An informed outside perspective helps you gain critical insights that will drive your business forward and inform your business strategy. An outside perspective facilitates conversations that look at the wider marketplace, uncovering opportunities only you can spot, given the correct information. That outside perspective helps you see the unseen network of opportunities inspired by the broader business and innovation world.

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