A major strategic change by a competitor can often cause firms to re-evaluate their own approach. This article explores questions you should ask when your competitors change their approach.
How does their change impact your strategy?
One of the first questions that it is useful to ask when a competitor makes a major strategic change is the impact that the change is likely to have on your strategy. For some changes, the effect may be quite profound – if a competitor releases a freemium version of their software, for example, the impact on your firm may be quite significant were your customers to move to their offering. On the other hand, if your competitor acquires an overseas competitor in a market that you don’t operate in, the direct impact on your firm is likely to be significantly less.
What will customers expect?
When considering whether or how to respond, it is important to consider what your existing and potential customers would expect, and how making a change or not is likely to impact your continued relationship with them.
At a minimum customers may expect you to have some response – to be able to explain what your approach is going to be, and whether you will follow your competitors in making a similar change. While there sometimes are advantages in keeping your options option, not having any reasons (or a ‘we don’t know yet’) can also be the worst approach. Indecision may cause customers to move to a competitor who is at least able to provide some certainty of their path going forward.
How would imitating your competitor's actions impact your strategy?
If you are considering imitating your competitor’s strategy, it is important to examine how it will impact your existing strategy. Does moving to copy a competitor’s actions play on your strengths – something that is broadly consistent with your strategy and existing capabilities. Or, does it move you in a different direction, and one that you are not well suited for.
While their move may work well with their decisions, it may work very badly with yours – potentially moving you into an area that you have very little experience in. Thus, it is important to consider the impact that the change would have on your strategy going forward.
Are there alternatives beyond imitation?
It is easy to fall into the trap of assuming that your response to a competitor needs to be either to imitate or not to imitate. These are the most obvious options, but they are not the only ones – there may be a third alternative, potentially somewhere in between, or possibly in a completely different direction that you can pursue instead. Rather than framing your response as to whether to imitate or not, look to broaden the considerations with other approaches that you could take that may better align with your resources and capabilities as well as your customer demands.
Can you use this as a way of further increasing your distinction from your competitors?
Finally, it is worth considering if the change by your competitor increases the distinction between then and your firm, and whether there are options available to further increase this distinction. You may be better off emphasizing the distinction between your offerings and theirs – potentially doubling down in the opposite direction as they have taken – as a way of luring a subset of customers who are unhappy with the competitor’s change to your product or service.
Final thoughts: Don't ignore the major competitor changes
Overall, it is important not to simply ignore a major competitor change. When you may ultimately decide that the best approach to a competitor response is not to make a strategic change, it is still important to consider options. Ignoring the change without consideration may be just as bad as copying whatever your competitors do without considering how it will impact your strategy.