Thorough market research includes understanding and monitoring key differentiators and trends that affect your position vis-a-vis your competitors. During a time that Fortune calls "The Age of Unicorns" (market disrupting tech-based startups that based on fundraising have achieved valuations greater than $1 Billion) your company’s ability to thrive in the turbulence of a competitive environment depends greatly on how well you understand, execute on, and protect whatever it is that sets you apart from your competition. Monitoring factors that affect your differentiation and preparing your organization for shifts in the competitive landscape will reduce uncertainty and unlock new opportunities.
What is Your Competitive Differentiation?
Today’s marketplace is dense with competition - perhaps more so than ever before - thanks to the fast pace of technological change. To compete, your organization must stand out by differentiating yourself from your competitors.
Differentiation is more than simply answering the question, “What makes you different from your rivals?” Instead, ask yourself more specifically: What unique value do you offer to your customers that your competition does not?
Consider how information gives you a competitive advantage in each stage of Porter’s Value Chain Model below.
On the surface, analyzing your competitive differentiation may seem simple. But it’s not, and getting it correct is critical. Developing a critical understanding of your true competitive differentiation is often much, much harder than you think it will be.
For example, when we ask groups of executives what sets their company apart, almost invariably many of them will answer “our people.” The fact is that many organizations consider their employees to be a key differentiator. Unfortunately, this is rarely, if ever, true. First, it is a claim that all your competitors probably also make. Second, it is also nearly always impossible to prove. Third, your key employees could leave tomorrow and join a competitor.
Make no mistake, key talent is valuable—especially in human capital-intensive industries like professional services. Astute leaders in any industry know this innately and make it a point of emphasis to consistently communicate and demonstrate to their employees how much they are valued within the organization. This is important from a talent retention standpoint. But often all of this internal cheerleading can create a false impression that your talent really is what sets your company apart from its competitors. Most of time, this simply isn’t the case.
To understand what differentiates an organization from its competitive landscape is to identify what could threaten its success in the market. This understanding can make or break your survival against the competition.
A critical analysis of your company’s differentiation also isn’t just a brainstorming exercise. When we talk with groups of employees, or managers, or executives from within a company, and we ask them what sets their company apart, we often hear dozens of answers. But after some poking and prodding, we can generally separate the wheat from the chaff. The reality is that most companies only have a handful of true differentiators—sometimes there’s really only one!
Identifying your true differentiators is the first step in developing successful strategies. Until you’ve done this exercise with rigor and a critical mindset, you cannot effectively plan anything from marketing messaging, to sales processes, to product delivery and customer support.
Start by considering these questions: What feedback are you getting? Why do your customers or partners choose to do business with you over another company providing the same or a very similar offering?
A word of caution. Relying solely on feedback from your sales force to get feedback from prospects and customers is never sufficient. Doing so will inject a wide range of biases into your data. We always recommend having an objective third-party conduct a structured win/loss analysis.
There are countless reasons your clients, or partners, might choose you over another company that has a similar offering. Whatever they may be, understanding the key differentiators that set you apart needs to be a part of your competitor analysis.
How Do You Identify Market Trends?
Understanding your differentiation is not only critical for strategy development, it also should be the first-step in understanding where potential disruption may come from. There are myriad ways in which businesses can be disrupted, and no company has the resources or wherewithal to watch everything, in all directions, all the time.
Those one, two, or maybe three things that truly set you apart and must be protected. Once you have a rigorous understanding of your differentiators, you can limit the scope of potential disruptors you will need to monitor. That’s where an understanding of and ability to monitor industry trends comes in.
Trends reflect changes in the way a market, region, capability or business is developing. They are not simply one event that is a shift away from the status quo, but rather a pattern of shifts or changes in interest.
Consider healthcare regulations. Alone, they are not a trend. One specific change in healthcare regulations that may specify higher levels of reimbursement for outpatient procedures than inpatient would also not be considered a trend. In this scenario, a trend would be a pattern of changes to various healthcare regulations that results in a continuous pattern of higher reimbursements for outpatient procedures. This pattern would communicate a great deal of information to healthcare companies who may decide to adjust their practices to take advantage of these higher reimbursements.
As you can imagine, it takes a good amount of data collected over an extended period of time to be able to recognize these trends and the potential impact to your competition or differentiation.
You can’t monitor everything, so you must prioritize your efforts.
Begin by building a competitive analysis framework (download our template without giving your email) to monitor factors that may affect or pose a threat to your differentiation. Take some time to consider what trends would impact your position. What would be a threat?
As you do this, it is helpful to understand the different types of trends, so you can better prepare for both the short term and long-term impacts they may have on your organization.
Three Types of Market Trends
Understanding shifts or changes in your market will help you mitigate risk and reduce threats to your position in the marketplace. High-level market drivers, also known as trends, identify potential opportunities and your core differentiation in the market.
Understanding the three different types of trends will better prepare your business for both the short term and long-term impacts they may have on your organization.
Mega Trends are near certainties that express what we know with confidence about the future. We know an aging population is inevitable, for example. Similarly, we are certain shifts in globalization, urbanization and technology change, like increasing micro processing speeds and a declining cost of data storage, will take place in the future.
Macro Trends are trends we know with a high degree of confidence, like Mega Trends, but on a shorter time frame and the result of a mega trend. The Mega trend in technology that we referenced above has resulted in a Macro trend of increased cloud computing solutions. Macro trends typically last between five and ten years.
Micro Trends are the result of Macro and Mega trends but occur on an even smaller scale. Micro trends consist of trends that drive future market requirements. Examples include technology needs and business models. For example, a SaaS-based business model is a Micro trend based on the increase in cloud computing Macro trend and the Mega trend of increased processing power and a decrease in data storage costs.
Identifying and then analyzing these types of trends as they relate to your organization’s differentiation will help you identify potential risks, threats, opportunities and future disruptions. The result of your efforts will better position your company amongst the competition.
What Are Market Disruptors, Indicators and Warnings?
Failing to plan is planning to fail, as the adage goes.
What will you do if you notice trends shift and become threatening to your differentiation? Part of your competitive intelligence must include monitoring for Disruptors, watching for Indicators and communicating Warnings to alert your organization of possible threats to your positioning within your competitive environment.
Disruptors are occurrences, events, technologies, and business models, in line with identified trends, that could disrupt the way your organization conducts business. These could include competitor movements, new technologies, new entrants, or a new approach to the market.
The number of potential disruptors to your business is endless. The types of disruption you might face are not. Deloitte, the industry-leading audit, consulting, tax, and advisory services firm analyzed dozens of cases from the past twenty years to identify how disruption is manifested in a rapidly changing digital world. Their research identified nine patterns of disruption.These patterns likely affect multiple markets but will not be universally disruptive.
We suggest you prioritize the disruptors you monitor based on three criteria:
The probability of occurrence
The severity of impact
The anticipated timing of the disruption
The key to successfully monitoring for disruptions lies in your ability to identify indicators.
Indicators are quantifiable metrics that can be monitored to help predict movement towards a disruptive event or outcome, such as new technologies or competitor’s movements that disrupt the way your organization conducts business.
Unfortunately, your disruption indicators won’t be a red flashing light or covered in yellow caution tape. Indicators are certainly cause for a sense of urgency to communicate distinct details about a specific potential threat.
A warning is a specific communication used to effectively articulate the risk, impact, timing and probability of occurrence of disruption to interested parties.
As you regularly monitor your competitive environment for changes, you should engage in proactive scenario planning so that your organization is prepared for a variety of threats or disruptions that could occur.
While analyzing trends, take time to consider the various scenarios in which the trends take place. What changes might pose a threat to your company’s differentiation? What are areas that can be adjusted? Who will lead that, how and, perhaps most importantly, when? If they change in your favor, how will you scale while maintaining your differentiation?
These are just a few of the questions you may find helpful as you proactively strategize how your organization will handle any trend shifts or disruptive events.
Competitive Intelligence involves taking into consideration all the factors that influence your organization’s position in the marketplace.
It is critical to identify your key differentiators prior to beginning any market research, SWOT analysis or competitor tracking. Your differentiators are the key to identifying and prioritizing which trends and disruptions pose the greatest threat or opportunity to your market position.
Start small and focus on the greatest threats to your differentiation. Prioritize your effort based on the probability of occurrence, level of impact and timing. Capture opportunities identified during your monitoring and provide recommendations that focus not on the “What” of the disruption, but the “So what” and actions to take.
Michael Irving is an accomplished professional who has more than 20 years of experience building successful sales teams for growth-oriented businesses. Michael has held various leadership roles for both Fortune 500 and SaaS start-up companies leading all selling activities for multiple divisions.