How to Escape Hyper-Competition and Improve Profits.

Horseracing symbolising hypercompetition.

Do you find that your well-researched and painstakingly developed innovations are rapidly becoming commodities due to your competitors fighting back intensely and from all around your market position?

Perhaps a new competitor has disrupted your market, undercutting prices to levels that barely cover your overheads? Or, perhaps you feel locked into an ‘arms race’ with your competitors, where you are all offering more and more features and relevant benefits, but unit prices are staying the same or even falling?

 If so, you’re suffering from hyper-competition. And if you read on we’ll tell you what you can do about it.

Globalisation and technological advances drive the hyper-competition that is apparent today.  You innovate to try and differentiate your product but it feels like you cannot move fast enough.  And even if you can, do you have the resources and resilience to keep going for the long term?

And then consider, what if your continual innovation and differentiation were actually adding to the problem?

Hyper-competition is evident in many markets from food retailing to women’s fashion, from consumer electronics to cars. It surprises and delights the consumer as they are faced with outstanding propositions that offer great value at incredible prices.

But for marketers, innovators and their organisations, it can feel like they are under siege and battling multiple threats. The competition seems to intensify with each passing year, and there doesn’t seem to be a way out.

What Can You Do about Hyper-Competition?

Marketing theory and our own best instinct encourages us to innovate and differentiate our products further, to stave off competition. It guides us to understand our customers at a deeper level and gain insight about them so that we can innovate and develop highly relevant and desirable features for them.

However, it is now apparent that this approach is not enough.  

We have found that to respond to hyper-competition you have to be much more selective about who you target, and where in the market you position your new innovations.

This means that when you scope out your innovation project you need to understand what kind of hyper-competition you are dealing with. Only then can you innovate in a way that will deal with the particular type of market threats you are facing. Only then will you be able to innovate an appropriate response. And only then will you be able to maximise your return on your innovation investment.

How to Diagnose Your Type of Hyper-Competition.

Typically innovation projects need to be scoped in advance. At Anatellô part of how we do this involves three key questions.

  1. The Innovation Strategy Question : This uncovers the role that innovation should play in the delivery of your corporate strategy
  2. The Customer Question: Who is the target customer for the innovation and what do they want?
  3. The Innovation Question : What degree of innovation are you looking to deliver?  This is about whether you are looking to innovate products or services? Innovate processes? Or innovate business models? And whether you are looking for radical or incremental innovation.

However, if your markets are affected by hyper-competition then this approach to scoping the innovation project will not be enough to effectively respond to that hyper-competitive situation.

Indeed, by innovating  you may even adversely affect your competitive environment. This is because in some markets creating new propositions for even smaller segments will exacerbate the type of hyper-competition that is operating in the market.

Product Differentiation is not Enough to Respond to Hyper-competition.

Where you are facing hyper-competition, product differentiation is not enough.

Bearing in mind the risk and resources involved in innovation it is not worth embarking on product differentiation unless you have a good understanding on the nature and dynamics of the of the hyper-competition from which you are suffering.

To do this you need to add to, or substitute even, the innovation strategy question above with some questions that will help you understand more about your market position and threats. Once you know this. there are some proven strategies that can help identify where and how to innovate to develop an effective and more sustainable response to your particular kind of hyper-competition.

Want to understand more about the hyper-competition you are facing? 

Download our Free Hyper-competition Diagnosis Tool 

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