Technology Fluidics and Adaptive Agility: Markers for Competitor Analysis in the New Age

Competitor analysis is a key aspect of developing strategy for any firm. The subject has received considerable attention with the theory of competitive strategy propounded by Michael Porter. Definition of competition and competitors has acquired a new abstractness and challenge in the increasingly technology-driven world. The commonly used markers of competition of a firm, for example, are in terms of revenues, profits, growth, products or services, regions or markets and investments. Each of these can be assessed in terms of relative industry ranking, the most important one amongst them being relative industry market share. However, the breadth and depth of an understanding of competitors can be far greater in terms of comparative absolute and ratio analysis. In fact, analysis of each item of an income statement or balance sheet, on an item to item basis, can provide significant inputs to sharpening the competitive strategy of a firm. There is a strong view, however, that financial analysis of competition is of limited value, and real insights can be gleaned from a detailed product-market analysis of competition.

For a firm, traditionally the marketing department provides information on competitors’ new product launches and marketing moves. Similarly, the strategy department undertakes a financial analysis of competitors. Rarely, the research and development (R&D) departments are involved in regular competitor analysis. In matter of fact, there is a new dictum that neither launches nor performance offers sufficient understanding of competitor activity. Product pipeline and market canvas, as drivers of future performance, are perhaps more relevant. With increasing tracking of product and market development activities, and voluntary disclosures by firms to acquire anticipatory customer interest, analysis of future products and markets is more feasible today than it was a few years ago. An automobile maker, for example, has a preview of the concept cars proposed by its competitors, years ahead through international automobile exhibitions. Proliferation of the specialist magazines dedicated to specific product lines has enhanced such transparency even further.  The same applies to entry into new markets and regions as well.

Defining competition

Competition is usually defined in terms of industry players, industry being defined in terms of a type of product or service; for example, automobile industry, consumer durables industry, power industry, and so on. This carries with it the interesting and intriguing facet of industry boundary, which is interplay of technology shifts, consumer needs and player positions. The apparently simple way is to define an industry is in terms of its customers (product or service users) rather than a broad function (need fulfillment), recognizing that the same users can be catered to by different products or services. For example, bus industry and car industry are different because they cater to different users, even though all the users are individuals seeking transportation. Overlaps in industry definition are unavoidable on several dimensions. At one level, two wheeler industry and low cost car industry could be competing with each other, the level of competition depending on the product price or its life cycle operational cost. At another level, they can never be competitors as the products cannot be designed, manufactured or delivered using the same or similar infrastructure. Given this complexity, it may be appropriate to define the industry in three ways (besides the firm as a player); in terms of a product at a basic level, in terms of technology at a delivery level and in terms of functionality at a gross level.  

Typically, in a sunrise industry which is built by, and around, the innovator who would also be a monopolist, the word competition hardly exists in the minds of many players. This is actually a false sense of security; for, competition even in sunrise monopolist industries surfaces sooner or later. Competition emerges not necessarily in terms of followers offering the same products or services but also in terms of new players offering alternate products or services (or additional ones) that make the innovator product or service less preferred or simply less competitive. The movement of external memory from floppy disk, through CD and DVD to flash memory is an example.  It emerges from the above discussion that competition, in the contemporary and futuristic environments, tends to be more abstract and more ubiquitous than ever, with competitive triggers emerging from diverse sources and translating into multiple forms. The traditional form of competitor analysis limited to an industry or sub-industry and a few players is hardly of sufficiency nowadays. Google as an Internet giant, pioneering products of futuristic technologies such as driverless cars, vision glasses that act as computers and cameras or contact lenses that act as continuous diagnostic devices, is a perfect example. This brings us to the question of technology as the central driver of competition; technology that can manifest itself in terms of any component or subsystem, and can be embedded in a restructured product.

Disruptive competition

Competition tends to be an endless continuum. The case of the watch industry is an interesting one. The initial threat for the handmade, hand-wound watches was the self-winding automatic movement. The introduction of quartz automatic movement provided the first serious competition based on the discontinuity of technology. The emergence of electronic movements posed the next serious threat. The watch industry weathered the storm by reinforcing the handmade quality to retain the watch as a fashion accessory while simultaneously integrating the electronics and perpetual kinetics to provide contemporary timekeeping perfection. The emergence of cellular phone with its time display made watches redundant for certain sections of the population but the recent emergence of smart watches aligned and locked into cellular phones is poised to bring watches onto a new plane. At this stage clearly, hand or machine made electronic watches and machine made, mobile phone mated smart phones are at two ends. It is conceivable that the watch industry would once again reinvent itself by integrating cellular smartness in its artful designs so that the future watches are communication smart with fashionable art.  Even more profound has been the competitive landscape in the handheld camera industry, from camera film to digital photography of varied sorts, and digital camera technology getting embedded in cellular phones for instant transmission and cellular technologies getting embedded in digital cameras.    

The forces of competition, of course, engulf different industries in different manners. The devices in the traditional category of largely mechanical or electrical devices (for example, automobiles or machine tools) are slow to get disruptive competition. The competitive landscape for the firms dealing with this class is easily tracked through conventional product-market share analysis of individual players. The class of electro-mechanical devices (for example, photocopiers, scanners or diagnostic devices) is prone to periodic bursts of disruptive competition. The competitive landscape for the firms dealing with the class is tackled though product-technology based analysis. The pure electronic devices (computers, smart phones, tablets etc.,) characteristically live in a technical environment of continuous disruptions in technology on one hand as well as continuous convergence and divergence of product functionalities on the other. This class of products also has the additional facet of different operating systems that determine the internal and external efficiencies of such devices. The competitor analysis for this class of products is indeed complex, and needs to be sliced on several dimensions, based on form factor, predominant product characteristic or operating system, for example. Given the agility with which product characteristics move based on multiple technological platforms, competitor analysis for manufacturers of this class needs to focus on the overall technical power of such firms, and the overall synergy of constituent product groups.

Technology fluidics  

The domain of strategy has mobility barriers as an interesting concept for determining competition. The theory classifies firms into strategic groups, and firms’ ability to move across strategic groups in response to internal and external factors is said to be based on mobility barriers across groups. Mobility barriers, themselves, are linked to scale and scope related to investments. If mobility barriers are low, firms are tempted to compete in multiple product-market segments, enhancing competitive intensity. Even more fundamental, perhaps, is the fluidic ability and adaptive agility of technologies to be deployed on multiple classes of products. For example, if flexible touch screen technology can be adapted to a huge range of screen sizes, say from 6 inches to 120 inches (diagonal) it could result in a massive transformation in display capabilities of an entire range of electronic devices. Use of Xenon flash or point and shoot SLR/DSLR technologies in camera phones and video recorders is an example. Use of sensors in any equipment from vacuum cleaners to assembly lines and from machining centers to robots is another example. The more is the discovery of platform technologies like nanotechnology, the greater would be the potential application across products and industries.

The fluidic ability and adaptive agility of any new technology is measured on two dimensions. The first is the months taken to commercially upscale or downscale any new technology to other devices in the same design family. The second is the months taken to embed the technology of one device into significantly different device. Traditional strategy theory has positioned technology as a core competence and collaborative factor. The more relevant theory would be to view all technology that is outside of a firm’s intellectual ownership or commercial access as being a potentially competitive force. Technology, being an embedded invisible platform, is abstract to identify in terms of commercial potential and feasibility. While Porter’s Five Forces theory considers technology as a competitive force, it really depends on a physical surrogate (ie., substitute products) for identification. This approach would be too late a stage approach for competitive analysis. The more relevant approach is to analyze competition in terms of technology share. An insightful understanding of technological competencies of a firm constitutes the marker for competitor analysis. A forthcoming blog post of the author will propose a conceptual and analytical framework to understand and potentially quantify technological competencies of a firm, in an industry context.

Posted by Dr CB Rao on January 19, 2014