The industry in which you compete may not emerge from this pandemic the way it entered. Some industries may undergo structural change (e.g., healthcare: telemedicine and long term care, travel, tourism, etc.) while in others the required adaptations will be less dramatic (reworking supply chains will be common). Yet many companies, once the immediate crisis has passed, will revert to the organizational routines and decision-making processes deeply embedded in their culture. Their strategic response will likely be “more of the same, but try harder!” This predictability will increase risks for the complacent and present opportunities for the agile. 

So how do your competitors think they can count on you reacting? Are you vulnerable to them exploiting your predictability? 

Periods of disruption create opportunities when the participants or the “rules of the game” change, or when new or emerging technologies are accelerated into broader use. This pandemic may end up changing the nature of competition in many markets, as well as who participates; it has already accelerated the adoption of distance learning, telecommuting, and virtual business.

Let’s start with market structure: many industries will become more top-heavy as smaller players are driven out of business and acquired by larger firms. This happened after the 2008 financial crisis, and is likely to be even more widespread this time, creating opportunities for more agile incumbents.   

“A key advantage was that everything was cheaper in 2007 and 2008. ‘We were able to acquire smaller companies for very favorable multiples since there was less competition bidding for these businesses. Moreover, their limited access to capital stunted their growth allowing us to gain leverage very quickly once they were part of XL Marketing,’ said David A. Steinberg, CEO of Zeta Interactive” (formerly XL Marketing). [Citation]

If your strategy has relied on selling to smaller firms at better margins — you might find that you will have fewer customers.

Cross-border trade (and reliance on low-cost Chinese suppliers) will face challenges, as the trading environment shifts to become more protectionist — affecting not only medical supplies, pharmaceuticals, and semiconductors, but basic inputs across a range of industries. For companies relying on tightly integrated supply chains originating in China, the costs and time required to diversify those supply chains may open up opportunities for competitors less embedded in China. What was once a strength can become a weakness. Even in the absence of limitations on free trade, changing foreign exchange relationships may make it easier for previously tertiary competitors to become quite troublesome. Can they rely on you to just “ride it out”? 

I recently wrote about how the pandemic requires a rethinking of where businesses choose to complete and how they will win. That article was introspective, looking from the inside out – focusing on what a business should be thinking about amid a shifting and unknown post-COVID landscape – unprecedented in our lifetimes (see article here). Now, let’s look outside-in: how do competitors view your position and strategy? Are you too predictable as your industry adjusts to a post-pandemic world?

Success in the marketplace is determined by the alternatives available to your customers. Those alternatives are generally your competitors’ products and services (with associated pricing and availability). Thus, your strategy is only as good as it affords your organization a benefit (to you or to customers) that competitors cannot match.

So, if the structure or the basis of competition in your industry shifts as a result of the pandemic, what do your competitors think you will do? Can they rely on you resuming “business as usual”? Organizational inertia dictates that this is probably the default position. And if you had an advantage pre-pandemic, maybe maintaining your strategy and organizational routine is appropriate. But, structural changes may prompt competitors to try to break the binds of that inertia (and count on you not to do so). One example might be re-regulation. Certainly the pendulum is swinging back in that direction as more industries and businesses are thrown lifelines (with strings attached). What might this mean to your industry? Is there a way that you can leverage regulatory oversight to your advantage? What if a competitor does so? 

If you suspect that the pandemic may shift the terms of competition in your industry, how should you proceed? We recommend starting by documenting the following:

  • Identify changes that may occur in your industry as a result of the pandemic:  Will trade barriers or tariffs become a factor? How? For whom?  Will reliability of supply become a more important purchase criterion?  Will certain customer segments shrink or grow?  Will competition in the industry increase?  Could aggressive new competitors enter? 
  • Who could benefit from the change(s) — you? Competitors? New entrants? For example, many manufacturers have realized that they can produce PPE and ventilators – are some of them new competitors (or suppliers) for medical supply companies? What current competitors will most likely not survive or need to alter their product/service offerings?
  • What organizational habits of mind could prevent your firm from adjusting to these changed circumstances? What about your competitors? 
  • Finally, think about talent – with employment in turmoil and many workers furloughed, is this an opportunity to acquire skill-sets that will advantage you in the future? Better than having a competitor do so!

Assess where your relative strengths might enable you to pursue certain opportunities better than competitors. Then, formulate a hypothesis around each potential and commit to testing each (a few is probably sufficient). Write down “what would I have to believe” in order to move forward with each hypothesis.

This exercise may provide tremendous insight – in fact, the very process of thinking it through and committing it to paper will be valuable in itself. It is also very likely that you will discover opportunities that your competitors will not (or cannot) act upon – relegating them to status of the sitting duck.

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