Today, major opportunities and existential threats are less likely to come from the usual suspects at the heart of your industry than they are from the ones on the fringes.
Thinking your competition is within your own industry creates major blind spots. Competition may come from another category that can address similar customer needs. But it may also come from categories that compete for the same customer resources, such as time, money and attention.
How do you think about your strategy in a world that no longer has sustainable competitive advantage to rely on? When you can’t rely on the strategies that used to work in the past?
The way business works is that an innovation happens which allows you to create something new, after which you can enjoy a commercial advantage for a while. But then something changes – it could be a shift in the environment, technology, regulation or your customers.
That’s a strategic inflection point, and what it does is to make the “taken for granted” assumptions in your business less relevant. Any business is born at a particular point in time, when some things are possible, and some are not. An inflection point changes those assumptions about what is possible: the digital platform revolution and the direct-to-consumer revolution are familiar examples. Understanding this pattern of transient advantage is critical.
Let’s take an example:
Hindustan Unilever is the largest player in the beauty industry in India-- bringing in $2.3 billion in revenue from the segment. Seven of its beauty and personal care brands bring in more than $150 million in revenue according to a report by Avendus. Unilever’s focus has traditionally been on brands with large addressable markets to ensure viability and assured return on investment. Standard operating processes on brand creation, product development and distribution meant that it could not capitalize early on niche market trends.
Unlike many DTC beauty brands which have made it easier for consumers to leap to premium offerings by filling white spaces in the category’s price spectrum. They’ve demonstrated brand savvy, a laser focus on customer needs and their asset light operations are more conducive to innovation and feedback. Nykaa, the beauty and lifestyle platform founded in 2015 is a minnow in comparison with Unilever with $159 million in revenues. Yet, it owns the customer relationship, has its own house brand products that compete with others on the site and its own offline footprint. It is now looking to raise $500 million at a valuation of $4 billion through a public offering.
Over the years, what happens to excellent businesses is they optimize around things that are success recipes. What an inflection point does is to shift that success recipe. Sometimes it can take you by surprise because it feels as though it came out of nowhere, yet if you had been paying attention, the signals had been building up for a while.
Inflection points actually take a very long time to build up, even if when they’re upon you they feel as though they happened instantly. If, as an organization, you can start placing small advance bets on something that could be important down the road, it can help you from being blindsided by changes in your environment. If you’re watching for the right signals, inflection points can take your business to new heights.
At Studio Jigsaw, we want to help clients build brands that transcend their industries and thrive in open, fast-changing environments.
We are doing so by flipping the traditional consulting approach on its head – and going (1) outside in, and (2) future back.
Rather than starting from inside out assumptions about sectors, categories and brands, we begin by listening acutely to customers – and unearthing how their fundamental needs, desires are changing on the fringes.
We’re also less interested in what’s happening now at the centre of the category than we are in what might happen next. We look at the peripheries and hunt for weak signals by exploring the ways organisations from seemingly different industries are likely to compete, collide and converge to address needs and win contestable customer resources.
Going outside-in and future-back enables us to trace these narratives back to their real world applications to consider new business models, products, services, systems, user journeys or communications.
This helps clients avoid playing by the sector rulebook to make game-changing moves that can alter the competitive landscape.
Over the next few weeks, we’ll focus on human needs and explore the competitive battles at the edge of culture, business and innovation. Stay tuned!