5 Questions for Detecting Competitive Threats

  1. How willing are customers to continue to pay for further improvements in performance that historically merited attractive price premiums? One of the key tipping points in a market occurs when a company, in Christensen’s language, overshoots a given market tier by providing them performance that they can’t use. Your television remote control probably serves as a daily reminder of overshooting. Each of those buttons can do wonderful things, but would you pay extra monthly fees for yet another button? Probably not. When overshooting begins to set in, industries can change rapidly.
  2. Are customer preferences and habits changing due to enabling technologies and/or changing social norms? Companies often miss important shifts because they start not among mainstream customers, but at people at the fringes of the market. But remember, the quirky behavior that teenagers follow today (100 text messages an hour!) becomes mainstream just a few short years later.
  3. How active are startups at the industry’s edge? For much of the 1980s and 1990s, many parts of the startup ecosystem focused on communications, technology, and health care. In the past few years, there have been significant investments in markets like data analytics, 3-D printing, renewable energy, and financial services. Executives in market leaders in those sectors need to watch these developments carefully, because the seeds of transformation are being sown as we speak.
  4. Are competitors with disruptive strategies having a material impact on portions of the industry? Christensen’s research shows clearly that transformation often comes in the form a disruptive innovator that makes consumption simpler, convenient, and more affordable. When a company with a lower-cost business model or one based around radical simplicity gains traction, it augurs significant change.
  5. Will current or pending changes in government action shift the basis or competition or make life easier for entrants? The government is often portrayed as an inhibitor to innovation, but that’s not fair. Many commercial innovations, including the Internet, mobile technologies, and countless lifesaving drugs, have their roots in government research. Nonetheless, in Seeing What’s Next we described how governments can curtail both the motivation and ability of innovators to drive disruption. When governments change the rules, or focus their ample buying power in new directions, executives need to stand up and take notice.

Source: Create Early Warning Systems to Detect Competitive Threats by Scott Anthony | HBR Blog Network

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