Redefining the Playing Field as a Business Strategy

It's a tough business climate right now, especially if you're facing global competition or in a mature industry. Although the economy is still in the middle of a four-year term of growth, consumer spending is slowing, competition is increasing, and many industries are struggling.

But what about companies that are reinventing their slow-growth and hyper-competitive industries? The grocery industry is one example. While traditional grocers such as Safeway and King Soopers are struggling to survive, new-era competitors like Whole Foods and Wild Oats are growing at an astonishing pace. So what gives?

Simply put, instead of running business as usual, these competitors have redefined the rules of their industries. While Safeway has for years focused on the middle-market grocery segment, companies like Wal-Mart have beat them by continuously wringing costs out of their supply chains and passing those savings on to customers. So the traditional grocers can no longer compete on price, given that they have less efficient supply chains and more costly union labor.

Newer grocers such as Whole Foods and Wild Oats, on the other hand, are developing a new industry playing field. Instead of competing on price, they are competing on product differentiation (natural foods), targeting a more profitable segment (affluent baby-boomers), and providing better service (through a satisfied non-union workforce). Whole Foods and Wild Oats are growing at an extremely high rate, while companies like Safeway continue to struggle.

These same trends can be seen in other mature industries. Southwest and JetBlue redefined the stodgy airline industry by providing no frills, good service, and low cost to customers. In music, Apple essentially commoditized music by making it a loss leader for its more profitable iPod MP3 hardware. And they are trying to do the same for television by offering downloads of popular TV shows at a low cost.

In all of these cases, the leaders in the industry are not playing the game the way it has always been played. They are creating their own game.

No comments: