P54 What To Do With New Competitors Part Two

Listen to the podcast

  • Given that all of us in business have competitors, what happens when the competitive environment changes significantly? All of a sudden you find yourself with a major competitor that previously had been only a potential or minor competitor.
  • This podcast addresses this situation. The sources for the information in this podcast are drawn from a Fast Company article titled The New Rivalries plus my own independent research.
  • Let’s get started with the first example in this podcast. This is the rivalry between DJI and Go Pro. When I first saw this rivalry in the article, my reaction was that Go Pro has very few meaningful camera competitors and who is this DJI company.
  • First about DJI. To my surprise this Chinese company is the world’s largest seller of drones. So one company is in the drown business and the other company is in the mobile, action camera business. How is this a rivalry?
  • This was especially a good question since last year these two companies were deeply engaged in a collaborative business venture. DJI featured the ability of their drones to use GoPro cameras. They had gone so far in their business discussions that there was talk that they would produce a GoPro branded drone. Their collaborative efforts ended when GoPro demanded two thirds of the profits.
  • So today DJI is getting into the small action camera business in direct competition with go Pro and will have these cameras available on their drones. Conversely, go Pro is getting into the drone business. While the drone business was an interesting $609 million in revenue in 2014, by the end of the decade it is estimated to be almost a $5 billion business. Net, there’s a lot of business to be had here.
  • So to companies that last year were looking to collaborate are now locked in a serious competitive battle for what will become a very, very big business.
  • DJI is deeply committed to dramatically improving drone reliability, intelligence, batteries, and navigation. Reportedly one of the new features in their drones will be an automatic obstacle avoidance system. In parallel with this effort, DJI is working on cameras that will be directly competitive to go pro.
  • Go Pro is already a very big and successful company – sales of $1.8 billion in 2015. When the collaborative effort with DJI fell apart, go Pro scrambled quickly to develop their own line of drones.
  • Both companies are leveraging an innovation program that optimizes their current strengths.
  • Here are some comparisons and key issues relative to this competitive rivalry.
    • How interested are future consumers of drones in a drone only versus a drone with a camera? I am guessing that for many consumers a drone and a camera are seen as one essential system. The drone makes the camera better and the camera makes the drone more valuable.
    • It appears that go Pro has a much stronger marketing starting point. Their brand-name has increasingly greater recognition. They have strong relationships with retailers and presence in retailer stores. Go Pro has developed outlets for video shot on its cameras through a partnership with YouTube. It is also exploring relationships with Hollywood for the creative coming out of the go Pro cameras.
    • DJI’s strengths would appear to be its drone competencies, especially innovative technologies. With China as a base, they may also have economic advantages when it comes to drones, although go pro would seem to be able to acquire similar economic advantages in China or other favorable manufacturing locations.
  • This is an interesting story to me for of a couple reasons. First, two companies that were friends and collaborators quickly became serious competitors. This is a potential lesson for listeners of this podcast. When you explore collaborative efforts with another company, you need to be careful. You need to be careful in how much you share about your capabilities and future plans. Early on it will help if you agree on a business model before going too deep into discussions – recall that go Pro’s demand for two thirds of the profits derailed this effort.
  • Second, which innovation and marketing strategy will be most successful? From my perspective, it is likely that the drones and cameras developed by DJI will probably be technically similar in many go Pro models. If this is the case, I can see go pro becoming the profit leader and maybe even the sales leader. They become the profit leader because of their brand reputation for quality and innovation coupled with a system where users can publish their video. DJI’s path to success depends on developing a brand presence and a reputation for drone capabilities that are just a step ahead of whatever go pro has at the moment.
  • When looked at this way, you can see where each company will want to focus its innovation – leveraging and developing its strengths.
  • The second rivalry is between the NFL and FIFA – after all, both are in the football business. Looked at from the perspective of the United States market, this does not look like much of the competition– the NFL dominates FIFA. But when looked at from a worldwide perspective, the competitive balance is dramatically different – FIFA dominates the NFL.
  • Each organization is increasingly invading the others stronghold. The NFL has been having a regular-season game presence in England while FIFA is making significant inroads into the American market. Regarding the latter, the 2014 World Cup soccer games beat out the last game of the NBA finals in the number of TV viewers. On the other hand, the number of weekly football watchers in the UK doubled to over 3 million viewers between 2009 in 2015, according to the NFL’s data.
  • Soccer under the FIFA banner and professional soccer clubs have infiltrated the United States market far more than the NFL has infiltrated the international markets. Soccer has the strength of both men’s and women’s competition as it looks to strengthen its presence in the United States. We just need to recall the recent win by the United States women’s soccer team in their World Cup, a FIFA competition.
  • The NFL is looking to go to two regular-season games per year in Europe starting in 2018. Unfortunately, initial efforts have focused on the Jacksonville Jaguars, a team that does not necessarily show the NFL at its best.
  • Worldwide soccer and FIFA are dramatically bigger in fans and financial results than the NFL. They are not only bigger, but also increasing their worldwide presence, which is already impressive, is growing at a faster rate than the NFL from a worldwide perspective.
  • Current trends and cultural factors suggest that these trends will continue. The NFL has some serious player safety issues, especially concussions. The impact of this is already seen in Pop Warner and high school programs where participation is down about 10%. Hall of Fame NFL players saying that they would not let their kids play football compounds this. Add to that the NFL’s messy and unsuccessful player discipline efforts, and the shine of the NFL brand has diminished. Only time will tell if this trend continues. FIFA has its own serious image problems as an organization with arrests and charges for corruption.
  • How might this rivalry be important and helpful to you? It is always important to look at the big picture of customer behavior. One of the big picture perspectives is who is competing for the customer’s entertainment dollar—not just American football and soccer dollars. Customers have only so much that they are willing to spend on an area like entertainment, which is discretionary spending. The NFL and FIFA are competing with movies, video games, other sports like basketball and collegiate football, concerts, and many, many other events.
  • As a business person, you need to widen your understanding of your competition, especially trends like innovative new benefits in your and competing industries. If the NFL were only to look at the competitive football matrix, they would see they dominate the pro-business. Their main direct competition is a very vibrant college football industry that is attracting some of the entertainment spending from them. When the NFL looks at the competitive matrix it is far more than just football at the pro and college levels. They see that the competition for entertainment spending is far more serious and complex.
  • Innovation in one industry will not only impact other competitors in that industry but also in many other related industries competing for the same customer dollar. You can see this as good news. Your source of potential sales growth through innovation is far more than just the business of your direct competitors but also your indirect competitors that are competing for the same budgetary dollars.
  • When looking at competition from this broader perspective, it impacts your innovation strategy. You need to understand the benefits you have and each of your more broadly defined competitors have. You also need to understand your weaknesses relative to these other competitors and the innovation initiatives they are undertaking. It’s always easier to develop competitive advantages by leveraging already existing strengths or competitive advantages that you have. As a result, your first option should be to innovatively explore how you can make your strengths mega strengths.
  • This is clearly a much bigger topic than can be deeply covered in this one podcast. If you are faced with the broader competitive matrix outlined here, you may want to contact us at Innovate2Grow Experts….i2ge.com.

Leave a Reply

Your email address will not be published. Required fields are marked *