Researching how your customers currently solve their problems, what their pain is, what they will pay or do to solve it along with understanding the functional elements of the industry you operate in, are critical success factors for business.
My Business Diagnostics co-author, Mike Thompson, and I recorded a series of short videos explaining the key elements of the Business Diagnostics Framework found in our Business Diagnostics book.
Successful business people can easily discuss their industry, its size, growth rates and trends. They can tell you how the industry is evolving, what matters the most and how the players are adapting to stressors or opportunities. Understanding the competition is important because knowing what the competition offers helps your comprehension of your own competitive advantage. It will also help you understand how competitors might respond to your offering.
Researching industry and competitive conditions is part of doing an external scan or PEST-C which is conducted before business strategic planning as a part of the Business Diagnostic Framework . Click to find the Business Diagnostics video series. The following is a transcript of the video on how to conduct an External Scan: Industry Competitive Conditions.
__________________________________________________
Today I’m going to talk about (researching) your industry competitive conditions, with competitive conditions being the “C” part of the PEST-C external scan model. We recommend this model (as part of) our Business Diagnostic Framework.
How do Industry Factors affect your Business?
Industry competitive conditions (are) really important and that’s why we have actually separated it out (of the PEST analysis) and made sure it is discussed. This (refers to) how the industry that you are operating in evolves and responds to competitive challenges (and) will make a drastic difference in how you operate your business.
How to do an Industry Evaluation
The first thing you want to do is an industry evaluation, starting by identifying and describing your industry. This will raise questions like; what life cycle is the industry in? Is it mature or is it emerging? Is the industry growing or highly regulated? What are the driving forces that are going to make a difference in your industry?
Industry Conditions
Now you must take a look at the overall industry competitive conditions and ask the fundamental question: Is this an attractive industry? Is this an industry we really want to get into? It is useful to use Porter’s Five Forces model to get a relative sense of who has power in the industry and how intense the rivalry is between market players. However, Five Forces is just a snapshot. The key is to put information together which will help you make decisions and not just simply fill out model templates.
What are Industry Substitutes?
Substitutions are particularly important because so many products are being delivered via new business models (like) online subscriptions. These new models are taking advantage of the sharing economy. Although switching (costs) to (industry) substitutes can be high, if the value proposition is there, eventually those substitutes are going to find their way to market.
A prime example is Air BnB, which is a substitute for hotel stays, thus challenging hotels to ensure they provide value and are targeting the right segments – a substitute with a strong value proposition.
How to do a Competitive Assessment
You are also going to have to assess your competitors. A competitor analysis is part of the ongoing tasks of marketing, though in the general assessment phase (of an external scan), it is more important to look at the macro issues that influence competitive strength. These are factors such as: How well financed are they? Who are their strategic partners? What is their competitive advantage or distribution channels? This is critical as you may see a competitive path that is missing in the marketplace, which is the whole purpose of doing the research. Maybe you’re providing a substitute product in the industry and you’re the one who is changing the industry.
There is a full list on how to get a fix on your competition in the Business Diagnostics book.
Industry Key Success Factors
You want to take a look at the key success factors in your industry. Is it reliant on lean operations, quality customer service or location? Knowing your industry key success factors will help you evaluate your operations and clarify your own competitive advantage.
To sum up, it is crucial to understand your industry competitive conditions. You need to know your industry and focus on your place in it – not what everybody else doing. Use the Business Diagnostic Framework (as your guide). It works and is a starting point to kick start evaluating your business and keep your head above water.
Leave a Reply