Know Thy Enemy, Befriend Rivals

Scrutinize your competitors, and become friends with them, too. You just might partner to pitch a client, buy one out (or vice versa), or grow the industry together.

Here's a truth:  At BzzAgent, the word-of-mouth marketing firm where I'm CEO, I go to ridiculous extremes to obtain information about our competitors.

I scan Crunchbase, study websites, and download mobile apps. I troll shamelessly for gossip about our rivals' executive teams and star players.  And occasionally—when I'm really on my game—I hit pay dirt and obtain a competitor's proposal to a client. And when that happens, our team goes to work.  We dissect it for valuable bits of information about our opponents' pricing models, positioning, and capabilities.  And it's this information that allows us to accelerate our innovation, understand where our competitors are strong—and determine how we can exploit their weaknesses. 
For instance, from one proposal we learned that our flat-fee model was being devalued by another company's "cost-per-engagement" pricing. We created a strategy to counter that objection with clients and prospects. And a few years ago, we got the inside scoop on a new opponent's practice of throwing in-home product-distribution parties for marketers and got ahead of market by developing the next evolution of the concept.

We're also interested in information about our competitors' processes.  For a while, one rival company responded to email queries by tersely exclaiming that they only accepted clients who had a minimum of $1 million to spend.  Hey, we were happy to accept those that 'just missed' that criteria.  In another case, a company that tracks social influence positioned itself as a competitor to us—but inside information proved that their engineering-first culture could be perceived as unfriendly to clients.  Our awareness of that issue was the foundation for a very lucrative partnership discussion.

Sun Tsu said it best:  "…know thy enemy."  As a strategy, this means more than the collection and dissection of as much information on your competitors as possible.  Alongside minor cloak-and-dagger data gathering, you should also be developing real, personal relationships with people at all levels of your competitor's businesses.  Just as much value—possibly even more—can come from a direct relationship.  Why not identify and tackle common challenges and goals? Growing an industry is often about the sum of its parts. With a rival, you might create standards or align to compete against a regulation. Heck, you may even partner to win a big client.

And if you're leading an organization and aren't similarly fixated on both knowledge-gathering strategies, you are putting your company at great risk.
I wasn't always so obsessed. At one time, I thought BzzAgent was untouchable. I believed we could always stay one step ahead of the competition.  I was convinced that what we did was often right and what our rivals did was often wrong.  Of course we would continue to evolve and they would remain static.  But I was wrong.
Many a corporate pundit will tell you to just focus on your own business. Don't get distracted by the competition, they will say. In our case, we were so focused on ourselves that we failed to look up in time to see how things had evolved.   We were the first entrant into the space in 2001, and for many years we were considered the only game in town.  We didn't have to outpitch anyone.  We just had to be us.  When competitors finally showed up around 2005, we mocked the fact that they weren't nearly as knowledgeable as we were.  We were confident they lacked our experience.  We thought their variations on our model wouldn't significantly impact us.  But by 2008, we found ourselves losing more projects than we were winning.  Competitors had learned how to pitch against us.  Their innovations weren't to be mocked; they were to be admired.

I realize now that this happened because competition is different today than it was just a few decades ago.  Business in general is moving much faster and ideas can be replicated on the cheap.  Competitors—and even companies not yet in your space—will adapt and learn and find ways to become better than you.  They are nimble and they will adapt.  And while they may falter, it's a much better bet to figure they probably won't.  Competitors are often smarter than you think they are, and if you turn a blind eye to them—or even blink for a moment—they're going to eat your lunch.  If you care at all about the organization you're leading, gathering significant information about your competitors isn't useful.  It's not something that might be worth your time.  It's something you must do.

At Smarterer, a Google-backed startup where I'm executive chair, we watched as Gild, a company that had been only tangentially related to us, deployed an almost-exact replica of our solution, which gives people a score based on how adept they are at things like Excel and PHP and Photoshop.  While initial reactions included hand-wringing and disappointment at being imitated so closely, we eventually settled on a valuable realization: There is no longer first-mover advantage.  This has been replaced by an ability-to-adapt advantage.   For those who are willing to gather as much information as possible, react, and innovate ahead of rapid market shifts, success will be inevitable.  For those who fail to pay attention to everything happening around them, getting overtaken is the only possible outcome.   Yes, it's still true that if you have a good idea, at least 10 other people are doing the same thing—but now they're watching you as closely as you should be watching them.

But you shouldn't consider your competition the evil enemy.  They exist for the very same reason you do, and in most cases rising tides do in fact lift all boats. When it came time to sell BzzAgent (we were acquired by Tesco in July 2011), we had a number of direct competitors that became potential suitors, solely because we had shared a beer at one point or worked together on authoring an ethical code for the industry.  You might not end up as BFFs, but having a competitor as a "frenemy" can be incredibly valuable.
How do you get there? The route to a competitor relationship begins simply: Pick up the phone and call them.   Don't wait; just do it.  Or actively seek out your competitors at a conference and introduce yourself.  Let them know what you admire about them and offer to share an ingredient in your "secret sauce."  Follow up and follow through. Send holiday cards; share client stories.  This will break down the barriers that hamper your ability to learn from others and grow your business.  The information you gather will be a critical asset that will help you stay ahead in your industry.

And if a frenemy asks, don't lie.  You can say, "Yes, we do have copies of your proposals. Know what? I'll send you one of mine. After all, maybe we can learn something from one another."

http://www.inc.com/dave-balter/start-up-strategy-know-thy-enemy-befriend-rivals.html