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Beat the Market Leader
February 02, 2007
By Glenn Gow
Among challenges facing a company is attempting to win against a market leader. In many cases, the leaders' substantial advantages include pricing power, brand recognition, control of distribution channels, a satisfied customer base and more.
Here are three ways companies can win against market leaders.
1. Accept the reality of the competitive landscape.
You'll only be able to win against the market leaders by defining your own terms, which means accepting what you can and cannot do. Once a company is clear about its place vs. competitors, it can develop a clear strategy based on reality, rather than hope.
Study the competitive landscape to see how you can leverage the leaders' position. They educate the market and build awareness about your product category, set customer and channel expectations, and create demand that exists regardless of your best efforts. It’s best to swim with the current when the current is strong.
Sybase: A Case Study
Sybase is an excellent example of succeeding by accepting the reality of the competitive landscape. To win against Oracle and IBM in database management, Sybase carefully chooses its customers and partners effectively. Sybase's vice president of field marketing, Mark Westover explains that "Prospects who are concerned about being locked into the single vendor solution offered by our larger competitors are more likely to be interested in Sybase, and the Sybase sales organization knows how to find and serve those prospects."
Unlike market leaders, Sybase focuses on partnering to create and deliver the entire solution. This approach further emphasizes the multi-vendor approach that some prospects desire, and also adds to Sybase’s competitive advantage as the company leverages the go-to-market capabilities of its partners.
Agile: A Case Study
Agile Software is keenly aware of the dynamic nature of its competitive landscape. Agile recognizes that when the market leaders (SAP, UGS, Oracle) address the product lifestyle management landscape, they may claim technology advantages, have certain marketing advantages, or have a larger installed base. Agile's vice president of industry solutions, Simon Parmett, says, "Understanding the changing landscape is important because there is only one real sustainable competitive advantage, and that is commitment to guaranteed business results."
2. Pick an opening in the competitive landscape to own.
To address a new market opportunity, market leaders must meet high hurdles—much higher than yours—for size and growth. Their ability to move quickly is limited. If segments don’t appear to be large enough or growing quickly enough, they represent low hanging fruit for you. Your leverage lies in narrowing your focus to a market segment you can own and define before it becomes appealing to your competitor.
Quest: A Case Study
Quest Software makes productivity enhancement and database performance software. How can a company of Quest’s size ($389 million) compete against the clear market leader, Oracle ($11 billion)? Quest's CEO, Vinny Smith, says, "We don’t provide the full stack of technology, we make the stack function better." Quest chose the right sub-segment, then went head-to-head with a behemoth and won.
AMD: A Case Study
AMD competes against Intel and makes microprocessors compatible with Intel x86 architecture software. Intel believed that a larger market opportunity existed in a new and proprietary architecture for high-end microprocessors, and built the Itanium. Part of the reason they built a proprietary microprocessor was to create a barrier to entry for AMD, and to enter a market with higher margins.
AMD, focused on addressing the needs of its current customers and built the next generation microprocessor to run all of its customers' legacy applications. According to John Volkman, VP of Strategic Communications at AMD, “What customers really wanted was to take the x86 architecture upstream. We came up with an incremental improvement to the existing product line, which was exactly what the market wanted.” AMD relentlessly focused on its customers’ requirements, then introduced a solution based on Intel’s x86 architecture. AMD beat Intel at its own game with the Opteron, a 64-bit microprocessor.
3. Relentlessly enforce your market focus decision.
One of the biggest strategic challenges facing companies is learning to say "no" to sales opportunities. Not pursuing business requires discipline. Successful companies won't pursue undeniable revenue opportunities that fall outside of the strategically narrowed focus until these opportunities are sufficient to change the corporate strategy.
Aspect Communications: A Case Study
Aspect Communications competes in the contact center market against companies such as Avaya, Nortel and Cisco. Aspect SVP and CMO Brian Gentile drove a corporate-wide, rigorous process through which Aspect defined the segments they wanted to own. Gentile says it's easy to get excited about sales opportunities, and very hard to say "no" to them. "You've got to have corporate courage to accomplish this. Every week our strategy is tested by sales opportunities, and we have to balance these against our chosen strategy. It's fundamentally an investment decision for us."
palmOne: A Case Study
palmOne faces a similar challenge. They make some of the most popular handheld devices, but not a dedicated MP3 player. They could choose to compete against Apple, Sony, Dell and others, but according to Ken Wirt, palmOne’s SVP of Worldwide Marketing, "We chose not to pursue the MP3 player business because we don't have a great key differentiation." Through expansion cards, owners of palmOne devices can listen to MP3 files. palmOne sticks to its strategy of developing products only in an area where it can create a sustained competitive advantage.
Once you've narrowed your focus and differentiated yourself, how do you keep it going? According to Brian Gentile, "You need to constantly revitalize your strategy. And the process of revitalizing begins as soon as your strategy is set. A company’s strategy begins to decay as soon as it’s born." Nobody said winning against the market leaders would be easy.
Glenn Gow founded Crimson Consulting Group in 1991. He has consulted on strategic marketing issues for some of the most successful companies in the world, as well as dozens of emerging companies.
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