When business leaders meet, the conversation often revolves around a popular question: “Who is your biggest competitor in the region? “
“The greatest.” It is the choice of words. And here’s how I answer the question: “Berkshire Bank Wealth Management is the ‘biggest competitor’ to my company, Berkshire Money Management.
Interestingly, BMM’s “biggest” local competition was over four times as much as we did just over ten years ago (on an income basis). Even after the bank made too many acquisitions for me to remember, the gap in that size difference closed enough that I recently sent out an unsolicited offer to discuss the acquisition of competition. (Spoiler alert: they weren’t interested.)
Therefore, I officially withdraw the trivial question “What is your biggest competition?” “It will be replaced by” Who is your most innovative competitor? “
As a competitive business owner, innovators are the most inspiring to me. One of the most innovative local fund management companies is Willow, owned by the indomitable Alexandra Dest. She is passionate about ESG investing (environment, social and governance). In addition, it has become the go-to authority on cryptocurrency in the county. It is much more exciting than our biggest competition.
I am not encouraging you to be the willow of your industry. Not yet, anyway. It’s a tall order to reformulate your entire strategy to suit the fastest growing segments of your customer base. You can do it, but today we will walk before we run. You may need to be Edward Jones Investments before you aspire to be Willow.
In a world where financial services companies scramble to serve day traders and cut commissions to zero, EJI was behind that curve. EJI apparently admitted that he couldn’t change his strategy too drastically because he was not ready to place himself in the most competitive part of the market. Instead, he began to move from his old transactional style of door-to-door selling financial products to more of applying solutions to problems.
EJI’s innovation was not revolutionary; it was self-awareness. EJI realized that it was positioned as a less practical product. He recognized the changes that have taken place in the industry and adapted accordingly to remain relevant. Instead of resting on its laurels, it positioned itself for the decades to come.
It is not only financial companies that are at risk. These are all industries, and it has been happening for a long time.
Twelve of the original 30 companies in the Dow Jones Industrial Average are no longer in business. Who would have thought that these giants would disappear?
In 1958, companies listed on the S&P 500 stayed there for an average of 61 years. In 1980, this period of tenure fell sharply to 25 years. In 2011, the average duration had fallen to 18 years. It has become more difficult, even for the titans of the industry, to stay as relevant as they used to be.
Only 10.4% of Fortune 500 companies from 1955 remain on this list. Some have been acquired. Others have gone bankrupt. Still others disappeared as their competitors figured out how to do things better and how to respond to new customers.
Neither you nor I are about to go bankrupt or disappear. But, we are vulnerable to radical changes in our respective sectors.
If you don’t innovate, you will die. I’m not talking about the kind of innovation of disruptors like Uber, Netflix, Apple or Tesla. Let’s face it, we’re unlikely to build a better mousetrap. These innovations are rare. The things I’m talking about might only sound like an innovation from the status quo your business has become accustomed to.
These traditional organizations are the ones that have bowed their heads and have so far gone the old way. These companies align their operations so closely with their business model that they risk not matching the changing needs and habits of their customers. They may be stuck for fear of change, but adaptation doesn’t have to come all at once.
Decades ago, Berkshire Hathaway CEO Warren Buffett explained that he doesn’t read the Wall Street Journal to rely on the “aha” moments of investigative journalism. Instead, he reads the WSJ every day because of the cumulative knowledge that occurs over the years.
You can use this same type of iterative process for your business. Over time, you observe the world changing and learn the best ways to exploit these opportunities. You design, test, and then implement.
To beat your competition, you don’t need to revamp your entire strategy today. If you subscribe to the Buffett concept, you can make incremental changes to meet new realities. As long as you have the will to change, your business can grow. Disruptive competitors can eventually force you to make significant changes. However, to start with, you can make small changes, like Sarah did, to take advantage of these disruptions.
Sarah has a luxury livery service in Pittsfield. Unlike taxi services in big cities, his business is not challenged by Uber. But, she knows the threat is coming.
Sarah has acquired an artificial intelligence tool to predict and prevent the maintenance of her fleet, thus extending its performance and longevity. She is applying for a license for the device so that her company can diversify its revenue by serving its future competition Uber.
If you want to be the biggest competitor in your industry, you have to be the most innovative. That doesn’t mean you have to create something brand new, or even immediately adopt a new good practice. You need to read your industry’s version of the WSJ every day and deliberately go through an iterative process to keep your business out of trouble.