When we think of competition in a marketplace, most good little free-market capitalists (like myself) would say that it’s a good thing.
And while you’d never catch me saying that competition ISN’T a good thing, lately I’ve been noticing different kinds of competition – some good, some bad.
In the early days of a market’s development, you mostly see what I would call “innovator competition”. This is where the focus of all the companies in the market is differentiation. They’re all looking to create some uniqueness to their brand and give you some reason to choose them. It’s a bit of a land grab and each company is trying to plant it’s flag. This is the most exciting time for product design because here is where we see the most variety and creativity. It’s the glory days. This is the kind of competition people think of when you take about competition in the marketplace. It’s all about the great variety products and approaches.
It bums me out when I see another increasingly common kind of competition: “zombie competition”. It comes at a later stage in market development, around the time commoditization starts. Instead of companies striving to innovate and differentiate, they run around like mindless zombies copying each other. Their strategy turns from “give customers a reason to choose us” to “take away any reason for customers NOT to choose us.” It’s defensive playing instead of offensive playing. At this point, it’s not a capability/benefit message any more, it’s all about the spec sheet. “They’ve got a fast processor? WE’VE got a fast processor. THEY’VE got 4GB of RAM? WE’VE got 4GB of RAM.” Markets at this stage of the game have mature, established products and customer expectations. Brand equity and recognition have been built up to the point where companies don’t actually need to provide quality products or services anymore. It’s all about the brand-name now. Customers will choose them despite having crappy products. Markets in this stage include: PC manufacturing and most consumer electronics (TVs for example, with the exception of 3D, the only real innovation in some time).
Here’s why I hate zombie competition so much: I believe it destroys markets. Whoa, that’s harsh, eh? Take the PC industry. NO-ONE is innovating anymore. Manufacturers are just running around copying each other’s spec sheets. They’re all the same. It’s not the lack of variety that bothers me. It’s that once the homogenization happens, and brands can’t compete on capabilities, guess what they compete on? PRICE. This is the beginning of the end. Once they’ve played their last card and have nothing left to go on but price, margins get squeezed as there’s always someone else willing to offer their copy of your product at $1 cheaper. Once margins really get squeezed, product quality and service go into the toilet. There’s an expression, “A rising tide floats all boats.” – this happens in a new market as the hype cycle puts it in the spotlight. Unfortunately, zombie competition sinks all boats. It drags everyone down to the lowest common denominator.
I have a lot of respect for companies that resist zombie competition by forging their own path, ignoring the competition, maintaining their margins through their product quality and innovation, and not following everyone in the race to the bottom.
