Competitors are Not the Problem

I advise many successful companies, and some of them have grown very quickly to their current size and state. They developed a product or service, matched it with a market, and are experiencing a great deal of success. During the earlier parts of this journey they were acutely aware of the possibility of competitors being able to overtake them or the reality that other competitors really were jockeying for position in the market. However, their growth rate meant that any competitors simply couldn’t keep up.

The leaders of these organizations have the feeling of close competitors fresh in their minds, and therefore many companies experiencing quick growth are unreasonably fixated on defending against or staying ahead of competitors when they really should be starting to repair and improve the internal structural areas necessary to continue their growth.

While maintaining awareness of the market and competitor activities is important, once an organization has reached a position which is clearly dominant in the market, I have observed that the bigger risk to the organization starts to come from within. Companies with that kind of growth trajectory typically forsake upgrading leadership skills and business processes necessary to continue the growth, often to their detriment.

These aren’t particularly new ideas, and Arthur Toynbee has written extensively on the growth and collapse of many societies in his works. The main idea is that an organization (society in Toynbee’s case) is grown by a creative minority whose ideas and progress attract a large group of followers. At some point this creative minority can become a dominant minority, the group starts erecting some types of walls or protective measures, and by that time the group is in breakdown mode.

King of the mountain

A fortified position is far easier to defend than to capture. If your organization has already reached a dominant position in a given area, and you are still making progress on improving your products and services for your customers, any competitor will have to work extremely hard to unseat you. Your organization is probably still led by a creative minority, and it is their direction and enthusiasm which leads to progress.

There is a tendency in these cases for some people, especially executives, to begin focusing on external threats. However, if you do a bit of introspection about the organization there are likely numerous internal ways in which growth can slow or perhaps be eliminated entirely. These areas are the bigger risk.

Newer organizations which have experienced rapid growth are typically headed by visionary but perhaps inexperienced founders. Their leadership and operations capabilities have almost certainly improved along the way, but it’s likely the company growth has outpaced their ability to upgrade their own skills. This often results in a young and vibrant company, with a great growth story, that begins to focus too much on defending against competitors when they should be focusing on creating systems to maintain growth.

If you don’t want to be public about your software development practices in order to defend against competitors, rather than blogging and doing tech talks and so on in order to continue attracting top talent, this means you. There’s are many reasons why Uber and other fast-growing companies do a huge amount of sharing about their technology work and practices, and one of those is because they know the big challenge is continuing to recruit many good developers. They aren’t getting overly sidetracked or paranoid about things Lyft might discover.

Look in the mirror

Humans often have a tendency to focus externally when identifying risks or weakness. This feeling is natural and has its place in a world where you might be eaten by a lion, but there are cases when the biggest risk to your livelihood doesn’t come from external threats but rather from internal deficiencies.

With this in mind, you can shift the focus to the internal areas of the business which are presenting the largest impediments to growth. When this doesn’t happen, the result might be the creation of what Toynbee calls an internal proletariat.

In my experience some of the main issues tend to be things like:

• insufficient leadership capabilities

• lack of business and technical processes

• insufficient documentation for existing processes

• ineffective or missing onboarding processes

• ineffective methods for increasing inbound candidates/recruiting

If the creative minority (leadership) doesn’t handle these sorts of things and instead becomes just the dominant minority (management) then an internal proletariat develops further and the organization begins to implode. One of the signs of implosion is excessive defensive emphasis, which often manifests as fear and paranoia about competitors.

It’s not uncommon for a growing company to talk about leaving competitors behind (less emphasis on defense) and after two years that same company might be having executive team off-site meetings about how to best address the competitive threat.

Conclusion

From Toynbee’s perspective, when a society is growing rapidly it is difficult to define the borders because the society and culture is radiating out at a rapid pace. If you’re at the point in your business where you could buy your competitor(s), and you are continuing to deliver improvements to your product or service, then your competition is probably not your biggest risk.

You have to look internally at the things your business requires in order to grow. You have to avoid the creation of an internal proletariat. You have to ensure your culture and vision continues to radiate outwards at a rapid pace. The requirements for these objectives will almost certainly not be technological things, but rather leadership capabilities and processes for operating the business.