Use this framework to maximise a company's strength
This framework is used to maximise a company's strength relative to the competition.
It is natural to wish that we didn't have any competitors. Life would be much easier if we had the marketplace to ourselves. However, in the real world this is hardly ever the case. We could look on competitors as a force for the good. Copying a competitor is not a good idea as it would result in a "me too" offer. A competitive environment is likely to promote more innovation, faster responses and an all-round improvement in customer service. It follows therefore that in developing a business strategy we should fully understand the competitive environment.
Kenichi Ohmae is an academic, business consultant and organisational theorist. In 1991 he published a theory on competitive strategy in his bookThe Mind Of The Strategist: The Art Of Japanese Business.
Kenichi Ohmae began life as a nuclear scientist and subsequently became an organisational theorist and management consultant. He developed the Japanese theory of balancing people, money and things into a three-part strategy for business – customers, competitors, and the corporation. When these 3Cs are taken into account, a business strategy can be developed. Ohmae proposes an industry framework in which three elements are in balance:
Customers. The customer is at the heart of the 3C model. Not all customers are the same and Ohmae recommends segmenting them according to their different needs and behaviours. This requires considerable understanding of the customer base – who they are, how they use the products, where they live, their age, interests and use of competitive products.
Competitors. As always, it is important to understand competitors’ differential strengths. For some firms it may be a cost advantage while for others it could be their reputation and brand strength. Where possible it is important to understand how the players in the market collect value and make profits. In developing a strategy it is important to work out which are the competitors that you are aligned against – the ones that you need to beat. Crucial to this is determining exactly how you are going to beat them.
Company. If a company is to be successful it is important that it understands its strengths and weaknesses. It is likely that the company will have a range of different strengths. One of the strengths should be developed into a competitive advantage. Ohmae recognises that there are some things that companies find it difficult to do in which case they could be outsourced. If activities are outsourced it may be necessary to manage in-house costs in order to ensure there is no loss of competitive advantage.
As with most frameworks, the triangle concept is simple but the intelligence required achieving the balance between customers, competitors and company could be complex and thorough. It shouldn’t be based just on internal perceptions. Customer surveys, benchmarking metrics, objective data is vital if an appropriate strategy is to be devised. It is a framework in which other frameworks could help such as segmentation, competitor intelligence, and the competitive advantage matrix. At every stage of the analysis it is important to ask the question “why?”. This may point to a number of small advantages which collectively offer a significant advantage over the competition.
Kenichi Ohmae tells a story of a competitive battle between Fuji and Sakura, two suppliers of photographic film to the Japanese market. Sakura was losing market share to Fuji which was the bigger company with a better known brand. It examined Fuji’s strengths which were the quality of its film for sharp colours and contrasts. However, customers were becoming more concerned about cost. Sakura didn’t want to create a price war by simply reducing its ticket price. Instead it responded to the economic need by launching a 24 exposure film at the same price as Fugi's 20 exposure film. This allowed Sakura to maximise its resource in cost efficiency, meet the needs of price sensitive customers, and obtain a competitive advantage over Fuji.
Some things to think about.
What is the critical success factor within your company?
How could you make better use of your resources?
Why do people buy your competitor’s products?
What above all else do your customers value from the products you supply?
What is your company's single relative strength versus the competition?