Selective Memories: How We Think About Competitors
Label this a small thought. It has to do with what we remember and how we color the information we do recall.
I recently read an article in the business section of my paper that discusses how people think about discount pricing. According to a New York Times article, a study in The Journal of Marketing observes that if a manufacturer offers a discount program and states the discount in terms of absolute dollars (or whatever currency), the consumer is likely to remember that discount and may also consider it a permanent price drop. That is, the consumer will expect from here on forward that you will sell that product at the discounted price. This same study compares the experience when a producer offers the product at “45% off,” for example. Apparently the specific discount does not stick when it’s stated in percentage terms. This producer has a better shot at raising prices without the customer rejecting the higher price.
In short, you or I seem to remember cash discounts more clearly than we do percentage discounts.
What does this say about what we’re likeliest to recall about a rival? Most competitors wave big red flags warning you of an impending major tactic–say an acquisition or a layoff. These are like cash discounts, and we remember them.
But the more subtle activities, such as a shift in a company’s supply chain, how it behaves at a trade show, a new sales force pitch–these are quieter; they make less of an impact than the red flag of “acquisition.” How a sales force goes about implementing its new promotional strategy, for instance, may be as powerful a disruption as an acquisition. In order to track and monitor – and recognize – these disruptions, you need to focus on the critical factors that can cause you and your firm the greatest pain.
Our memories tend to be selective. But they can be trained to focus on the competitive clues that matter most.
Two entrepreneurs and their disruptive visions for The Wall Street Journal
Irony of ironies, Brad Greenspan, a co-founder of MySpace, whom Rupert Murdoch bought out a couple of years ago, has reportedly also placed a bid for Dow Jones. He wants this prize for himself and sees a somewhat different future in it than does Mr. Murdoch.
But the visions of Murdoch and Greenspan share a common theme.
Rupert Murdoch’s move to buy Dow Jones and its flagship, Wall Street Journal, is a natural extension of his long-time approach: Content, content, content…it’s all about content (or at least content that can attract advertising).
In the past two years, the public war games we have run between Harvard Business School and MIT’s Sloan, as well as with the London Business School, on competitive battles in the digital entertainment and social networking spaces both involved News Corp. The three games all brought to the forefront the fact that News Corp’s expressed strategy of “Content is King,” trumps all other lesser dogma.
Murdoch believes strongly in leveraging his TV, movie, and news content through his various platforms. For this reason, the teams playing the role of News Corp were able to articulate and forecast the moves News Corp is in the process of making – many months into the future.
Greenspan’s vision is to turn the Wall Street Journal into an Internet television station with streaming video of the latest business news coursing onto viewers’ screens. Murdoch wants to make the content more widely available, also using the Internet.
Companies and entrepreneurs like Murdoch wear their strategy on their sleeves.
Whoever buys the Journal will change the way the Journal delivers and can profit from its valuable content. The Journal may remain the top business information dog but it will only do so by learning some new distribution tricks. The intelligence is clear and the story it predicts is nearly inevitable.
$10 Billion on corporate spying? Not exactly!
A couple of weeks ago a reporter from a major business magazine contacted me with questions concerning spying accusations leveled at Hewlett Packard. In the course of our discussion, he asked me, “How much do companies spend on legitimate competitive intelligence efforts?”
I’ve heard the question before, but now, for the first time, I had a realistic answer to the question.
Fuld & Co. recently completed the first-ever global CI benchmarking study (From Stick Fetchers to World Class) that polled companies for their CI budgets, among other topics. By comparing the survey’s findings, industry by industry, with that of the Fortune 1,000 listings, we were able to reasonably estimate overall CI spending for this class of companies in the United States.
I believe my estimate of $1 billion of current annual CI spending for America’s 1,000 largest companies, with $10 billion spending projected in five years, is likely conservative. I recommend you read our June 19 press release.
But it’s as important to understand what these companies AREN’T doing as what they are doing. They aren’t spying. These are legitimate companies, most publicly traded, whose managements strongly believe their companies need competitive intelligence to survive and thrive.
Do companies make mistakes? Sure. Do some cross the line of what’s permissible and appropriate? Yes (and that’s what prompted the reporter to contact me in the first place). We often see the results played out in the courtroom. At the same time, though, companies know they have to compete for the long term. That means producing a good product or service and keeping customers happy, but it also means anticipating market surprises or taking advantage of market opportunities – before the other guy. That’s what competitive intelligence is all about. That’s what makes it so critical for today’s company.
That $10 billion in expected spending isn’t for spying; it’s just good business.
