It’s not a war

I suggested that he think differently about potential competitors, pointing out that the threat probably wasn’t anything near what he was anticipating. His scepticism was still palpable even after I told him Starbucks was just one of the five coffee shops in as many blocks on Fourth Street, Calgary, and that Purple Perk, a family-owned coffee shop on the opposite side of the street from Starbucks, is consistently busier. 

Far from being concerned about Starbucks, Purple Perk co-owner Paul Overholt saw advantages in having it close by. His well-reasoned strategy struck me as a classic example of how a small business can outmanoeuvre a large competitor by exploiting its weaknesses. The surrounding neighbourhood, Mission, is home to an eclectic population that Paul judged would favour a neighbourhood coffee shop reflective of the look and feel of the area. One way he conveyed this was through incorporating ceramic tiles from buildings being renovated in the area into the floor of his coffee shop. 

His purpose was to subtly create a sense of familiarity for customers. By contrast, as Paul pointed out, the Starbucks across the street is cookie- cutter typical of the chain’s standard architecture, standard interior and standard corporate palette. Paul knows that many of his patrons have an aversion to foreign-owned multinationals. This is what I mean by identifying your actual competition. There is bound to be some overlap of customers, but for the most part Starbucks is an apparent rather than an actual competitor. Paul’s actual competitors are the other privately- owned coffee shops on the street.

By not distinguishing between apparent and actual competitors, you waste time and energy barking up the wrong tree. Rather than being concerned about the green mermaid across the street, Paul welcomes her presence, saying: “Her visibility raises the profile of coffee and the concept of coffee shops to the advantage of all privately-owned coffee shops in the area.” The lesson for all small business owners: identify your actual competitors, understand their strengths and weaknesses, and then adjust your business model to stay ahead. You should also know what your competition is up to at all times so you’re not caught by surprise and end up with a sore butt, like an unobservant coonhound.

Binoculars

There are different ways of keeping an eye on your competitors. I knew a service station owner in Calgary who kept a close eye on the per litre petrol prices his competitors up and down the street were displaying. This was what the binoculars under the counter were for. A few times a day he would reach for the binoculars and check the competitors’ advertised prices. I don’t mean to suggest you should obsessively watch your competitors, but it should be part of your routine management activities – being oblivious could have consequences ranging from a slow deterioration in your competitiveness to a sudden, damaging, unpleasant surprise. How you gather intelligence on your competitors is important. Keep good ethics in mind and definitely don’t do anything illegal. You can learn much about your competitors through trade shows, advertising material, websites, press reports, customer gossip, mutual suppliers, couriers, truckers, social media pages and perhaps even surreptitious visits to their premises.

What and why

So what should you know about your competitors? The short answer is everything you possibly can to help you outwit, outmanoeuvre and outperform them. The first thing to understand is you’re not going to do this by imitating them. You need to differentiate your small business, and a ‘me-too’ strategy is not the way to do it. Seth Godin’s book, Purple Cow, is about standing out from the herd. It’s a good philosophy, but it only works if you know what to stand out from. You must know their strengths and weaknesses. And this isn’t a one- off exercise. In business, nothing is static. We have to be aware of changes as they occur.

So, what do you need to know? A paper published by Leeds Beckett University provides a good summary: the products and services they provide; how they market to customers; the prices they charge; how they distribute and deliver; their market share; their brand and design values; their staff numbers and the calibre of staff; how they use IT; their management style; and their media activities.

Competing in customer service

A number of the items affect customer service – in other words, the customer’s experience. Outstanding customer service is likely what many of your competitors think they provide. And it’s likely that few actually do. If you’re going to exploit a competitor’s weaknesses, a good place to start is with the low-hanging fruit; customer service is usually low-hanging fruit. If your small business does this better than the competition, it will stand out from the herd.

The price of war

So what’s the takeaway? Compete hard but ethically and avoid warring with your competitors. In the short- term, there’s no joy in conducting day-to-day warfare – it’s debilitating, distracting and counter-productive. But there’s also an important long-term reason to avoid warring with competitors. When the day comes that you need an exit strategy, you don’t want to find that the obvious candidate to acquire your small business is the competitor with whom you waged bitter war. Intense but peaceful competition is a much better strategy.