Blog, Strategy

McKinsey on Responding to Competition

Interesting study released by McKinsey has just been released titled “How companies respond to competitors: A McKinsey Global Survey.”

The study, which is surprisingly concise, has some interesting information, but as all things McKinsey, there is a sales pitch involved.  The main ‘abstract’ of this report says:

Management theory suggests that companies facing serious competitive threats should extensively analyze how to fight back. Actual managers, however, say they are satisfied with the results of a less active approach, according to a McKinsey survey. Companies that understand how their competitors really react may be able to gain an edge.

The results of this research suggests that:

On the whole, as companies determine how to respond to a competitor’s moves, they generally assess three or fewer options and don’t look forward more than two years. About half don’t examine more than one round of countermoves by any competitor. A significant number rely on intuition to determine a response. And companies most frequently respond with whatever counteraction is most obvious in the moment—answering a price cut, for example, with a cut of their own, which often doesn’t hit the market until at least one or two sales cycles after the competitor’s move.

As I mentioned, the report has some good info, but there is an underlying ‘sales pitch’ that says the following:

  • most companies don’t have a clue what they are doing
  • Hire McKinsey and we’ll perform ongoing exhaustive analysis for you and help you make better decisions.

Now…personally, I think McKinsey has some good folks and they offer some excellent services, but I think this particular research report does more harm than good.  Why?

It makes it very obvious that organizations are clueless and that in order to make the ‘right’ decision, an organization should hire McKinsey so they can make those decisions for you.

What I’d like to see is another report from McKinsey that outlines what value their decision making process on competitive moves brings to an organization.  Can they guarantee better results than can be had by assessing ‘three or four options’ and/or using intuition?  Perhaps…but would those results make more economic sense? If i have to pay them a million bucks for them to give me two more options to choose from, does that really help me?   If the option generates multiple millions of dollars in savings and/revenue, yes…but if not, then perhaps no.

I’d recommend reading the article regardless of what the size of your organization.  If you take anything away from it, have it be this:

When thinking about your competition, take the straightforward route and follow your instinct.  Create options for how you can out-maneuver your competitors…and when you think you’ve thought through the options, take a step back and think again.  Try another angle…see if you can come up with other options.  At the end of the day, your intuition has to lead you through whatever decision you make…if it feels right, then it probably is.

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About Eric D. Brown, D.Sc.

Eric D. Brown, D.Sc. is a data scientist, technology consultant and entrepreneur with an interest in using data and technology to solve problems. When not building cool things, Eric can be found outside with his camera(s) taking photographs of landscapes, nature and wildlife.
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