A product is valued for its problem solving ability. For instance a watch measures time and camera captures images. This distinction becomes the basis of industry classification which gives rise to structure and strategy dynamics. Industry structure within which firms compete is defined by factors like seller and buyer concentration, product differentiation, barriers to entry and exit, degree of vertical integration and growth rate of demand. The product based conception of structure accordingly etches boundary that divides one industry from the other. Firms ‘conduct’ (strategy) in a structure and produce performance outcomes. Hence a camera company like Nikon directly competes with another camera producer Nikon or a computer brand like Lenovo wrestles with HP. This view of competition is direct. Firms evolve strategy and develop success blueprint based on an idea of their competitors and their competitive behaviors.
In a way industry conceptualization allows managers to identify which competitive space they belong and ‘not-belong’ to. Accordingly it lends ease in identifying competitors and their behaviors. Thus a car maker like Ford should fight with others in the car marketing space like GM, WV or Toyota. This is one of the ways to conceptualize competition known as direct competition. But a need can be satisfied by a different product. For instance transportation can be taken care of by a whole range of non-car products like cycle, scooters, airplane, and railways. That is a firm may face competition indirectly from products that ‘do not belong’ to a given industry. Managers often fall into a myopic strategy trap when they fail to factor in the implication of these indirect competitors. In this regard Ted Levitt had cautioned managers to answer the question, ‘what business we are in?’ It may be myopic to think of an industry in product or technology terms.
The competition indirectly can come from anywhere. The new emergent business environment is rendering the industry boundaries totally fluid and permeable. This is both a threat and opportunity. It all depends upon how far the vision of a manger can go.
Mobile phones are embedded with time keeping utility. Is it wise to consider that Nokia or Apple is not a threat to brands like Nikon or Olympus? Is a computer is computing or entertainment devise? Wrist watch is now being increasingly conceptualized as a ‘device’ with fluid functional boundaries. Many companies like Apple, Sony and Nike are eying wrist for potential business opportunities. Burg has already launched a device for the wrist which combines the watch and mobile phone space into one. This is a watch phone. Burg calls it ‘new smart watch’. Consider the following:
- Sony’s Smartwatch has two inches screen and can show emails and twitter posts which it can extract from Android phone.
- Nike’s Fuel can feed a lot of data about your daily body statistics like calories burnt to a smart phone.
- Pebble can play music and display text indicating needed information
- Nokia and other mobile phone brands are building higher imaging capabilities.
The linearity of thinking causes managers to seek incremental innovation. The accent is placed on betterment of existing value for instance, increasing the accuracy of a watch or refinement of reception of a television panel. But now the character defining core functionality which sat at the center is being decentered in many cases. A radically different perception is needed to view everyday objects. This depends upon an understanding of what makes sense to new emergent customer. It may be wrong to assume that the new generation is a linear extension of the previous one.
Is computer something to ‘computing’ with or something to ‘accessorize’ with?