Redefining the Competitive Set

If you’re reading this, you know that digital technology has changed things.

You know that in a single year, humans create more information than they have in all of history up to that point.

You know that your customers are inundated with more information than their brains can handle.

And yet, you (or someone around you) thinks of the competition in a primarily direct way. Look at a tracking report. Which companies are included? Probably those companies that make exactly what you make, and go after exactly the same target.

Unfortunately, traditional understandings of “competitive set” don’t take into account the way the world works. As soft data becomes hard, and information about everything is broadly distributed, you’re no longer competing with fellow automakers, fellow vodka distillers, and fellow airlines. Market leaders in every category reset expectations for every company that aims to sell stuff to the modern consumer.

This means you have to rethink how you design your products, services, and experiences. You have to set your sights on being the best in the world, bar none. It’s no longer cool – or acceptable to shareholders – to be the best in your category. This isn’t just about “digital,” or “social media.” It’s about the way humans understand the world around them.

Why? Because people aren’t reading your positioning PPTs.

As people receive more input – photographs, advertisements, movies, tweets, packaging designs, even shipment notifications from FedEx – their hunches about brands become ever more informed and ever more sophisticated. Consumers don’t restrict their thinking to the other companies in your category, they compare experiences they like with ones they don’t. Put a tacit understanding of how retail is supposed to work (see Apple) up against a broken but similar system (see the Departures Terminal at JFK) and you have a problem in the minds of your consumers.

This is an old discussion, thankfully enough. It started at Harvard in 1903, when Philosopher Charles Sanders Peirce put forward three basic propositions that offer a logical way to explain human “illogical behavior”:

1. People don’t understand things until they experience them.
2. People use a set of perceptual judgements – created from their life experiences – to form perspectives through inference.
3. People’s internal hunches about new things are formed when they put together two or more perceptual judgements of disparate origin together to create a single insight.

So, what to do about it?

In other words, this rising mental tide threatens to overflow brands’ boats, rather than lift them along the way. But all is not lost. Here’s three ideas for how to move forward in the face of smarter, more intuitive consumers.

1. Brands compete not just with direct competitors, but with everything people come into contact with everyday. So learn what you can take from successes outside your direct competitors. Idea: build the Zappos of the banking industry, instead of trying to recreate Mint.
2. People and businesses are getting more connected, not less. Look to create internal connectivity where there was none before. [PDF] Idea: put IT and Marketing next to each other; put your social team closest to your engineers; watch what transpires.
3. Design is the great differentiator. As more people see more great design, the desire for design goes up, not down. Idea: hire more and better designers; barring that, enroll employees outside the design function in a multidisciplinary design course.

But if you only take one thing from this post, take this: Digital has fundamentally changed who you need to consider a competitor. With finite resources, a luxury watch consumer isn’t just choosing among pilot watches at a $2,500 – $5,000 price point. They’re also thinking about the new Macbook Air, and a down payment on that new BMW coupe that caught their eye.

Act accordingly.