Complementary models: Sony/Domino’s Pizza
Competition has been around forever.
In the early nineteenth century, loom-weavers were afraid that the Jacquard loom of 1804 would put them out of business—which it eventually did. Those who embraced the new technology stayed in business—selling to an ever-larger market—while those insisting on making products by hand ended up taking an early retirement.
In the fourteenth century, European artisans were probably afraid of the competition from Marco Polo’s trade with China. No doubt the artisans did lose share, but they then learned new “tricks of the trade” to apply. Every competing product was potentially a new product line. European merchants certainly benefitted from the availability of increased offerings.
We could easily trace these patterns back to trading by the earliest caravans and seafarers. The point is this: Learn to embrace the competition!
Do you know how every insurance company can promise they can lower your rate? The industry has settled on a specific business model which encourages switching among competitors. It generates revenues for the sales people, who get commissions, while at the same time allowing the industry to overcharge the majority of customers.
While Living Widgets will ultimately make this model obsolete, it currently works. The insurance companies agree to compete with each other, swapping their customers on a regular basis, since the entry prices are low and then balloon in 3 years. Customers that don’t switch—do you switch every 3 years?—are simply charged a premium rate.
In this new global marketplace, you will frequently find yourself obsolete. (See the Sony/Domino’s Pizza Model.) Agree to work with your competitors as an industry, and you can constantly alternate your customers as new technologies come out. Everyone can win, if you carefully choose your niche and your partnerships. Does your company innovate, or does it streamline processes, reducing costs and improving quality? Choose your strength, and let your competitors profit in your areas of weakness, while they refer customers in your area of strength. Perhaps your company knows how to educate consumers, maximizing sales. In that case, you should mostly market and sell the products of others.
Find your niche among what you consider to be the best of your competitors, and let them give you their business, while you give them yours. These competitors become your suppliers, as you compete with those outside your circle. Do not worry about “loss of market share,” since you will be recreating the market on a regular basis.
Set goals for each relationship with a competitor/supplier. If you are not attaining your goals—achieving more profits by giving away some of your business—then find a better relationship. Remember: You have something very concrete to offer. Your competitors want what you can offer, just as you want what they can offer.
The Car Insurance Model was created for a static world, but it provides a powerful solution for a fluid, ever-changing world.
