How to Compete in a Copycat World
U.S. manufacturers are facing more than just competition from overseas. A collision of forces, including the deregulation of existing markets, decentralization of information and breathtaking technological advances has created “a much more rapid, fluid and transparent marketplace where it becomes a lot easier for companies to imitate each other’s products and services,” according to Dr. Oren Harari, a management expert.
Companies are seeing now that, whatever they provide, it is harder and harder to differentiate themselves,” he said, “especially in ways that truly impress customers and investors.” The key challenge for manufacturers is figuring out how to stand out in a copycat economy.
The increased commoditization of goods and services isn’t a new phenomenon, but it is occurring at an accelerated rate. “The velocity is hitting people square in the face,” Harari said. “Everyone is at risk,” he added. In a discussion with an executive of a manufacturers’ trade group, Harari learned that their members never anticipated the challenge from Asia. “Now, Chinese companies have taken over 30% to 40% of that business within two years,” he said. Their prices are a third lower and the quality is good.
“The real challenge for small and mid-sized manufacturers is not to play the commodity game,” he said. “The technological sophistication (of companies overseas) is getting higher and higher.” The solution is to “yield the commodities market to others and go to the top of the food chain,” he said. Such a move can mean developing “new technology, new designs, new services, new customer care, new customer-as-partner opportunities and expanding product lines. These are the kinds of answers manufacturers ought to be actively pursuing. There are huge opportunities.”
But it’s not enough to think, “‘Let’s just do what we’re doing, but do it a little bit better,’” he said. “Continuous improvement is a good thing to do – it keeps you in the pack. But understand that everyone else is doing the same thing. If you’re going to break from the pack, you’re going to have to reinvent what you do and how you do it.”
Truly reinventing an organization requires three key elements:
• Strategic audacity. This occurs when “a company is doing things that violate conventional wisdom and established industry practices,” said Harari. “You need
to be audacious to break from the pack.”
• Organizational lunacy. “When the entire organization (its culture, systems, people and resources) is focused on charting and executing a new direction that violates conventional wisdom, it is in a state of ‘organizational lunacy,’” he said, “because observers say that what the company is doing is ‘crazy.’”
• Passionate discipline. “Passionate commitment and attention must be funneled not just to customers and the vision, but to the back-end functions like operational efficiency, cost containment, supply chain management and execution in general,” he said.
“By focusing on an audacious plan, building an organization that supports it and pursuing its execution with passionate discipline, this is the way to reinvent yourself profitably,” said Harari.
This kind of calculated reinvention might mean changing production and manufacturing technology, developing a new supply chain and hiring different kinds of people. “In order to deliver these great ideas, you have to render obsolete what you’re currently doing and reinvent everything. It’s calculated and very disciplined,” he said.
Harari urges manufacturers to pursue this path. “I think there are a lot of amazing companies doing extraordinary things,” he said. For example Matrex Mold & Tool, Inc., an innovative manufacturer from Portage, recently introduced a patented plastic H-clip used on roofs in the construction industry. This design is stronger and won’t corrode like traditional metal clips. The Grip H Clip™ is starting to pay off with more construction business. But Matrex is not just innovating product design, they’ve also automated their production equipment. Product comes off the line already packaged getting it to customers faster. In Minnesota, Anchor Wall Systems, a manufacturer of retaining wall systems, has come up with a patented pinless, mortarless system that sets it apart from competitors. “When I talk to them, they talk about patents and designs, not products,” said Harari.
To bring about such radical change and break from the pack, executives and managers need to look at themselves and how they view their work. What’s needed is a “12-step” program for leaders to break away from their old habits. Like other 12-step programs, the first step is acknowledging that a problem exists. Managers need to “admit you’re a commodity and that your business is becoming a commodity,” Harari said. “Your skill set is becoming a commodity. Your job is to grow yourself – it’s your responsibility. Your company may help with training and development, but it’s your job. Understand that your skills and competencies are less and less differentiable. That’s bad for your career, for your progress.”
Additional steps for leaders include honoring priorities (“If you’ve got more than five, that’s too many”) and going outside their industry to get fresh ideas. “Ally with people outside your industry to get cool ideas,” he said. “Don’t just benchmark competitors. They’re doing the same to you.”
Just as important is to “lead from a glass house,” he said. “Understand that whatever you say and do will be seen – your actions and words, budget allocations, meeting agendas.” Every action will be scrutinized to make sure it is leading the company in the right direction. “Otherwise, people will throw stones.” “The trends defining the copycat economy will continue through at least the end of the decade and become more and more accelerated,” Harari said. “Manufacturers can rise to the challenge by refusing to become complacent, always having a sense of positive urgency (not panic) and always doing whatever it takes to keep themselves and their organizations ahead of that tsunami wave. The copycat economy is not as scary as it sounds,” he said, “and breaking from the pack can yield enormous rewards for manufacturers who are willing to reinvent themselves and look to the future for new opportunities.”
Oren Harari is a management expert and professor at the Graduate School of Business at the University of San Francisco. He is the author of eight books, including the bestseller, The Leadership Secrets of Colin Powell. His latest book, Break from the Pack: How to Compete in a Copycat Economy, discusses the nature of the copycat economy and how to respond to it.