Competition for scarce resources is part of the natural order.  In a forest young trees compete with more established ones for daylight and their root systems compete for water and nutrients.  People and organisations have the capacity to compete more intelligently than trees.  As adults we are ingenious in our means of competing for love and affection, financial resources, promotions or property.  Companies compete for market share.  Those which do so intelligently develop strategies which take account of their current position relative to competitors, their resources and the likely reactions of competitors to the moves being considered.  It sounds obvious, but most firms do a poor job at placing their strategy development in the competitive context. 

If this all seems a little bit warlike, it is .  The aim of war is to beat the competition - for example, to gain control of disputed territory.  Al Ries and Jack Trout in their book Marketing Warfare adapt some military principles proposed by Clausewitz to a commercial context.  They argue that mindless aggression is a recipe for military and commercial disaster.  They propose a few simple, practical principles which encourage managers to develop smarter competitive strategies. 

One of the electives offered to students during the final year of their MBA course at LBS is based on Riles and Trout's book. Teams role-play competitors in a variety of markets.  The key question posed ie: what do I do now to differentiate my offering from the competition, enhance its value to the customer, and above all, fight on ground of my own choosing which plays to my own competitive strengths?  The "right" answer depends on your starting point, your resources and your understanding of your competitors' resources and game plan.  In those short games students must develop "winning" strategies and then reconsider them in the context of the revealed strategies of their competitors. 

What are the key learning points? 

It's the customer, stupid.  The battleground is the customer's mind.  Companies rightly expend huge resources investigating customers' expressed and latent needs.  Sophisticated techniques are used to develop and test new product concepts.  These activities are valuable so long as they get to the heart of this issue and are acted upon.  We urge managers to enrich these formal techniques by getting out there themselves.  One component which appears to distinguish winners is the amount of time senior management spend in the marketplace talking to real customers, defectors and prospects.  In doing so they improve their understanding of what represents value in the marketplace through personal experiences. 

Understand the competition better than they understand themselves.  Traditional competitor analysis and the attendant competitor data on recent pitches, etc, have been replaced in the best companies by dynamic war rooms which have a key role in informing and continuously updating management's assumptions about key competitors.  Their strengths, limitations, problems, strategies and possible next moves.  Activities such as formalised dissection of competitor strategy provide important insights and accelerate organisational learning.  These activities create a climate in which management focuses on winning the real battle, the battle for the customer's mind.  In doing so they not only get beneath their competitors' skins, they develop a better understanding of their own strengths and weaknesses. 

Really differentiate.  A winning position isn't one that just sounds good, it is one that customers believe achieves genuine differentiation of your offering from those of your competitors.  Firms with a traditional approach to competitor analysis tend to converge on the tried and trusted profit formulae in the market, often backed by market research similar to the competitors'.  More often than not all except the leader fail.  Market leaders will reinvent themselves to protect their current position.  Challengers will not compete head to head with the leaders, they will adopt a flanking or niche (Ries and Trout's "guerrilla") strategy.  Daewoo and Direct Line are examples of firms that successfully revisited fundamental consumer needs and conceived value delivery systems that flew in the face of the established formulae in their respective marketplaces.  More established players have adapted their positioning as a result. 

To the sceptics we throw out this challenge: can you really anticipate your competitors' moves?  You can only do so with confidence when you have developed an accurate mental model of the dynamics of your current and predicted marketplace (incorporating customers' expressed and latent needs, existing and potential competitors, current and future technologies) and continue to challenge it.  Do you have a clear competitive strategy, based around a specific competitive positioning which plays to your strengths, defends your established strengths and focuses your growth on attractive, lightly contested territory where you can build a commanding position?  Are your systems and programmes aligned to support this strategy?  Do you and your people really want to win? 

If you can answer yes to all the above, yours is a rare company, and we wish we were shareholders.