Four Mistakes to Avoid When Predicting Competitors’ Moves

Four Mistakes to Avoid When Predicting Competitors’ Moves

by Leonard Fuld  |   10:00 AM January 13, 2014

Since 1986, Byron Wein, Vice Chairman Blackstone Advisory Partners (part of the Blackstone Group), has been offering 10 predictions for the coming year.  Most years he is about 50 percent correct. But for 2013 he was only about 15 percent on target. Gold did not reach $1,900 an ounce. Iran did not build the Bomb. The S&P did not plunge to under 1800 – in fact, it hit an all-time high.It’s tempting to have a laugh at Wein’s expense – and at the expense of all the other prognosticators who turn up every New Year. But his 2013 forecasts were certainly within the realm of the possible; they just failed to materialize this year.  His spotty record simply tells us what we all already know: you can’t predict the future with certainty.

Nevertheless, you still have to plan for it, even when you don’t know precisely what’s it going to be – what your market will look like, how technology might evolve, and how your competition might respond.

You can gather and analyze the available information. But what happens when you want to look beyond today and examine your rivals or your market a few years from now? Uncertainties mount, yet you need to steer your company down some path — hopefully the right one — anyway.

Facing such uncertainty, I’ve seen too many companies get caught up in trying to predict the future. Instead, here are four common pitfalls to avoid as you try to anticipate what a rival may do or where your market may go in the future:

1. Obsessing over market leaders. The proverbial 800-pound gorillas in an industry can sit anywhere they want, including in your market space.  But that doesn’t mean they will.  For instance, Samsung is a $250 billion behemoth in televisions, cell phones, appliances, industrial machines, and many other products. Many smaller companies sell components or products to Samsung that it incorporates into larger systems it sells. If you are one of those companies, you might worry that Samsung might one day decide to move into your industry. But in fact, they sell to a much different set of customers and will continue to do so. You need to ask yourself if they are even worth watching at all when you could be watching much more relevant competitors and potential competitors.

2. Watching federal regulations at the expense of state and local laws. When you watch regulations in your market remember to think local – in all geographies around the world.  Far too often companies watch regulation on a national basis in their countries of operation, missing small regulatory changes occurring in a province or state. Those regional laws can suddenly catch fire and become national or even international law, to the advantage of companies that have been paying close attention and preparing. In the United States we have begun to see exactly this evolution with respect to taxing Internet sales.  Amazon, for example, must now collect taxes on Internet sales for only 16 states. This trickle will likely turn to a flood as most states begin taxing Internet purchases. The lesson is to think local – everywhere – when you monitor legislation and its effects on your market and competition.

3. Focusing on products, instead of bigger market solutions. An exciting new product can get a lot of media attention, but services are often what really sell customers on a product – more than the product itself. When we’ve constructed strategy maps on Apple, comparing it to DellApple’s retail service offering starkly distinguishes it – in particular, its Genius Bar. Just ask members of my family who love their Apples.  A lot of their “love” has to do with how convenient it is to have a Genius Bar nearby where trained staff can diagnose a problem in person and offer a solution.

Or take another example from a different industry. Companies in the pharmaceutical industry – particularly in the U.S. – are feeling pressure to prove the efficacy of their products. To respond to this pressure and differentiate themselves from their rivals, some firms are partnering with or buying adjacent services or products, such as specialized tests that qualify patients as having a perfect genetic or biological match for the firm’s specific treatments.   The lesson: watch not only the product but the overall solution that a rival may pursue.

4. Assuming uniform economic effects. Everyone agrees that the economy is the root of nearly every possible future for themselves and their competitors.  And it’s true that the ups and downs of the economy can change the direction of an industry, as the Great Recession did the auto industry.  However, many executives fail to consider how economic changes might affect their rivals unevenly. In a growing economy, a rising tide may lift all boats — but it doesn’t determine the direction in which each might be steered. Similarly, receding waters could uncover various opportunities that were previously invisible for some of your competitors and that remain inaccessible to others – but perhaps not to you.

I’ll make one prediction for 2014: predicting the future will remain impossible. We don’t know whether the economy will continue to recover, which CEOs will be ousted by their boards, or what new regulations may take effect. But even though you may not be able to predict the future, you can prepare for its possibilities.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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