The Strategic Advantage of the Upstart Competitor

From the days of ancient warfare, large armies have struggled with an inherent disadvantage: Sheer size presents an easy target for a quick and nimble attack force. The red-coated, regimented British struggled to fend off undisciplined American revolutionaries. The Vietnam era Americans could not defend themselves adequately from the pesky, unpredictable Viet Cong.

In the modern strategic arena, an upstart company can gain advantage over larger and well established rivals by identifying an attractive and profitable niche of their rival’s customers. “Cherry picking” initiatives seek to snatch away the most profitable customers from a market leader, while leaving the other company with the more cumbersome and less profitable dregs among their customers.

Have you seen the Progressive Insurance commercials touting the way their service people will provide you not just with a quote from Progressive, but also with sometimes even more desirable quotes you might receive from their competitors?

Altruistic? Hardly. Because of their superior information technology, Progressive is able to sort the customers they do want from the ones they don’t. That is, if you as an automobile driver are likely to drain off more money in claims than you’ll restore by paying premiums, Progressive will gladly help you find a nice insurance provider down the street… one who’ll give you a lower fee than will Progressive. If you are recognized by the company as a safe driver – meaning Progressive is safe from the risk of having to pay you for a claim – then Progressive wants you and will compete aggressively to get you. For Progressive as the smaller attacker, that’s cherry picking the profitable customers while saddling the larger opponent with an ever more needy and draining customer base.

In recent years, Progressive has reinforced the notion of the insurance business as a free wheeling “marketplace,” as characterized by their “store lady” hosting a grocery market of insurance products, encouraging us all to “shop” for the best deal. Allstate’s notion of “good hands”? The comfort of a long and trusting relationship as touted by State Farm? Well, that’s defensive strategy as the insurance behemoths of old urge us to stay in place. By way of contrast, the Progressive lady wants us out shopping for new and exciting relationships so the company can pry loose the most desirable customers.

What to do? Let’s look to the ancients for advice… The most influential treatise on military strategy between the age of the Romans and the Napoleonic era was written by the Roman citizen known as Vegetius in the fourth century A.D. His writing was cherished as the Bible of Strategy by Charlemagne, Richard the Lion Hearted, and England’s Henry II. Vegetius’ De Re Militari contains insight into strategic and operational planning that are relevant still.

By Vegetius’ time, the great empire of Rome was in its waning days, its once mighty military descending into atrophy and decay. The days of Julius and Augustus Caesar were a vague memory, having passed four hundred years earlier. Vegetius wrote about “the ancients,” the generals and leaders of Rome a centuries before his time, and sought to capture and share concepts of strategy that had put Rome civilization into its long-held position of dominance. Despite his aspiration to help restore Rome to its days of glory, Vegetius came along too late to make an impact, and he was little noticed by Romans of the time. In the centuries to come, though, his work became a staple for strategists and leaders throughout Europe.

Among the key advice we receive from Vegetius: Avoid unnecessary impedimenta. Impedimenta, the encumbrance of supply trains and support people and materiel, impedes the ability of an army or organization to move about the strategic space in a nimble, flexible manner. Clearly, for example, Southwest Airlines has sustained its success for decades in competition with the so-called “major” air carriers because its leaders have minimized impedimenta, while American, Delta, United and the others remain encumbered by large “hub” airports, a variety of planes and equipment requiring redundant teams of pilots and technicians, and large, entrenched, and increasingly inflexible workforces.

Vegetius said this:
“An army too numerous is subject to many dangers and inconveniences. Its bulk makes it slow and unwieldy in its motions; and as it is obliged to march in columns of great length, it is exposed to the risk of being continually harassed and insulted by inconsiderable parties of the enemy. The encumbrance of the baggage is an occasion of its being surprised in its passage through difficult places or over rivers. The difficulty of providing forage for such numbers of horses and other beasts is very great.”

Advice for the strategist: heed the direction of Vegetius. Smaller, ambitious businesses should and will identify desirable niche markets and pursue them aggressively and precisely. You cannot take on the established competitor full force to full force. But you can win a niche and establish a beachhead from which to pursue future expansion.

If you are the entrenched but wary player, then as strategist you must slow the erosion of advantages, and continually seek new high ground representing future competitive advantage. Good strategic thinking for established businesses means scanning the competitive environment for unwanted challenges, and staying nimble enough to do battle in the niches that count. Moreover, the strategist must erect “barriers to entry” to protect present advantages.

Translate »