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Q: How or what do you do to learn from your competitors?
-- Lloyd Morrison, Entrepreneur Magazine reader
A: No matter what business you are in, you always have to keep a close eye on what the competition is doing. But some business leaders spend so much time looking over their shoulders at the competition that they lose track of where their own companies are headed. Too much focus on "What are they up to now?" can result in a corporate culture that is strictly reactionary, rather than one in which innovative products and services show the way forward.
Building an innovative culture requires that you strike a balance, learning from your competitors' mistakes while pushing ahead with ideas of your own. Here are three tips for forging that balance:
1. Pay attention to what your customers are not doing.
At Virgin, we probably pay the most attention to our competitors when we are considering whether to set up a new venture. Specifically, we look at common weaknesses in an industry -- for example, we ask ourselves why customers aren't happy with what's available on store shelves. This is why I often just say "Screw it -- let's do it": A lot of our decision-making process is often based on instinct and experience rather than hard numbers and market research. As customers ourselves, we know what we're trying to fix.
Regular readers of this column are familiar with the story of how we started Virgin Atlantic, our flagship company. The decision to launch an airline was the result of my frustration with the consistently poor levels of service I experienced on other airlines. My gut reaction was that Virgin could do a better job. And customers voted with their wallets. In 1984 -- when companies like Pan Am, TWA, British Caledonian and British Airways ruled the skies between London and New York -- Virgin Atlantic started off with a single Boeing 747. But by 1991 British Caledonian and Pan Am had shut down, and TWA followed 10 years later.
2. Imitating your competitors may flatter them, but improving upon their model is better business.
In our experience, one of the most common reasons that big, established players begin to fail is because of needless complexity. As their businesses expand, their bureaucracies grow more complex and so do their processes and procedures, which directly affects the customer. So new entrants to a market should not be intimidated by the sheer size of the competition, but instead focus on meeting customers' needs.
In the United States, "It's like trying to speak to the phone company" is a line people use to describe any hopeless customer service interaction. Sure enough, when we looked at phones or more particularly the cellular communications business, we saw this hot new gizmo that everyone had to have but also involved red tape and complex contracts that nobody truly understood until they wanted to get out of them -- and by then it was too late.
When we set up Virgin Mobile in that market, which was already crowded with established players, we succeeded by throwing away the industry playbook: We introduced a pay-as-you-go system with no contracts or monthly bills. Simplicity and good customer service will win every time.
3. To learn where to improve, try being your own customer.
The Scottish poet Robbie Burns wrote that if everyone had "the power to see ourselves as others see us," we would all do things differently. Applied in the business world, this means that rather than focusing on what your competition is doing, you should frequently check out your competition's competition. (That would be you!)
To get a sense of where you could improve and innovate at your own company, try buying your company's products or services incognito, then try using them. If you run into a problem, get in touch with customer relations -- assuming, of course, that you can track down the contact information, a page that is usually hard to find on most websites. Throughout this process, take notes and take names.
When you're done, follow up and review with your team: What changes or innovations would make your product or service not only more useful to your customers, but more memorable and enjoyable? Were the interactions with customer service representatives of the sort that you would like your customers to have? How could they be more helpful?
While your people may be quick to point out a competitor's mistakes, they are more likely to try to cover up any such blemishes at your own operation -- particularly if it could reflect badly on their personal performance. So remember to take this opportunity to also catch your employees doing something right.
When you're considering how to compete, remember the words of business coach Ken Blanchard in his book Raving Fans: A Revolutionary Approach to Customer Service. It's not good enough to simply be no worse than your competition; you have to constantly work at creating raving fans.
This approach has certainly worked well for us over the years at Virgin -- it just might work for you.
The author is an Entrepreneur contributor. The opinions expressed are those of the writer.