Alice in WonderlandWherever a mature product category exists, there will be incumbents who hold an established position and challengers who want to take that position away from the incumbent. Danger lurks on either side of that equation if either team becomes complacent.

I’ve spent twenty-plus years focusing on making business relationships yield strategic results, working with Fortune 100 companies and leading brands, in everything from dynamic new category introductions to mature industries. I’ve seen the complacency challenge from many perspectives, and it still fundamentally intrigues me: how do we become complacent, what happens because of our complacency, and what can we do to break the pattern?

The complacent incumbent

I recently met with an executive who might as well be called Alice, because she’s living in Wonderland. She has blinders on. Her company grew by 22 percent last year; she’s assumed that whatever she’s been doing has contributed to that, so she just keeps on repeating past strategies and tactics.

The company has become extremely internally focused; they’ve developed a bias against working with outsiders. If I didn’t have a multi-year track record with her senior leadership, ”Alice” probably wouldn’t even be working with me. Her company—let’s call it “Wonderland”—has no formal training or development program. Alice has not committed to her own personal development, nor is she modeling personal development as a goal for the people she leads. “Wonderland” has completely neglected to nurture avenues for anyone to bring a fresh perspective.

How prepared for the attack of a challenger is “Wonderland”? Not very. There is a pervasive assumption throughout the company that its customer relationships are solid. Alice and her peers do nothing to check critical assumptions about whether they will have those customers’ business tomorrow.

The truth is, those supposedly solid customer relationship distribute along a bell curve. Some are looking for new solutions; many are generally happy; and a few are true fans. With the complacency of the incumbent, Alice is doing nothing to find out if there is more business she can get from those in the middle, or to leverage the “true fans” niche to find more like them, or to study the other end of the curve to find out what innovations that niche within their target market is seeking.

The challenge for the incumbent is to make the value they deliver daily visible to their customers. Just as we tend to become complacent about our own performance, our customers are prone to become complacent about us. Like an old couple that has lost the spark in their relationship, neither side of the equation is exerting effort to add more, better, or new value.

The complacent challenger

Meanwhile, the challenger has a shot at the incumbent’s business, simply because people have sympathy for underdogs. On some level, they want smaller businesses to have a crack at success. For evidence, look no further than the historic competition between rental car leader Hertz and competitor Avis. In 1962, by challenging the incumbent with the ad slogan “We’re only #2, so we try harder,” and living the promise of better customer service, Avis’ financial performance went from a loss of $3.2 million to one year later, for the first time in 13 years, a profit of $1.2 million.

The strategic advantage of the challenger is the opportunity to lead and think differently. While a challenger isn’t likely to gouge the bulge out of the bell curve of customers—at least not at first—a challenger can have the agility to identify an existing crack in performance, execution, or results. The challenger has the potential to reframe value that, like the Trojan Horse, gives them entrée to build new customer relationships.

Challengers, driven by the need to succeed that typifies underdogs, will prioritize developing new relationships. They will become closer to the customer, more able to find an impending need or to create a need.

A challenger’s complacency becomes a strategic weakness when it assumes that its advantages—the psychology of the “underdog” and greater organizational agility—are sufficient to win the day. Challengers typically succeed by delivering exceptional customer service, because that tends to be the weak link in the incumbent’s armor. This is the strategy Avis executed in challenging Hertz on rental car service.

How to avoid complacency

Incumbents and challengers must prioritize strategic relationships if they are to defend their position and achieve growth. Incumbents must avoid making assumptions about their relationships, allowing stagnation to replace engagement. Incumbents must continue to invest, not just in areas of core strength, but also in net-new opportunities. They must avoid the arrogance of “800 pound gorillas.” Challengers, on the other hand, must be ready to frame the competition for the customer around their strategic strengths—to pick the battle and thus, gain the advantage in preparing for it. Challengers frequently fail to apply the same rigorous discipline of objectives, measures and value that I call the #New Norm. They tend to rely on instinct, rather than numbers, to understand what’s happening and why.

For the “Alices” inside incumbents like “Wonderland”—and for the challenger “Avises” who find themselves competing for market share against a dominant established player—the real opportunity lies in proactively seeking out fresh insights and information. Either can win the day if it can find a new lens through which to see their operations in a new light.

Nour Takeaways

  1. Incumbents are prone to complacency that leads to a lack of fresh perspective and flawed assumptions about customer relationships.
  2. Challengers can wrongly assume they have enough advantage to win simply because they lack the complacency of the incumbent.
  3. To avoid the pitfalls of complacency on either side—incumbent or challenger—focus on the #New Norm: objectives, measures, and value.
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