1. How to Anticipate and
Mitigate Competitors from
Adjacent Markets and
Industries
A Complimentary Webinar from Aurora WDC
12:00 Noon Eastern /// Wednesday 20 February 2013
~ featuring ~
Phil Britton Michel Bernaiche
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3. Agenda
 How to spot investments from your competitors that may
signal a change in focus or capabilities using Porter’s Model
 How to look at a your own company’s growth, and apply that
to your competition
 Summary, Q&A and Discussion
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4. Porter’s Five Forces
We’ve all seen it before… But Porter’s Five Forces indicate where to look for
threats from adjacent markets
Threat of New Entry Threat of Buyer Power:
• Time and Cost of Entry • Number of Customers
New
• Specialist Knowledge • Competitor Differentiation
Entries
• Economies of Scale • Price Sensitivity
• Cost Advantages • Ability/desire to substitute
• Technology Protection • Cost of changing
• Other Barriers to Entry
Current
Supplier’s
Competitive Buyer’s Power
Power
Rivalry
Supplier’s Power Threat of Substitution
• Number of Suppliers • Substitute Performance
• Size/Resources of Suppliers • Cost of Change
Threat of
• Ability to Substitute • Emerging Technologies
Substitution
• Cost of Changing • Change in regulatory environment
• Uniqueness of Service
Michael E. Porter. "The Five Competitive Forces that Shape Strategy", Harvard Business Review,
http://en.wikipedia.org/wiki/Porter_five_forces_analysis
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5. How Do You Identify Changes in Adjacent Markets?
Don’t Play Defense! By exploring Adjacent Markets for your own company,
you also identify areas in which your competition make seek to invest
Third: Look at how your company can be
First: Look at your own business
Second: Look to Expansion Opportunities
disintermediated
• Determine be substituted for your product/service?
• What otheryour core expertise andhave similar needs to to it
What can industries/applications begin to look adjacent
those that your products/services address?
• Look for opportunities, map them to your core expertise
• What other uses can be identified for your
• What other channels to market are there for your products?
product/technology?
• Opportunistically pursue adjacent markets
• What geographies can you expand into? conjunction with
• What other products/services are used in
your product/service?
ORD Guideline: Developing a Roadmap for Identifying and Tracking Adjacent Market Opportunities
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6. Knowing When You Competitors May Innovate Against You
Blue Ocean Strategy suggests that an organization should create new demand in
an uncontested market space, or a "Blue Ocean", rather than compete head-to-head
with other suppliers in an existing industry.
• Red oceans represent to all the industries in existence
today – the known market space. In the red
oceans, industry boundaries are defined and
accepted, and the competitive rules of the game are
known. Here companies try to outperform their rivals to
grab a greater share of product or service demand. As
the market space gets crowded, prospects for profits
and growth are reduced.
• Blue oceans, in contrast, denote all the industries not in
existence today – the unknown market space, untainted
by competition. In blue oceans, demand is created
rather than fought over. There is ample opportunity for
growth that is both profitable and rapid. In blue
oceans, competition is irrelevant because the rules of
the game are waiting to be set.
 Kim, W. Chan; Mauborgne, Renée (1 February 2005). Blue Ocean Strategy: How to Create Uncontested Market Space and Make Competition Irrelevant. Harvard Business Press.
 http://en.wikipedia.org/wiki/Blue_Ocean_Strategy
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7. Red vs. Blue Oceans
Heavily commoditized products and/or a highly fragmented market provide
powerful inducements to look in to line extensions and/or new potentials for growth
• Assuming Blue Oceans aren’t “fishable” to you, adjacent markets are
often explored as a company is faced with the task of growing its business
in a commoditized market
o May be used to diversify its portfolio
o May be used to bolster market share in a sagging industry
• To determine if a competitor is going to explore an adjacent market
strategy you can observe:
o Acquisitions (especially buying someone who found a Blue Ocean)
o Investments
o New hires
o New technologies
o Shift in suppliers
o You know, follow the money
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8. Case Study - Apple
In 2001 Apple released its first MP3 player, the iPod. At the same time, it
introduced a music service called iTunes. Riding the wave of digital distribution of
MP3 music, it helped to upend the music industry
• Prior to 2001, Apple was a computer manufacturer
who sought to expand its base
• It saw the opportunity to get in on the MP3 revolution
• Needed a “killer value proposition” that would allow it
to gain an advantage for its new device +
• Apple developed a “closed ecosystem” where it sold
the product, sold the content for that product and
managed the connection between the device and the
music
• Result:
o Changed the way people purchased and listened to music
o Closure of music store chains
o Shift of power within the music industry from record label to
iTunes (and others)
o Opened the door to other iDevices, such as the iPhone and
iPad
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9. What could the incumbents have done differently?
By understanding Apple’s attempt to get in to an adjacent market, key established
players could have mitigated some of the impact of the shifting market and avoided
all-out obsolescence
• Music Labels:
o Could have set up an MP3 site to cut out the iTunes middle man
o Should have realized sooner that the customer was embracing the technology
• Electronics Stores:
o Should have negotiated a revenue sharing deal with Apple based on the
amount of music downloaded to devices sold via their channel
o Could have exited physical media (shiny discs) earlier
• Music Retailers:
o Could have more quickly embraced digital distribution, even if changed their
revenue model drastically
o Branched in to MP3 player and affiliated products
Epilogue: Apple has continued to look in to ways expand in to new adjacencies with
video, books and applications… None of which existed when iTunes launched
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10. Could it happen to your industry?
Questions to ask your self and your strategy partners: For every
adjacency we found for our company, could a competitor exploit it
faster or cheaper?
Look at the adjacent products and services to your own business and ask if
the key players there could enter in to your business or seek to disrupt the
status quo in your business
• Do you have a business model/business line with fat margins? It could be
ripe for disruption by a lower-cost supplier
• Do you have a product line that could be replaced by technology?
• Do you have a service model that could be outsourced or replaced with
automation?
• Do you have a larger non-direct competitor with deeper pockets looking to
diversify to drive growth?
• Is there an emerging technology that no one has figured out how to
monetize? Well, someone is working on that problem right now…
• Suspend Disbelief – As to cost, barriers to entry, ask “what if”
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11. Recap
 Look at a your own company’s growth and
opportunities using Porter’s model and apply that to
your competition
 Look for changes in technology which may alter your
company’s landscape
 Spot investments from your competitors that may
signal a change in focus or capabilities
 Suspend disbelief as to barriers to entry
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12. Phil Britton is a Sr. Manager of Competitive Intelligence with Best
Buy, the world’s largest consumer electronics retailer. Starting 1993
as a store employee, Phil has been involved with Competitive
Intelligence within Best Buy nearly since its inception as a
department in 2001. Phil has been actively involved in moving the
capability from a pure pricing function to a full-blown CI
department serving customers from individual retail stores to
senior executives on multiple continents.
Web: www.BestBuy.com
Phil Britton
Email: Philip.Britton@BestBuy.com
Competitive Intelligence, Best Buy Corp.
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