Be better than the competition
It’s a tough world out there! It’s likely, whether you recognize it or not, that you are in a cutthroat marketplace where some competitors resort to unethical tactics to gain an edge – lying, cheating, or even jeopardizing safety.
The side of business involving fierce competition is the “Red Ocean,” a concept popularized by W. Chan Kim and Renée Mauborgne in their book "Blue Ocean Strategy," published in 2005. “Red Ocean” is a metaphor for the "bloody" competition inherent in crowded markets, where businesses fiercely battle for market share.
This seemingly dystopian nightmare scenario is playing out in many markets today, involving large corporations and local businesses. From Volkswagen's emissions scandal to strip clubs blacklisting dancers, tales of "bad" competition expose the damaging consequences of unethical practices.
The good news? You don't have to compromise your integrity to succeed. You can thrive like the most sustainable businesses by being better, not worse, than your rivals.
Let's delve into the dark side of competition and explore how you can rise above the fray with ethical strategies, innovation, and a customer-centric approach.
Tales from the Red Ocean: Toxic Competition
The Red Ocean is rife with examples of “bad” competition, where businesses prioritize short-term gains over ethical practices. These tactics not only damage the businesses’ own reputations but also erode trust in entire industries.
Here are some stark examples of “corporate culprits” (with their sins listed in the past tense to acknowledge that some - but certainly not all - have cleaned up their acts):
Volkswagen deceived consumers and regulators by claiming it had “clean diesel” technology when, instead, it was cheating on emissions tests.
Walmart engaged in aggressive price cutting and offered lower-quality versions of popular goods.
Budget airlines such as Spirit and Ryanair stripped services to bare minimums and competed on price by cutting costs on amenities, legroom, and customer service, creating a race to the bottom..
Freelance platform Fivver stressed low prices rather than quality and attracted inexperienced and lower-skilled providers competing mainly on price.
Algorithm-driven “news” platforms prioritized engagement metrics (views, clicks, shares) over substantive quality, incentivizing shallow content and potentially spreading misinformation.
Big Pharma stifled smaller competitors through expensive patent litigation, even with weak cases, knowing the legal costs could bankrupt them, keeping drug prices artificially high.
Big brewers such as Anheuser-Busch have faced legal action for allegedly using exclusive distribution agreements to block craft brewers from reaching markets, stifling innovation and consumer choice.
Purdue Pharma aggressively marketed OxyContin as a non-addictive painkiller, incentivizing doctors to overprescribe, fueling the opioid crisis and causing immeasurable harm.
Boeing rushed the development of the 737 MAX, cutting corners on quality and safety systems to compete with Airbus. Management prioritized meeting deadlines and cost targets over rigorous safety testing and transparency, with tragic consequences.
Lest you think it’s only big companies that are “bad” competition, consider these small business examples:
Sassy's Bar (Portland, OR) allegedly coordinated with other strip clubs to blacklist dancers who worked at competing establishments, limiting their career opportunities.
Sticky's Finger Joint (New York) reportedly resorted to fake negative online reviews to damage competitors’ reputations.
Independent pharmacies (Texas) colluded to fix prices on common prescriptions, exploiting local customers in small towns.
Austin Private Limo Services (Austin, TX) got into trouble for allegedly creating fake Google business listings with incorrect contact information for competitors, diverting potential customers.
Dragon Gate Restaurant (San Francisco) reportedly paid for hundreds of fake one-star reviews targeting neighboring Chinese restaurants.
Perfect Glam Eyelash Studio (Chicago) was cited for poaching staff from competitors by offering unsustainable bonuses, then slashing wages once the competition was weakened.
Select Dental Group (Miami) reportedly bought up all available Google Ads keywords, including misspellings of competitors’ names, to capture their online traffic.
Prestige Auto Works (Seattle) was said to have hired individuals to pose as customers at competing repair shops to not only gather pricing information but to spread negative rumors about the competitors..
Seven Brothers Landscaping (Boston suburbs) was fined for systematically underbidding competitors by employing undocumented workers and paying below minimum wage.
What Characterizes “Bad” Competition?
“Bad” competition consists of competitive behaviors or practices that harm businesses, consumers, or industries rather than fostering innovation, efficiency, and better outcomes. It often involves unethical, destructive, or short-sighted actions that prioritize immediate gains over long-term sustainability.
To identify “bad” competitors, here’s what to look for:
Price Wars. Companies engage in aggressive price-cutting to undercut competitors, often leading to unsustainable margins for all. This erodes profitability for everyone in the market. Price wars can drive smaller or less financially stable competitors out of business, or at least reduce their incentive and ability to invest in innovation or quality.
Predatory Pricing. A company sets prices below cost to eliminate competitors and establish a monopoly or dominant position. This creates barriers for new entrants and hurts consumers in the long term as the dominant player may raise prices after eliminating competition.
Copycat Products. Competitors imitate or clone successful products instead of innovating or creating unique value. This discourages investment in R&D, creates legal disputes, and diminishes trust in the market.
Short-Term Focus. Companies prioritize quarterly profits or market share over long-term sustainability and customer relationships. This leads to poor customer experiences, declining loyalty, and eventual reputational damage.
Misleading Advertising. Companies exaggerate or misrepresent their products or services to gain an edge over competitors. This erodes consumer trust and can lead to regulatory fines or lawsuits.
Unethical Poaching. This involves companies targeting competitors’ employees or clients using unethical tactics such as spreading misinformation or breaching contracts. The result is hostile industry environments and damaged professional relationships and trust,
Regulatory Arbitrage. Companies exploit regulatory loopholes or “bend the law” to gain an unfair advantage. This harms the broader industry and creates inequality. It can lead to stricter regulations that hurt responsible players.
Sabotage. Companies deliberately harm competitors through unethical means, such as spreading false rumors or hacking. This destroys trust in the market and diverts resources from innovation and growth.
Collusion and Cartels. Competitors collaborate to fix prices, limit supply, or manipulate markets. This hurts consumers by eliminating fair competition. It undermines the credibility of the industry.
Winning Without Compromise
Building a successful and enduring business doesn't require unethical shortcuts. Here are actionable strategies to help you compete effectively in the Red Ocean while maintaining your integrity:
Focus on Value Creation: Deliver superior products or services that genuinely address and even exceed customer needs.
Example: Blue Bottle Coffee (Oakland, CA) cultivated a loyal following by prioritizing ethically sourced, high-quality coffee and a premium customer experience.
Example: Patagonia (Ventura, CA) thrives by combining high-quality gear with environmental activism, fostering customer loyalty.
Differentiate Through Quality: Emphasize premium features, craftsmanship, or exceptional customer service.
Example: Milk Bar (New York City) stands out in the crowded bakery market with its unique, high-quality desserts.
Embrace Ethical Cost Leadership: Optimize operations to offer competitive pricing without compromising quality or fair labor practices.
Example: Trader Joe's, starting as a small grocery chain, thrived by offering affordable, high-quality products through efficient sourcing and private-label goods.
Invest in Innovation: Develop new technologies, business models, or processes that set you apart.
Example: Sweetgreen (Washington, D.C.) disrupted the fast-food industry by offering healthy, customizable salads through a tech-driven ordering system.
Example: Square (San Francisco) revolutionized payment processing for small businesses, combining innovation with accessibility.
Build Strong Customer Relationships: Prioritize customer satisfaction and loyalty through exceptional service and engagement.
Example: BookPeople (Austin, TX), an independent bookstore, fosters a community hub by hosting author events, offering personalized recommendations, and exceeding customer expectations.
Example: Zappos (Las Vegas) grew by prioritizing unparalleled customer service, from easy returns to 24/7 support.
Conduct Market Research: Understand your competitors' strengths and weaknesses to identify opportunities for differentiation.
Example: Bombas (New York City) identified a gap in the sock market by focusing on comfort, social impact, and donating a pair for every pair purchased.
Leverage Data Ethically: Use data insights to improve offerings without compromising privacy.
Example: Snowflake (Bozeman, MT) provides secure cloud-based analytics, enabling companies to optimize operations responsibly.
Foster Strategic Partnerships: Collaborate with reliable suppliers, distributors, or complementary businesses to strengthen your market position.
Example: Taza Chocolate (Somerville, MA) partners directly with cacao farmers, ensuring fair trade practices and high-quality ingredients.
Example: Mailchimp (Atlanta) partnered with e-commerce platforms such as Shopify to streamline marketing for small businesses.
Invest in Employee Development and Engagement: A skilled, motivated workforce can be a significant competitive advantage.
Example: Clif Bar & Company (Emeryville, CA) invests in employee wellness programs, fostering a culture of loyalty and productivity.
Example: REI (Sumner, WA) shares profits with employees, fostering a strong culture and consistent growth.
Prioritize Sustainability: Align operations with environmental and social responsibility.
Example: Method (San Francisco) grew by offering eco-friendly cleaning products with stylish design.
Embrace Digital Transformation: Leverage technology to improve efficiency, enhance customer experience, and gain market insights.
Example: Glossier (New York City) built a beauty empire by leveraging social media and e-commerce to connect directly with customers.
Example: Warby Parker (New York City) disrupted eyewear by blending virtual try-ons with sleek design and transparent pricing.
Practice Agile Strategy: Be prepared to adapt quickly to market changes and emerging opportunities.
Example: The Sill (New York City), a plant delivery service, pivoted during the pandemic to offer virtual workshops and consultations, boosting engagement and sales during a challenging time when physical stores were closed.
Example: Peloton (New York City) shifted from in-home bikes to app-based fitness, broadening its audience during the pandemic.
Stay Mission-Driven: Build your brand around a purpose customers can believe in.
Example: TOMS Shoes (Los Angeles) pioneered a one-for-one giving model, turning shoes into a movement.
Be Better
Don't let the cutthroat nature of having to compete in the Red Ocean tempt you to go down a path of unethical competition. By focusing on value, quality, innovation, and customer relationships, you can achieve sustainable success while maintaining your integrity. In the long run, being better is the best strategy.
