Proactive Vs Reactive Strategy

Lat month I had the opportunity to speak with Rick Cuellar, Director of sales for Foresight Sports. Foresight Sports is the most advanced and accurate launch monitor globally and has experienced rapid growth over the past few years, alongside a recent acquisition in September 2021. We discussed various topics such as innovation, business culture, and digital marketing, but one element of our conversation that I found fascinating was the topic of a reactive or proactive business strategy.

The conversation reminded me of the book "Innovation Stack" in which author Jim McKelvey spoke in detail about Southwest airlines and their approach towards competition. Southwest Airlines are a prime example of a firm that demonstrated a proactive strategy within their industry.

Southwest Airlines are renowned for their unique and innovative approach within a very traditional industry and experienced considerable barriers to entry at the start of their journey.

However, the expertise and guidance from their founder Herb Kelleher allowed the firm to overcome the odds and penetrate this tightly knit marketplace.

An element of their strategy that really stood out to me was the aggressive focus on the consumer. In highly competitive industries such as airline, automotive, and, in some sense, golf there is an enormous emphasis placed on following your competitor's every move and responding accordingly. This response is usually in the form of aggressive price cuts, which is a significant drain on the company's resources and, therefore, the bottom line.

Staying within the airline industry, I found it fascinating learning about the battle between Virgin Airlines and British Airways, otherwise known as British Airways vs. Richard Branson. This provides a clear example of a firm that was reactionary in its approach towards a competitor and ultimately paid the price (literally). As Virgin Airline's popularity grew among consumers and opportunities to expand their fight offerings increased, UK Airline giant British Airways became highly concerned by the company's actions. Rather than utilizing their financial prowess to fund innovation projects that would encourage customer loyalty, huge amounts of resources were spent monitoring Virgin (spying on Branson); the company became very defensive and tried everything in their power to stop Virgin becoming successful through legal and illegal activities. Although everyone is a genius in hindsight, it surprises me how a firm with such financial power went straight to defense rather than offense. Funding projects exploring why customers enjoyed flying with Virgin and using this feedback to inspire innovation seems a much more effective strategy. The capital BA had at that time would have allowed the company to fund innovations at a scale that smaller airlines such as Virgin could only dream of, keeping their loyal consumer base happy and forcing competitors to up their game! Isn't that what competition is all about?

After speaking with Rick, it was clear that Foresight like Southwest Airlines had a unique business strategy. Through focusing heavily on their consumers & product, Foresight was able to invest in R&D and create the most advanced and accurate launch monitor in the world. Something I found very interesting was how aggressively they focused on the product. The launch monitor industry is highly competitive, with brands such as Trackman executing some of the best marketing campaigns within the sports industry. This would suggest that other firms such as Foresight were investing copious amounts of resources into creating marketing campaigns that could respond to competitors. However, the case was very different; the brand focused on creating the highest quality product possible and designated resources towards this aspect of the business. Although this neglect of marketing practices may have held the firm back from experiencing even more growth, the trajectory the business is now on has proven to be more sustainable than other competitors.

It amazes me how many large companies still act in a very reactive way towards competition, often from much smaller firms that lack the financial prowess that these larger firms have. However, these smaller firms have an agile and highly creative business strategy that allows them to compete in ways that extend well beyond price but on building and sustaining a strong relationship with consumers, Virgin Airlines executed this perfectly.

In the case of Southwest Airlines, it was clear that their aggressive focus on the consumer allowed the firm to implement high levels of innovation and prevent the business being tied up in a fight for customers that would crush already small margins. Instead, they focused on providing value to the customers themselves and brought new customers into the market (Proactive strategy). By implementing Lean methodology elements, the airline could become a low-cost option for consumers while also being customer friendly. They overcame the idea that firms that offer low costs must sacrifice their high level of customer service.

Through focusing more on the customer and less on the competitor, the firm was able to innovate and wasn't tied down by the norms of an industry that for years lacked innovation. The company successfully introduced new customers to the market (Non-flyers), making the pool of potential customers even bigger. This new influx of potential customers combined with innovative practices that led to lower operating costs helped Southwest become a dominant player in the airline industry.

Similarly for Virgin Airlines, the PR backlash that British Airways experienced allowed the airline to capitalize on their underdog image and set new standards for customer service within the airline industry!

Although, I believe a business acting proactively is much more effective, I also advocate for businesses to monitor their competitors, not purely obsess over every move but be aware of what they are doing as this may allow the firm to take advantage of their shortcomings or provide the foundations for an innovation in the business.

I feel that businesses that are reactive towards their competitors will not be sustainable in the long term, the resources and effort required to respond to competitors can prevent innovation and take attention away from the consumer. Those businesses that invest in practices that allow them to be proactive whilst also monitoring competitor actions will achieve much more long-term success.

Why are larger organizations not setting new trends within their industry that could allow them to be proactive rather than reactive when competition increases? Should companies be focusing on attracting new customers to the market rather than fighting with competitors for current ones? Why can smaller companies that are at the start of their business journey implement more innovation with smaller budgets than larger companies with huge financial backing?

While writing this, the concept of business culture was constantly running through my head as a way for businesses to be more proactive in its approach towards competition ; I would love to hear some ways a larger firm can implement a culture that helps achieve huge innovation & creativity whilst also allowing the firm to be operationally sound. Any examples spring to mind?

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