If you were to box, wrestle, or race an opponent, you would get to know your competition's moves, weaknesses, tells, and strengths. Business is no different. Before starting a company, great CEOs study their rivals until they're able to predict their decisions and how their moves will affect the market.
Leonard Fuld, president and founder of consulting firm Fuld & Company, interviewed current and former CEOs from a variety of industries. He writes in Harvard Business Review about the four distinct strategies executives use to outmaneuver their rivals. Below, check out the methods Fuld discovered.
Find the weak spot
Will Ethridge, former CEO of Pearson Education, tells Fuld that if you find a company's weakness you can be pretty sure the CEO is going to try to fix it quickly. If sales are down, he might try to poach some of your biggest clients to give the numbers a boost. "It's important to understand your rival's weak spots and strategy," Ethridge tells Fuld. "I knew one rival whose CEO was focused on driving profitability and bringing up margins. I knew that meant he would be relatively focused on short-term results while mostly ignoring product development. I also realized he would go after our top salespeople to meet those short-term sales goals. So we worked extra hard to protect our key salespeople. At the same time, we continued to invest in long-term product development and overseas markets, knowing it was unlikely he could follow us in the short term."
Act on your own strengths
When you are studying your competitors, don't concern yourself with their strengths. If your rival CEO has a good gut instinct and you are more analytical, for example, don't start making moves with your gut. Former Harrah's/Caesars executive David Norton says while MIT-trained economist Gary Loveman was CEO of Harrah's, one of the company's biggest rivals was a gut-feeling type of decision-maker who successfully opened casinos overseas. But Norton says his team stuck to their strengths, applying their "deep quantitative knowledge of customer behavior in casinos [to] double down on U.S. expansion, outmaneuvering [their rival] in the domestic market."
Train your company to be spies
Former American Airlines CEO Bob Crandall tells Fuld that he encouraged employees at all levels to "watch the competition" and pass along every bit of information no matter how small or how irrelevant it seems at the time. "It's like running a national intelligence network," Crandall says. "If you are running it right, everyone is aware that anything and everything is important, and lots of information trickles up to management. For example, if a ticket agent in Chicago hears from an agent at another airline that the rival airline is looking for additional gate space, she should tell the local manager, who calls the division head, who feeds it up the line. Senior management could then make some guesses about what the rival is up to, and could either add flights to use existing gates more intensively or take other action to blunt the success of whatever the rival might do."
Once you know your rivals' strengths and weaknesses, it's time to get to know them as people. Your rival shouldn't be a shadowy figure but someone you have a real relationship with. It should be honest, not marked by deceit. "Face-to-face contact can pay off in unexpected ways," Fuld says. Pat O'Keefe, former CEO of Watts Water Technologies, says his goal was to grow the company through acquisitions of smaller fish. To achieve this goal, he would buddy up with rival CEOs and see if they wanted to "join the Watts family of companies," he tells Fuld. "I wanted to know more about them than other bidders, when and if the time came to make them an offer. But there was no point in deceiving them. Their CEOs all knew who I was and they would very willingly show me their products."