The business literature is awash with stories of companies failing to adapt successfully to new entrants into their market. Research from Georgia State University explores how the response companies make to such competition is influenced by the way it handles interactions with customers.
Interestingly, the researchers found that when companies have difficult encounters with customers, they’re more likely to hold off on responding to any innovations from their rivals.
Customer to the fore
The study underscores the paramount importance of placing the customer at the forefront of any organization’s technology adoption strategy, regardless of competitors’ actions. The research team employed a pioneering metric, known as the case mix index, to examine the uptake of robotic surgery systems by American hospitals. This metric is particularly well-suited to the healthcare industry, as it enables researchers to gauge the specific demands facing each organization, on a yearly and individual basis.
When one player in this sector embraced the new technology, others were forced to weigh their options: follow suit by also integrating the system, or differentiate themselves by investing their resources elsewhere. This predicament highlights the complex calculus required to thrive in today’s fast-paced business landscape.
“They have to evaluate the decision based on their own individual needs,” the researchers explain. “Which of these two paths is going to lead to the most success? We can show that things like knowledge spillovers, opportunity costs, things that really drive the competitive behaviors of firms can be very different based on an organization’s own individual customers, and the tasks that they have to solve.”
Customer focused
The authors believe that an organization’s strategy should be fundamentally geared towards its customers and their specific needs, as well as the tasks and demands they face, rather than simply mimicking the actions of competitors. To illustrate, the researchers examined one organization faced with a rival that had made a sizable investment in cardiology services.
Rather than engage in a direct confrontation, the organization determined that the costs of following suit were prohibitively high. Instead, they chose to redirect their resources towards a distinct area in which they could excel and be a market leader. Moreover, the demand for cardiology services among their patients was not especially high.
Furthermore, the study offers insights into how organizations can anticipate and respond to first-movers in the market, as well as their competitors’ likely reactions. Should a first-mover adopt a particular technology or innovation, other players in the market will undoubtedly consider their own response.
By considering the needs of their competitors’ customers, an organization can better discern how they may react to the first mover and tailor their own strategy accordingly.
