Professor Tim Calkins’ new book shows business leaders how to protect their companies from competitive threats
10/17/2012 - Buzzwords like “growth,” “innovation,” and “leadership” make managers feel inspired and upbeat; “blocking,” “limiting,” and “preventing” don’t sound nearly so positive. Yet these concepts are key pieces of a defensive strategy, which Kellogg’s Tim Calkins
argues should be foremost on business leaders’ minds.
“Almost everyone would agree that you have to take steps to protect your business — but very few people talk about what exactly those steps should entail,” says Calkins, a clinical professor of marketing at the Kellogg School. “My goal is to shed light on this very important part of strategy, and to get managers thinking about what should be involved in defense.”
In his new book, Defending Your Brand
(Palgrave Macmillan), Calkins begins with a simple stylized example. If an established player in, say, the oatmeal business faces a new competitor, the risk might seem to be a few million dollars: the potential lost sales multiplied by the business operating margin. So conventional wisdom suggests that the incumbent should spend up to this amount on defense.
Yet the true risk is much greater. Variable profit, not operating profit, better captures the full impact of market share changes, which could nearly triple the risk. More important, the loss must be considered over time. What seemed like a small threat has a huge net present value — which will almost certainly grow, since success will embolden the competitor to attack further.
“Anyone who’s not on the lookout for competitive threats is at a huge risk these days,” Calkins says. “Companies very frequently get into trouble because they underestimate the threats out there, or fail to respond to the threats that emerge.” Real-world examples
Beyond the stylized examples, Calkins riddles his book with real-world cases. Companies such as Blockbuster failed to defend against new entrants Netflix and Redbox. Product lines such as ConAgra Foods’ Reddi-wip defended aggressively and successfully against the threat of Kraft Foods’ “Cool Whip in a can.” Dozens of other cases lie between the extremes of these examples.
“It’s good to tell people that they should try to limit competitors’ trial-building efforts, but it’s much more helpful to give examples of how companies have done that successfully,” Calkins says. “My goal is to not only explore the theory, but also show people how the theory comes to life in practice.”
Calkins gives detailed, nuanced examinations of several important keys to a defensive strategy, including how to gain competitive intelligence, stop a competitor’s launch and limit awareness of a competitive product. One chapter shows innovators how to anticipate and react to the defensive strategies of established firms.
Throughout the book, Calkins aims to open more discussion and debate on the “dark arts” of defensive strategy.
“At Kellogg, I’ve been teaching about defense for a long time, but it always amazed me that there was so little about defense in the literature,” Calkins says. “That highlights why there’s a need for a book like this: to get managers thinking more and talking more about defense.” EXCERPT
If you’re looking for a cheerful book about the power of innovation and strong brands — well, this isn’t it. Instead, this book is a practical guide to the dark arts of marketing: the shadowy world of defensive strategy.
This book will teach you how to survive, and perhaps even thrive, when competitors attack. It will show you how to push them back and protect your market share by using a systematic approach. Fair warning: some of the tactics are not pretty …. But knowing how to defend a business is essential in a world where competition is intense and new market entrants are attacking from all sides. — Defending Your Brand