May 7, 2007

Frog Mentality and Competition

Posted by Bizaholic | 10:17 PM | , with 0 comments »

There is an old frog parable. It says that if you put frog in boiling water it will immediately jump out with all its energy to save his life. But if you put a frog in cold water and then slowly heat the water, the frog will eventually die as the water becomes hot.

This is the frog mentality, a mentality that blinds us to the changes happening around us. In corporate world, this frog mentality is widespread, particularly in handling competition. If the competition hits hard with all its might in one go, people react like a frog thrown in boiling water and do all they can to save themselves. But if the competition attacks slowly and gradually, they fail to notice the changing environment and end up dying a slow death. Since smaller but serious competitors often attack slowly and gradually instead of hitting their bigger counterparts with a big bang, the second scenario of a slow death due to inability to read the environment is all too common in corporate world.

The problem is acute in companies having big brands with big market share. They have a tendency to wallow in their arrogance and laugh at the covert and overt moves made by competitors. MNC giants like Unilever learnt it the hard way when Nirma gradually ate away their market share in detergents with some smart maneuvers. By the time Unilever realized that its tail was on fire, it was too late to use fire extinguisher! In Indian context, similar were the stories of CavinKare's attack in the shampoo and the fairness cream segments where Unilever again found itself at the receiving end; and the attack by Priya Biscuits on Britannia's stranglehold of cookies segment. In international context, slow and gradual onslaught of Japanese car makers led by Toyota is a historic example. Other examples could be gradual dominance of Korean and Japanese appliances manufactures to the detriment of giant American appliances manufactures. If looked beyond surface, it would emerge that the common thread running between all these examples is the frog mentality on part of the incumbent and a nimble-footed, flexible, and consistent strategy of the challengers.

This frog mentality is bound to make many giants tumble if they don’t learn to recognize the changes in competitive environment. At least in India, I can see that days of many a big brand might be numbered due to complacency on their part to recognize the existence of competition. Non-acknowledgement of a reality is the easiest way to move towards a disaster.

I have seen very senior managers trying to hide the fact that competition exists; at least they underplay the impact of competition. Instead of accepting the presence of an aggressive competition and chalking out a strategy to minimize their impact, senior managers discard it as not worth attention. If anyone brings to their attention the growing menace of competition, they dismiss it as mere panicky behaviour. They consider themselves too big to get hit by competition. In the process, they forget that some time back they too were small and only gradually became big! Their competitor too can become big.

It’s high time for business leaders to shun frog mentality and wake up to the realities of their environment before it is too late.