Whenever one is evaluating an action to improve or maintain their business’ competitive situation, thinking through the competitor’s likely response is a critical element. I frequently see companies taking actions and not thinking about competitors response. A classic move to increase competitiveness is to cut prices. It’s a huge mistake however to evaluate your offering with lowered prices against your competitors offering with their existing prices. There will be a new equilibrium once competitors respond to your action. There maybe several rounds as some initially follow suit, and some wait and see and take action later. But assuming there will be no response and predicting the outcome using that assumption is foolhardy.
A recent example is Google Maps on iOS. According to many published reports, Google refused to offer Apple turn-by-turn directions in the Google powered iOS mapping application that was bundled with iOS 5 and before. Google’s refusal was so they could keep turn-by-turn directions as an Android only feature. In hindsight, this plan was a strategic blunder as Google lost a 23 million iOS users as a result. Even in foresight, this was predictably a blunder since it failed to consider Apple’s likely response. Was it really even possible that Apple would just accept this deficiency in their most profitable product line, the iPhone? It wasn’t necessarily predictable that Apple would create their own mapping app as there were many companies they could have chosen another partner instead. But what was predictable was that Apple was going to quit using Google as their mapping provider costing Google many million map users. Even though Apple’s switch to providing mapping was rocky to a say the least, Google still suffered. And, Google’s response to Apple moving to their own mapping system? To introduce that same turn-by-turn direction feature they originally refused to provide on iOS. Google had no choice but do so once Apple introduced their feature as losing the entire iOS user base greatly decreases the value of their local content.
It’s entirely possible there were other factors that lead to Apple’s decisions to no longer rely on Google maps which make it difficult to judge how big a blunder this was on Google’s part. Apple may just not have been comfortable relying on a competitor. But what is clear is that Google was never going to succeed in gaining any competitive advantage over Apple in the smartphone war by withholding any mapping features as Apple had alternatives for getting these features. The moral of the story is think through the likely response from your competitors when taking any action to boost your competitiveness. If someone else is proposing a plan, ask them what the competitor’s likely response will be. If you get a blank look, you know that they haven’t thought it through and their touted benefits are likely fantasy.