Management: How to stay ahead of the discounters

TEN YEARS ago, an office-furniture maker set the world on fire with a modular design that revolutionised the way we work. At the same time, a computer maker made computing friendly, and a marketer of packaged goods cleverly used consumer information to outwit its competitors. Today, all three bosses are quaking, their jobs on the line along with those of thousands of their employees. Why?

'It has became a discounter's world, a nightmare,' said one, who not long ago was hailed as an example. In fact, all three are singing from the same page of the hymnal: Discounters abound ('without scruple,' one added), profit margins are evaporating, and the sky is falling.

Funny thing, I have not an iota of sympathy for these three, although I do worry about their endangered front-line workers who have succumbed to numerous programs-of-the-quarter in an effort to hold back the tide. Each company lost its nerve. All three had reached the top through derring-do, then rested on their laurels and watched as their big market leads eroded.

That's not fair. None of the three, or a thousand thousand more like them, snoozed. They worked to improve quality. Made customer service more friendly. Cut product-development time.

Yes, they re-engineered; but they didn't reinvent. They countenanced change, but not revolution. They cheered change agents, but not terrorists, traitors and anarchists.

I reviewed a catalogue from the office-furniture maker beset by dastardly discounting competitors and cost-obsessed customers. Truth is, it bored me silly. Ten years ago I was wowed by its products. Now it offers more of the same.

Sure, a dozen (or several dozen) new features were being touted. But I can't imagine paying a premium for what today looks like run of the mill goods (albeit from a quality mill).

The computer maker is in the same pickle. It is still a pioneer, but only rises a twitch above the pack these days. Twitches don't merit a 25 per cent (or even a 5 per cent) price premium - let alone the 50 per cent variety that the firm boasted not so many nanoseconds ago.

Rumour has it that owners of leading independent bookstores, trying to fight back against the megastores that copied their friendliest features, are thinking of starting a purchasing and distribution co-operative.

Suppose the strategy, aimed at achieving volume discounts from publishers equalling those given to the biggies, is successful. What will have been achieved?

Some independent stores will have shaved a penny or two from costs and will have come close to imitating the megastores. How stupid]

Cutting costs any way you can is fine, but it's nutty to imagine such a move as the core strategy for turning the tables on giant, deep-pocket competitors. Instead, independent bookstores must up the ante. They must invent something entirely new. Just as the maker of office furniture, the computer creator and the packaged-goods company must do.

Almost all of life - if you are lucky - is about being copied. This is true for successful football managers and actresses and sprinters as well as for travel agencies, car dealers and pharmaceutical houses.

But sadly the standard response is to copy the copycats who copied you. Nothing wrong with improving your act. Every one of us must do that, all the time. But if you want to command the heights, you must self- destruct or risk being destroyed. That's the nervy word from the in-house newspaper of the successful printing company.

Call it reinvention, call it cannibalisation, call it what you will. What counts is having the guts to mercilessly attack yourself (which may even mean stonewalling your shareholders and the securities analysts if your first risky ventures falter).

If you don't have the gumption for such self-destruction, you can be sure some dreaded discounter waits around the next bend - doubtless a bend that is much closer than you think.

TPG Communications