Few folks come to me having done extensive competitive analysis about their idea/product. What happens goes something like this:
Me: “What do you know about the competition?”
Entrepreneur: “Oh, what I do is different?”
Me: “Really? Different, how?”
Entrepreneur: “Well, others have [x feature/approach/etc.], and we have [y].”
Me: “What if your competitors add that?”
Entrepreneur: “Well, they could, but…”
The conversation keeps going, and I keep needling because they’re really not answering the fundamental question.
Understanding your competitors is not about comparing features and functionality. That’s dangerous because you’re not looking deeply at the competition or competitive reactions. Having a new technology, a different approach, or different features may not be enough differentiation to get you very far.
To make sure that you have a real business opportunity you need to understand the competition – their strengths and weaknesses.
It’s through this analysis that you can determine if you can get in the market (beating the competition) and stay in the market (further beating the competition). I’ll break this down for you.
Conduct competitive research and analyze what you find:
What are they doing well?
What are they not doing so well?
Are they solving the problem?
What’s the problem with that?
Are they solving the problem but customers aren’t happy with the solution?
Are they solving only part of the problem?
Find out why the competition is not solving the problem in the way that you envision. Sometimes there are opportunities that the competition doesn’t focus on because of constraints that they have:
• The market is too small.
• They lack the technical expertise.
• They’re committed to an existing product.
• They don’t see the opportunity in the first place.
• They can’t change or adapt quickly.
Identify precisely how your solution differs from the competition and why there’s room in the market for you.
Identify your barriers to entry. These are the barriers that your competitors erect to keep others out of the marketplace. These barriers might include:
• Intellectual property (IP), which can lock you out or impinge upon your freedom to operate
• Partner relationships or contracts, which make it hard for you to gain customers
• First to market, so they have the brand recognition and maybe even customer loyalty
• High cost of entry, which is acutely true in the life sciences
• Switching costs, which may make customers reluctant to try new products
The list goes on, but you get my drift. Figure out the barriers to entry for you and then develop strategies to surmount the barriers.
Develop your barriers to competition. These are the barriers that YOU can erect to stop others from getting into your market.
Sound familiar? Make your barriers hard to get around:
• Develop solid and defensible IP that can lock out your competitors.
• Lock in your customers with contracts that give them benefits to stay with you. Give them great customer service and no reason to change vendors.
• Be the first to market, or, if you are second (or even later), don’t worry. Develop the best product. Think of Google.
You think they were the first search engine? Or the second? Third? Fourth? They were way late, but they did something better and they rose to the top.
• Erect cost barriers if possible, or build in switching costs to your model.
• Start and stay customer focused and make everything about them. That will make it hard for new entrants and existing companies to steal market share.
Never ever say, “There is no competition.” This is a major red flag. It usually comes out like this, “We have no competition because no one is doing the exact thing we are doing.”
My response: “Just because no one has invented your exact solution does NOT mean that there is no competition. There’s ALWAYS competition.” Look for what IS competition.
Divide competition into direct competitors and indirect competitors. The status quo is a big part of your competition.
People are herd animals, and they do things that they’ve been doing for no rational reason – just they’ve been doing this for a long time.
If what they’re doing doesn’t solve their problem, you have to get them over that apathy and stasis.
When you research competitors, rather than talk about a lot of individual companies, I recommend that you chunk the
competitors into different types. Your pitch might go like this:
• My competitors fall into direct and indirect.
• Within those categories are companies which focus on [a, b, and c].
• Here are the leading players in each of those categories.
• And here is a table of what makes us different.
Mark struggled with entrenched competition in the early days of Suitable. Universities recognized the problem of student
engagement and preparation for the workforce. So, they had existing contracts to solve the problem. The competing systems all claimed to solve the problem. Except that they didn’t. Mark analyzed existing systems’ performance. He found low student engagement, minimal follow through, and lackluster response from employers. When he presented his analysis, universities realized the ineffectiveness of their current solutions. Suddenly they became much more willing to try Mark’s product. Bingo!