Know your competition!

k2075878In an earlier post, we looked at how to conduct an early screening of the competitive landscape in order to decide if the venture is right for you and your team. Now we will build on the pre-screening methods and review how to conduct a deeper dive into your competition.

In order to due a more comprehensive analysis of your competitors, you should make the list of all direct and indirect competitors, hopefully many identified during your early screening work. Direct competitors are those organizations that offer a comparable product to the one you plan on developing with your venture. In order words, the customer sees your offering as a similar product and an acceptable alternative solution to existing products. Think Nissan versus Volvo, both sell cars and compete in certain markets especially in technology-enabled vehicles. Direct competitors can be further subdivided into organizations that already exist and compete in the market and those that currently don’t offer competitive products, but are possible new entrants. Think Google and Apple’s early research into smart cars as movement of potential future entrants into the car industry.

While direct competitors offer similar products, indirect competitors are organizations that offer optional solutions to the customer’s problem, but are considered different products. They are considered different than what you plan to offer, but the customer may see them as an acceptable alternative solution to their problem. So in this case, you might think about various transportation offerings that a customer can use to say commute to work. They can buy or lease a car from Nissan. They could also consider public transportation or a car sharing service as an optional way to get to work.

Once you have a comprehensive list of competitors, we recommend starting with your direct competitors, especially those that are operating within your target customer segments. Are they reaching customers in your geographic area? Are they targeting similar customer segments? List these direct competitors and begin to research all the elements of their business model. Just as you have done with your own venture, start with their product offerings and value proposition. Learn as much as you can about their products including features and benefits they highlight in their marketing materials. Next, take a look at their marketing and promotional activities to see whom they target as customers and how they segment them. If we take the car companies as an example, look at who are the driver’s and passengers in the commercials? What music is being played and who would most likely relate to the music or artist? You will begin to identify which segments are the focal points of their efforts.

You can learn a great deal about you competitors’ business and their business model though many secondary sources. Everything from industry reports, public financials, marketing materials, and social media can provide you with a great deal of information. Be creative and open to new sources and you will be surprised what you will find.

Here some ideas:

  • Collect all competitive literature and advertising
  • Conduct an internet search through various trade publications, looking for information on product introductions, plant expansions, financial results
  • Acquire competitors products or try services if affordable and accessible in public domain
  • Construct competitor’s product roadmap – recent product introductions, timing, features & performance
  • Visit trade shows speaking directly to competitors and suppliers
  • Use public financial sources, such as annual reports, 10K reports, key word searches through financial papers and magazines

One of the most productive strategies you can employ to enhance your research on the competitors is to create a Google Alert for each competitor. You will receive email alerts to your inbox on any associated news or social media comments. It really helps you stay on top of each competitor and their activities.

The next analysis recommended is a variation on the traditional strengths, weaknesses, opportunities, and threats (SWOT) analysis model. In this variation, your first list the strengths and weaknesses of each of your competitors. What aspects of their business model are considered strengths by the customer, the marketplace, their industry? What weaknesses are typically discussed in the media? Customer forums and blogs? Industry reports? Once you have identified the strengths and weaknesses of each competitor, then you can define the opportunities that their weaknesses create for you and what threats may occur due to their strengths.

After you have completed the competitive SWOT analysis, you should position your product offering against your competitors. For startups, you can start with the core value or benefit areas that are important to the customer. Once you have defined two or more of these value attributes, then you can create a typical X-Y axis chart with four quadrants. For example, say you are competing in the home security business, today a very competitive industry. As you speak with potential customers, you realize that customers want to provide as much protection to their home as possible for the lowest price. You may want to compare your new home security venture with the competitors in terms of security coverage (say alarm only versus alarm with video surveillance) and price (low versus high). Place all competitors in their respective quadrants, highlighting your venture in the appropriate position. This is a good way to communicate your positioning strategy to customers, team members, and investors.

The final analysis to conduct is what is sometimes called competitive chess. As in chess, you are more successful if you can anticipate the moves of your competitors in reaction to your moves in the marketplace. As part of your overall analysis of the competition, you can determine what actions or changes might competitors make to their product offerings or business model to compete with your business. The bottom line is that once you enter the market, your competitors will not remain stagnant.

In summary, start with a comprehensive list of direct and indirect competitors, investigate their strengths and weaknesses, position your product or service in a way that differentiates your offering from the competition, and then anticipate marketplace reactions to your entry.

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