Competition is a strange topic. It is both underrated and overrated. This may seem like a contradiction, but it really isn’t.
Startups often don’t spend enough time understanding the market, and spend too much time worrying about competition once they launch.
In this post we look at different aspects of competition, and how a startup can deal with its competitors.
- Do the market research before you launch
Before you launch your startup, study the market. Startups are about the opportunities. To identify an opportunity, the founding team needs to do market research.
The worst way to start a company is to start without understanding the market.
Just identifying the need and talking to customers is not enough. Part of the initial research involves understanding the competition. Who else is working on this problem? Are they small startups or big companies? How long have they been at it? How are they doing? Are they succeeding? If not, why not?
Understanding the competition is critical, because the opportunity may actually not exist.
Sure, customers may want the product, but competitors may already have a good enough offering. Founders rarely spend enough time doing market research and really understanding existing competitors, yet it these are critical parts of launching a successful company.
- Beware of ‘no competitors’
There are a handful of red flags that turn off investors. One of them is when the CEO of a startup says, “We have no competitors. No one else has thought about this, we are the first ones!”
No matter how you look at it, saying you have no competitors is not a good thing.
First of all, by definition, all good ideas are competitive, and all real markets have competition. Lack of competition may imply lack of opportunity. Either there is no customer need, or the opportunity is small and not compelling.
More often then not, investors know the market better than founders, and can name competitors better than the founders. This is also a bad situation because it means that the founders either didn’t do their homework, or did it poorly. Either way, when a CEO says his or her company has no competitors, this creates immediate concerns and trust issues for potential investors.
- Know your past and future competitors
When investors think about opportunities, they don’t just think of them in the present moment. The founders are expected to know about competitors who failed in the past as well as potential competitors.
For example, in the past people who have worked on artificial intelligence and virtual reality have not succeeded. Startups today are working in these spaces again and say that things will be different this time. While this could be true, the investors want to know what exactly is different now, what conditions didn’t exist before, and why this time is going to be different.
Similarly, it is important to think about who else may enter the market. This is a much more difficult dynamic to predict because by definition, predictions are difficult. Investors often ask the founders what will happen if Google or another large company goes after their market. While it is not possible to predict, it is good to think about this question and have an estimated answer.
- Figure out your competitive differentiation
Doing market research and studying current, past, and future competitors eventually boils down to one thing—what is the differentiation?
What is your unique insight? Why and how are you different? Why does this difference matter enough for you to win?
This is why having Founder-Market Fit is particularly important. Founders who have experience in their specific market typically have unique insights and are able to come up with differentiated offerings.
A good differentiation is typically a product, go-to-market or sales advantage. Product advantage is created when your product is substantially different in how it works from competitors’ products. Go-to-market advantage is based on channels that you are able to secure that no competitors can lock in. Sales advantage is typically based on your experiences and deep understanding of the customers.
Peter Thiel, in his book From 0 to 1, defines competitive advantage as a secret or a set of secrets—something that you know or believe to be true that nobody else knows yet. The secrets help you execute better than your competitors and eventually beat them.
- Keep track of your competition, but ignore the noise
Most founders spend too much time worrying about competition on a daily basis. News is extremely noisy—someone launches something every day. If you follow every single bit of news from every one of your competitors, your life is likely a major emotional rollercoaster.
At the end of the day, it is not what your competitors do, but what you do, that matters more. You don’t have control over product releases, sales, or PR of your competitors—all you can control is your own business.
Focusing on creating the best possible product that your customer loves is your best defense against competition.
Instead of reading daily news about competition, set up a quarterly, or at most monthly, review of both competitors’ news and, more importantly, products. This way you can keep track of what’s happening without the stress involved in following your competitors daily.
- Accept and play “The Idea Exchange” game
When I was running my startups, I remember the feeling I would get when a competitor launched something that we had previously launched. A competitor stole our idea! Even worse, they executed it better, and no one gave us credit for being first.
Founders often complain about this situation. The reality is that this is now an accepted reality. Today, companies readily copy products and iterate on each others’ ideas. There is no protection for ideas; they are basically free to take.
Founders should just stop complaining and assume that their ideas will be copied.
The product and the business needs to be able to survive in the environment where pieces of UX and user flows are being copied.
In exchange, you as a founder benefit from taking ideas from your competitors’ products. Much like they copy your ideas, you can copy their ideas.
- Build relationship with your competitors
While sharing secrets with competitors is a bad idea, being friendly in general makes sense. Competitors are typically the most knowledgeable folks about the space besides you, and it is interesting to talk to them and get their perspective, again, without revealing too much.
Founders tend to run into their competitors at conferences and events, and naturally have the opportunity to connect. By building the relationship with your competitors you are both helping co-create the space, and getting to know your competitors as people.
You never know what the future holds. It may make sense for you to join forces, or create a partnership. Markets with big opportunities tend to consolidate; so investing in a relationship with your competitors is likely a net positive for you.
- Win with your heart and mind
Once you are in the market, you compete on the product, and your unique approach to the problem. No one but you knows exactly what you think and what you are building.
You win because of your unique approach, not because your competitors did or didn’t do something, or copied or didn’t copy you.
Ultimately, competition does not matter nearly as much as your vision and your resilience.
You win by imagining the future and taking your customers, your company, and the world there. You win with the product that is unique to you, with the business execution that is yours. No competitor can take it away from you because they don’t see the world the same way. Your competitors aren’t you.
The best founding teams have their eyes set on the vision, their true north, and go there, regardless of what the competition does or doesn’t do.
The best founding teams win with their hearts and minds.
Image Credit: CC by Open Data Institute Knowledge for Everyone