DeepDive: Researching The Competition
Just in case you didn’t realize by now, starting a business is challenging. Succeeding as a business is even more challenging. Everything is stacked against you in the beginning, but if you can make it through alive, then you are much better prepared to succeed in the long-term. The best way to ensure that you get through the toughest first few years, is by making sure you have as much information as possible. Every single decision you make as a business can be the difference between life and death, and that is why having more information is so important. So that you can make the best decisions and have confidence in every action you take.
The first part of that information gathering was all about the industry as a whole, and the next part was beginning to understand the customers. The final area that you need to have a very clear and extensive knowledge on is the competition. Like we have said before, it is impossible to ever know everything there is to know about any of these areas, because there will always be new information to learn. So it is critical that you gather as much as you can now, in an attempt to get to the point where you are caught up, so that any new information is just added to what you already know.
This is especially true for competition. First of all, we have to assume that competitors have roughly the same information as us. So now it becomes a race of who can learn quicker and adjust better.
If you are starting a business with real potential it is guaranteed that there are many other businesses to compete with. Succeeding means you will have to beat them, probably not at everything, but that is what we have to figure out. Before knowing what it is we can beat the competition at, we first need to understand everything about them. This will help to identify what it is they are great at, and what they are not so great at. Only then can we determine which areas we should try to be better, and how to do so.
Here are the steps to take when researching the competition:
- Create A Master List: Just as we did with the other types of research, it is usually best to start on a macro level. Start by creating a spreadsheet that includes every single competitor you can think of. This will be the starting point. It doesn’t matter if they are direct or indirect competitors. The important part is that they are accounted for.
- Filtering: Once you have accumulated a good sized list, start to analyze it. Which key features or offerings do they have? How are they priced? What are they best at? What are they worst at?
Any details that you can use to understand what makes each competitor different from the others. - Ranking: Once you have in-depth details about all of the competitors, you can now make informative opinions on which ones are the best. This does a few things: helps you identify what you should be focusing on or ignoring, but it also gives you a clearer idea of who leads the market and how difficult it will be to take market share. Run this ranking by other people, such as customers, experts, etc. to see if they agree with your assessment.
- Keep adding: Never stop searching for competitors and staying up to date on the ones you have identified. This is a constantly changing battle where everyone is for themself. If you don’t know who the enemies are and what types of weapons they have; you are as good as dead.
Ultimately, you will get to a point where you have a somewhat concrete competitive landscape. This means you should be able to list the top competitors on a matrix, based on their competitive strategy. This matrix should show the two most important factors to determine for customers in the market. There are plenty of ways to define the axises on the matrix, but a common one popularized by Michael Porter is shown below:
The whole purpose for doing all of this is to figure out exactly where you plan to fit into this market and be able to compete with the most success. This doesn’t necessarily mean you should try to go for the portion of the landscape that is least concentrated, but rather using this information to understand where there is the most value to be filled.
It may be the case that of the top 10 competitors, only 1 dominates the cost leadership strategy. However, that may be only possible because they have been established for 20 years and can afford to compete on pricing in a way that is just not possible for a new company to do. At the same time, 8 of the 10 may have a differentiation focus, but there are 4 clear niche markets to differentiate on and each one has 2 competitors.
On the other hand, maybe the one company that has the cost leadership strategy is self cannibalizing itself with too low of prices, and is soon to fail, or maybe their main supplier is going out of business and you already have a relationship with the next best supplier. Maybe new technology and customer preferences have developed a 5th niche market that has no clear leader, and you have what it takes to be the disrupting innovator.
The point here is that it takes a lot of digging to see where the best fit would be for you in the market. When you can clearly identify a gap in the market, that is where you have the best chance to succeed. It is at this point when you have to identify exactly what your company needs to do in order to capture that area, and fend off the competitors. This is where we start to identify the detailed ways that you plan to differentiate your business from the rest.
Stay tuned for more on how to separate yourself from the competition and stay successful in next week’s DeepDive: Differentiation
