Too often startups tell me that they have no competition. I write those startups off right away because I can guarantee that not only do they have competition, but the competition is a worthy opponent that must be taken seriously.
Rather than convincing me that your startup is special, stating that you have no competition tells me instead that you are either ill-informed, unrealistic, delusional, or too lazy to perform a thorough analysis of your competitive landscape. I’m sure the motivation is often just trying to impress the investor, but I am infinitely more impressed when a startup rattles of a dozen competitors and tells me everything there is to know about them. The startup journey is a competition, and it inspires substantial confidence when a team has thoroughly studied their adversaries.
How to evaluate your competition
The first mistake that founders make is believing that any company is that is not offering exactly the same product as their own is not in their competitive set. Let’s take messaging apps as an example. Image for a second that you are Steward Butterfield and your team has just built a business messaging app co-named “Slack” that employs channels to organize threads. It’s a really phenomenal innovation in the messaging space, and no other app that you are aware of organizes messages in threads. Does that mean that you have no competition? Clearly, no.
Your target customers are business people in small to medium-sized companies, so consider what other tools they are using for communicating with their colleagues. Assuming that you know your customer well, you can lean on your own experiences and observations to answer this question. In my career I have seen colleagues use the following tools to communicate:
- AIM (yes, I know)
- Google Hangouts
Some of the items on this list such as Facebook and Email don’t seem like competitors at first, but if your target customers are using them for business communications, they absolutely are an alternative and could potentially draw customers away from your business. Another way to look at it is that your new messaging company will compete with those tools to get business people to use your messaging tool instead.
Not only that, I would argue that many project management tools are also in your competitive space because users communicate using them as well. I would add Asana, Jira, Basecamp, Trello, and Microsoft Teams to your list.
Having compiled a list of your direct and indirect competitors, it’s time to learn everything you can about them. The most important thing, in my opinion, is to understand, in detail, how they are better or worse than your own product. Perhaps these competitors are better suited for certain tasks. I find that creating a comparison matrix allows me to both grok the high-level and detailed differences between solutions.
In addition to understanding how other products compare to your own, there are a number of other pieces of intel that can prove to be extremely valuable:
- Pricing. What are competitors charging and why?
- Customers. Who are they targeting and how many customers do they have?
- Distribution Strategy. How are they getting their users?
- Size. How many employees and offices do they have?
- Age. How long have they been around?
- Funding. How much money do they have in their coffers? Who are their investors?
- Key Hires. Who are their superstar team members?
As you can see, there is a lot that you have to learn about your adversary and this takes a lot of work. But you are literally going to war with them and only a handful of you will ultimately survive, so you better know everything about them – it’s one of your key competitive advantages.