How to compete

Sport and business are often compared. But there are as many bad comparisons as good ones. While professional sport provides us with fantastic insight into highly efficient, motivated, goal driven team work, I believe it provides a poor metaphor for how business competition works. Simply beating a competitor is not necessarily an indicator of good business.

Who are my competitors?

The first key misconception about competition is that you as a provider of a product/service get to choose who your competitors are. You don’t. If your customers or target users do not think you compete with Facebook, then you don’t compete with Facebook. If your customers or target users compare you with Hotmail, then Hotmail are a competitor of yours. They decide.

All too often startups declare themselves as competitors of an existing product/solution/service or that they operate in a certain “market” when they are the only ones on planet earth who think so. If you really want to compete with something, then you have a huge marketing challenge to tell the world you are their competitor. For small businesses with a big idea, that already sounds like a waste of time and money to me. You should spend that time and effort telling the world how your solution will help them.

The warning bells should be ringing if you are an early stage startup and you are spending more time on “positioning” than development. More on this later.

When to compete?

Commodity traders compete on basic criteria such as volume, price, color, smell, size, “prettiness”, “shineyness”. In terms of value, commodity traders provide quick value at the highest recurring risk. If all you compete on is very basic criteria then someone will always be able to easily compete with you. In web app terms someone will always be able to make it prettier, faster, cheaper, shineyer, provide quicker customer service and be nicer people. Commodity trading is highly profitable because it provides quick profit and value based on huge volume. Without huge volume and diversity, commodity trading doesn’t work in the long term. Trading in a specific commodity is by definition a race to $0.

Direct competition

Unless what you have is at least 3 times better in your customer’s eyes (many say 10 times better) you should aim to avoid directly competing. The reason is that if you are directly competing with someone, you are getting yourself involved in a commodity criteria, checkbox-list-type “face off”. You only want to be in that position (or architect that position) if what you have is significantly better in your customer’s eyes. If your sales situations involve you either constantly describing your differences to your competitors, or sitting there sweating while your customer evaluates checklists of basic criteria then like it or not, you are involved in a commodity type sales situation. This is OK if what you have is significantly better than your competitors, but I’d bet it it wont last as a business model if you don’t.

The key to most competitive situations and selling in general is not in competing, but in “flanking”. Rather than spending the time demonstrating how you compare to your competitor, you should be spending the time learning your customer’s real problem and changing the criteria with which your customer looks at the problem and answer. If the project is big enough, you should be spending the time discovering your customer’s compelling event and figuring out how you are going to help them resolve it. Actually trying to appreciate your customer’s problem will help you get their support, allow you to influence their plan and ultimately put your solution at the heart of how they look at their problem. That is the skill of a real sales person. At the very worst, this approach seems like a great source of information to try and make your product at least good enough to compete directly on. In this scenario you have an opportunity to become more than just a provider or vendor, you are an adviser to your customer. This is far healthier place to be.

Unfortunately, the common model in software and web apps is often to design/build something very similar to a competitor product with some commodity level differentiators so that you can “market it”. You release it to “get it out there” and then ask for feedback when it’s too late. That seems the wrong way around to me. If you want to build a business from day one, you need to be able to have a compelling vision and be able to describe how your product will help from day one, not just how it is different to competitor’s offerings.

Your biggest competitor?

Your biggest competitor is likely not a company or product at all but your customer deciding not to go with any product/solution. When your potential customer chooses neither you or your competitor, that seems like a worse position to be in. We often spend so much time competing and forming a rock solid “positioning statement”, that we forget to really focus on helping potential customers understand why your product, service, approach will specifically help them. For early-stage startups this seems like the right place to focus time and money to me.

Competition is difficult. We can get get so preoccupied with “beating” our competitors that we lose sight of the core problem that we’re trying to solve. Stop sweating defensively over feature-lists. Put your vision, your customers and their problems’ front and centre.