I only remember one question from my first big job interview and even then, the answer was what really stood out to me: “Your competition.”
The question was something about your number one priority as a manager. It is etched in my mind; the idea that when faced with a multitude of choices, a strategy change by a competitor is the one you pay attention to the most.
I ask every startup I evaluate about their competition, and after six years of investing, and countless pitch meetings, I continue to be amazed at the lack of rigor given to this area of company building. Especially when you’re expected to be an expert in the space you’re attacking, even if you haven’t quite found product market fit.
This nonchalance is the main reason I find the lack of attention to true competitive analysis in startups so frustrating. Ask a very early stage startup about their competition and you constantly hear them say “We don’t have any- we’re the only ones doing this.” That’s a big mistake. You’re failing to understand what you’re actually competing for. It’s not the quality of your solution.
The dissonance occurs when you start thinking about what your competition actually is. It’s easy on a field of play; it’s your opponent and you need to outscore them to win. It’s not so easy for businesses; you’re not just competing with those who do exactly what you do.
Consumer-facing startups compete primarily for time. If you can’t persuade your customer to spend more time with you than with your competition, then you’re going to lose. That’s why content companies are all competing with Facebook, Instagram, and Twitter. If you’re selling anything, you’re competing with Amazon, even if they don’t sell what you do-they have set the standard in terms of service and what to expect when shopping online.
Business to business startups are all competing for one thing and one thing only: budget. The companies you’re selling to aren’t looking for an “on demand cloud based analysis system that distributes attributes to the correct quadrant.” They're looking for ways to increase revenue or cut cost. If your competition can do that with a completely different product and you can’t, then you’ve lost, no matter if they're on your competitive slide or not.
Once you understand what you’re actually competing for, then you can begin to think about how to compete. Do you really have a better product? Are you the cheapest solution? Do you have the best service?
The interview for that first big job was at Macy’s. We spent at least two hours a week shopping in our competitor’s stores- checking pricing, assessing the merchandise assortment, counting sales associates (yes, I’ve been kicked out of a store).
The only way to do real competitive analysis is to constantly ask your customers about what they face and how they evaluate you versus others. That holds true for any company.
Put in the work. It is critical to your success.