We see a lot of investment pitches from entrepreneurs ranging from high tech software to more humble local restaurants. More than half, probably 3/4 either completely ignore, or give lip service to
We don’t believe in slavishly following competitors. We’d far rather talk to a customer about their problems than research a competitor’s solutions, but understanding the competition is key for several reasons:
- First, does it exist? Competition is usually a function of market size. No competition typically means no market. That’s a flag. There may be a reason there are no restaurants in a certain area – maybe it’s a poor catchment for eating out?
Of course it exists. It may not be direct competition, but your market is doing something right now. When a pitch lacks adequate reference to competition is makes me question their market knowledge. That’s an even bigger flag. And remember budget competition is still competition. To pursue the restaurant example, people have a choice of eating out, or ordering a take out, or going to see the movies. They could stay close to work and eat there, or come home early and eat here.
It helps you scope the market. How much money is being spent right now in similar solutions? Analysts are often mystified that Apple can charge such a premium for their iPhone over superficially similar non-brand phones, but the real takeaway is that people are apparently quite happy to spend $600 plus every couple of years on a personal device. That’s worth knowing even if you make plain old boring watches.
It helps you position yourself. SalesSeek is basically the equivalent of SalesForce (CRM), Google Analytics (web), Hootsuite (social) and Marketo (marketing automation) all in one simplified package for SME. Most people “in the market” understand what that means. What is your niche? What is your competitive moat? How are you differentiated? Are you fast food? A romantic dinner for two? A family restaurant?
It’s not just about product, but go-to-market too. How do your competitors price? What is their sales model? How do they get leads? Again, there are constraints and opportunities here which guide your own go-to-market strategy. Do the other restaurants open for lunch? Do they provide take out? Delivery even? How do they source their wine?
You get product ideas. The competition is not awful. The competition probably have some very good ideas. Ditch any propensity to “Not Invented Here” and focus on out-execution, not ego-led “everything they do must be bad”. If you are opening a restaurant you should plan on eating out a lot elsewhere.
Of course everyone makes lots of mistakes when setting up a business. But different people make different mistakes. The one consistent thing we see across the board though is lack of competitive knowledge, probably stemming from over confidence in your own solution (which isn’t bad, but does need to be tempered). Competitive analysis is well worth the effort regardless of your market – you will certainly learn more about it by studying the competition.