Competitive Analysis for Startups: The Goal
One of the hardest things for emerging companies to get a handle on is analyzing the competition. Investors grimace when we hear “there is no competition” because outside of the world of patents, it’s just not true. But on the other hand, what’s the point of starting a new company when there are lots of competitors, implying a crowded space? Entrepreneurs often get lost somewhere between “no competition” and “too much competition”. This leads to unconvincing business plans or, worse, a strategy that’s blind to real competitive threats.
What’s the goal of competitive analysis?
For most entrepreneurs trying to convince people about a new product, the goal seems to be to prove, at all costs, that what they have is unique. There’s a standard series of tricks to accomplish this, two of my favorites of which are:
Our competitive advantage is that we are at the top right
We have more checkmarks than our competition
It’s pretty easy to define your competitive analysis in such a way that you appear totally unique. The question is, are you defining criteria that your customers care about?
“Competitive Intelligence” vs. “Competitive Analysis”
Whether you’re preparing a VC pitch deck or just strategizing about your business, remember that your real goal isn’t to show that you have a competitive advantage. Why? Because you might not. The real goal is to be an expert about your competitive landscape (and a paranoid one at that). The real goal of the Competition section of your business plan is to impress the reader that you are a) an expert about your competition and b) more paranoid than the reader (since the reader isn’t the one running the business).
The bad news is that being a real expert about your competition takes more time than creating a 2X2 matrix. But the good news is that you’ll be much better prepared for conversations with customers and investors who love pointing out that “Product X already does that”.
Stop Being Afraid to Talk About Your Competition
The takeaway is that you shouldn’t be afraid to have a competitive analysis that seems to be full of competitors. Your job is to show that you have a sophisticated understanding of your industry and where you fit in. I’m always more interested in how a startup is going to compete rather than why they don’t have to.
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Bruno Morency says:
May 22nd, 2009 at 2:51 pm
Great post! I like to label competition as actual competitors and alternatives. You can’t really compare yourself to an alternative with feature-by-feature table because their way of solving the problem is quite different then yours … but if they’re after the same problem, it’s competition.
If what you do is truly innovative, you might not have actual competitors but if there’s no alternatives, you might want to seriously re-asses whether people actually want this?
Competitive Analysis for Startups: Being Better, Not Just Different | FLOW Ventures says:
May 25th, 2009 at 8:53 am
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Caroline Lavergne says:
June 3rd, 2009 at 8:51 am
This is a fantastic post. “We’re INTEGRATED”: HA! classic. But why are you not impressed with my positioning map??
raymond says:
June 3rd, 2009 at 12:13 pm
Thanks Caroline. Besides the humour value of most competitive analysis, I think most people forget that the real point of using those MBA tools is to convince *yourself* first. Entrepreneurs spend too much time convincing other people of things that even they may be skeptical about.
The Value Net as a Tool for Competitive Analysis | FLOW Ventures says:
July 6th, 2009 at 8:09 am
[...] talked about the goal of competitive analysis and being better, not just different, it’s time to talk about a framework for doing [...]
» One small step for startup kind | StartupNorth says:
July 21st, 2009 at 10:16 am
[...] The number of times that this is true is rare. Most companies and products have competition. Stop being afraid to talk about your competition. Understanding where you fit in the competitive landscape can help you figure out your product [...]
One small step for startup kind | DavidCrow.ca says:
July 21st, 2009 at 10:20 am
[...] The number of times that this is true is rare. Most companies and products have competition. Stop being afraid to talk about your competition. Understanding where you fit in the competitive landscape can help you figure out your product [...]