How important is the competition?
Are you in a competitive market, or bravely going where no startup has gone before?
If you are actually creating your own market, you may not have to pay as close attention to competition as the rest of us. If you’re successful–and I’m positive you plan to be–you’ll have competition soon. Get ahead of the game and consider a framework for analyzing your competition.
Even early stage startups have competition–the status quo.
Before going any further, let me state clearly that I’m a big believer in customer development and in user-centered design (a flavor of user experience design). Ensuring that you target a group of people with a real problem that you can profitably solve puts you in a really good space. Applying UCD techniques to ensure that you provide an optimal solution to that identified problem helps stack the deck in your favor. That’s how companies create markets.
But you won’t be alone forever.
As much as startups may hate to admit it, Mark Suster is right about this: There’s more to winning than just product.
What’s the purpose of competitive analysis?
Do you know how to do a competitive analysis?
Competitive analysis is a practice that can help identify where your company and your product(s) fit in the marketplace, and where your competitors fit as well. This evaluation takes a number of things into account.
At the company level: What segment(s) are they targeting? What problems are they solving for those segments? What messaging are they using to reach the segment(s) in question? What information has been revealed in recent press releases and shareholder filings? What kind of job openings are posted for the competitor?
At the product level: How are competing offerings priced? What does their feature set look like? How easy is implementation? How quickly does their support team respond? What packages of products are offered together?
I’m sure you can think of more.
The information you gather about your competitors can inform decisions you make about segments to target, features to build and directions to pursue. If you find that most of your competition zigged, you can zag. Your observations also may lead to changes outside the product–perhaps you need to consider additional professional services to address ancillary problems?
Roger Cauvin reminds us that it’s not just the what, but the why:
Competitive analysis should primarily be about analysis of customer psychography and perceptions. Don’t just compare your product to other products, determine what differs between your customers and those of competing products….This sort of competitive analysis is what should drive the positioning of your product, which largely determines the relative priority of product requirements and the strategies for marketing and selling your product.
As Roger points out, if your learnings suggest a different positioning in the market, your development priorities should shift in line with that. This is why positioning should really be done before building the product, not after.
If what you’re learning is a specific feature strength or weakness of a competitor, you as a product manager may be keenly interested in taking advantage of that in your own feature design. If it’s more of a portfolio observation, you may be able to exploit that from a product marketing perspective in the way you sell all your offerings, or you may need to consider a new product at some point in the future.
If nothing else, the reason you should keep an eye on your competitors on a regular basis–at a minimum, performing a complete review once a year–is to ensure there isn’t something you’ve missed. It’s hard to make a deliberate decision to stay on course–or to take flanking action–if you’re unaware of what the other players are doing.
So what techniques are most effective here?
As you can imagine, competitive intelligence isn’t as easy to come by in B2B as it is in B2C. For a B2C product, you can typically just go buy one of your competitor’s products and give it a whirl. In B2B it’s a little different: You’d have to spend a very large amount of money, plus go through a rigorous sales cycle and possibly an RFP process, to get to the point of actually seeing your competitor’s products up close and personal.
And going through that under the guise of being an actual potential customer can bring up fraud accusations. It’s not ethical and it’s not wise.
Think about the options you do have at your disposal. Keep in mind, unless you have a large portfolio of products and find yourself unable to keep up, you may not really need competitive analysis tools.
- How can you get your eyes on your competitor’s product? Does your best friend use it? Be resourceful!
- You should already have Google Alerts setup for your competitors’ names. You should probably setup alerts from a service like ChangeDetection.com so you can be notified when content / messaging on your competitor’s website changes.
- Following your competition on Twitter may be useful as well. (Note: If you don’t want them to know you’re following them on Twitter, don’t “follow” them–add them to a private list. It’ll be undetectable by your stalk-ee.)
- Your support, services and sales teams are great resources here. Ask them for insights from time to time, and when they provide data, show them how it impacts your decisions. Encourage helpful behavior!
- If they’re a public company, financial filings are a gold mine. Profitability, cash flow, and stated strategic objectives are just some of the many interesting insights these kinds of documents can provide.
- Finally, think about industry analysts. Although you’re paying for a relationship in some cases, and although analysts won’t tell you specifics about which competitor is doing what, you can still learn a good bit by the way they do or don’t answer questions, the way they interact with you at events, and the phrasing they use when discussing specific vendors in market updates. Analysts can also be a (non-exclusive) source of leads.
Consider automated tools. Competitive intelligence specialists exist who can help with monitoring public announcements and filings, and can even help with filtering down to actionable information. You don’t have to do it alone–let’s face it, this is one of the areas that’s most likely to fall behind the daily fires.
For the strategic part of the analysis, start with a framework that describes the market itself (and where your offerings fit). That analysis should cover market size, growth rate, your current position in the market, segments served, major competitors, etc.
Then try to summarize where each competitor fits in that framework, in terms of their position. Buy vs. build analysis might be useful here if your competitors are in a space that you aren’t in yet. Look at each competitor’s size, revenue, recent acquisitions and try to estimate future possibilities.
Next, let’s think about the more tactical comparisons of features and functionality.
Comparing Features and Functionality
If you’re a new entrant into an existing product category, you’ll be looking at the core features of your product in comparison to the other key offerings you’re competing against. You’re probably looking to match the minimum acceptable level established in the market for each core feature. As a differentiation strategy, and based on the segment of customers you are targeting, you may choose to overinvest in one or more features, and/or deemphasize other features by under-investing in them.
A tool I’ve found especially helpful in visualizing features across competitors is the Strategy Canvas as illustrated in Blue Ocean Strategy by Kim and Mauborgne. The Strategy Canvas is a line chart, with various core areas of functionality on the x axis, and quality of solution on the y axis. Each competitor is plotted on each area of functionality using a unique color, which then presents differently-colored lines representing each player.
Blue Ocean Strategy spends significant time on the case study of Cirque de Soleil. Cirque took the dated concept of the circus and turned it on its head. Finding that the animals weren’t really what brought people in the door, they got rid of some of the staples of traveling circus troupes: the smelly animals, and the concessionaires walking the aisles. In their place, they added more sophisticated music and dance, light shows, and a more refined environment.
Source: Berg Consulting
By extending their canvas into the “blue ocean” area on the right of the chart, they were able to charge a multiple of the admission prices charged by traditional circuses.
The Risk to Young Products
When building the first version of a new product, startups and growth companies frequently start with MVP (minimum viable product) and move forward. The feature set they build is driven by actual prospect need and behavior iteratively through interview and observation.
Steve Blank wrote in 2010 that competitive analysis poses a significant risk to startups, that I’ve observed within incubated products in larger companies as well. The risk is that by identifying features of competitors who aren’t actually serving the same customer segment, you may end up building features not needed by your customers. Blank calls it “feature sprawl.”
The mandate becomes; “Our competitors have these features so our startup needs them too. Get to work and add all of these for first customer ship”…..Only after the product ships does the company find out that customers couldn’t have cared less about most of the bells and whistles.
I’ve seen products built based on assumptions of customer needs, that not only identified features (which took months to build) being rarely used, but which were shelved entirely.
At its best a competitive analysis assumes that you know why customers are going to buy your product. At its worst it exists to rationalize the founder’s assumptions about what they are building. This is a mistake – and it is a contributing factor (if not a root cause) of why most startups get their initial feature set wrong….
If you are building a competitive analysis table, do so only after you understand that the features you are listing matter to customers.
Note, as Blank also points out, this may be a little different if your startup is entering an existing market. Your mileage may vary.
The message here isn’t that product professionals shouldn’t look at the competition, but rather that features should be built on the needs of your own customers. You still need to do the work to understand your own customers.
Don’t make the risky assumption that only because your competition has certain features, you should too. (great post on the topic of Feature List Dysfunction here) If you do that, you’re simply doing it wrong.
The fact that competitors offer specific features may be an opportunity, a threat, or neither. You have to analyze deeper than a feature list!
Communicating Learnings Throughout the Company
Many teams don’t watch the competition frequently enough. But among those who do, a significant number fail to capture the value from the activity because the learnings are not communicated to other teams.
Product teams need to provide digestible information to the teams that need it. This doesn’t mean forwarding every press release verbatim, or sending piles of spreadsheets. The conclusions and hypotheses need to be called out explicitly.
Jacques Murphy suggested:
“Without the succinct analysis that gets to the heart of the matter, you risk having sales reps and others ignore the raw information you collect. If you gather lots of information on a competitor into a single document, available on the intranet for example, make sure that the analysis is on the first page.”
I’ve seen product teams provide this information verbally to sales and marketing in scheduled meetings, but as the pace of activity quickens, it becomes harder and harder to find time for this kind of information sharing in verbal form with so many other topics to cover. So it makes sense that in written form, you’d include a summary since your audience won’t have the time or background to parse the data as you can.
A couple of forms of written communications can help:
- An competitive intel email digest can be distributed every 2 to 4 weeks as appropriate. The digest should include written reminder of the high level context and recent developments, so Sales reps can stay in the loop on the world outside the company’s doors.
- A set of battle cards can be really useful if frequently maintained. A good battle card speaks about a particular product in comparison with the offering of a particular competitor. It conveys strengths; how to answer specific objections; and the points to press on to win. This is one way to help ensure opportunities to win aren’t missed because the sales rep forgets the response, or product forgot to prepare them.
At the end of the day, it comes down to this: Once you’re in a competitive space, your opponents are conducting competitive analysis on you. Why let them have the advantage?
Image via Gratisography