
Inspired by a great post by David Hornik, i wanted to share a bit about the experience i have talking with entrepreneurs and their way to understand and explain what competition is. Bottom line: most of the time this is the part i am frustrated with when i discover this is not a part of the business that is mastered well enough.
It is clear that your business should never be (only) guided by your competition's moves but by your own vision of the market and the way to answer a specific problem. But mastering your competition environment is a must specially when you try to convince investors: not only to demonstrate why what you do is unique, but also to show that you know perfectly what you are talking about. And honestly this is an easy part where you can showcase your skills (i would recommend not to talk about competition in a specific slide but all along your presentation)
I cannot count the number of meetings where entrerpreneurs mention that they do not have competition (usually not a good news by the way and if so you should explain very well why not). And when they do, often the list is very incomplete or poorly detailed. And this is really surprising to me because i think this is the easiest part of the job. There are so many easy and free ways to seamlessly find who is your competition that i cannot understand this is not done more often. Before i mention a few methods to find them let me first detail what i mean by competition.
- Direct competition: companies/services doing exactly what you do (Gmail vs Yahoo mail)
- Indirect Competition: Companies solving exactly the same issue but with a different approach (buy a book on Amazon vs an audio book on Audible.com)
- Segmented competition: Companies in your space but operating in different geographical, demographic segments or industry vertical (Facebook for consumers vs Linkedin for pros or Google vs Vertical search engines)
- Potential competition: players that are not in your space but could come to it very quickly (ex Youtube coming to live streaming space)
- Attention Competition: companies totally different from your environment but that have a service that is capable of capturing your consumers' attention on their product instead of yours (eg blog ad networks and the variety of formats and ad widgets or startpages vs your traditional portal page).
- Finally, Investors' attention competition: Many entrepreneurs do not realize they are competition for VC money against all other projects out there, not just their direct/indirect competition. VCs want to bet on the best opportunities (and diversify their risk), so they will evaluate those by benchmarking risk and rewards regardless of the company's activity. Bear that in mind when you meet investors
So. How to find those bloody competitors? here are a few free tips to do those, that i use myself.
- Google: isn't it obvious? you'd be surprised by the number of entrepreneurs that did not even do that. Think about the core of your business, identify key "keywords" and run a search, you ll be amazed by what you can find...Power tip: use related page at the bottom of a very relevant link
- Delicious: the web filtered by smarter people than you. isn't it great? run a search in what people tag and bookmark, you can find jewels over there
- Blog search: just like google but for blogs. Use technorati, wikio, google blog search...
- Blog comments: wherever you spot a blog post talking about a competitor you spotted just run through the comments. Readers are way more knowledgeable that the blog writers themselves. 10 times out 10 i find useful competition information there. Do a test, you ll see it works
- Ask people: no comment. so obvious i wonder why people do not do it more often. You can use Question and Answers services like Yahoo Answers or just ask people in Real life (yes it works too)
- Comscore/Hitwise/Nielsen: those market research companies are tracking users behaviour on the web but are not free. They do have free resources
- Twitter/FriendFeed: yes Twitter, which is for me the best Q&A service ever, Just ask your friends. You need to have enough followers. Same Thing with FriendFeed that has search and agregates the digital lives and infos of people that matter to you.
Spotting them is not good enough: you should find out about them, what they do, how they do it, how the service works, how they make money, feedback from users (forums are usefull for that), who are their team and investors, possibly their financials (this one is tough). I find that there are 2 great non conventional ways to know very well your competition:
- attend events they speak at, they usually will tell a lot more than you'd expect about them.
- Meet with them: when i was young and naive i thought you never talked to your competitors. But this is wrong, you should. Very early, if for no better reasons because you guys are building a market together. Nothing replaces the feel of a direct contact.
My final point would be to say that understanding competition is not a one-off task for a VC presentation. It is a dynamic process that should obsessively be part of your on going task. FMCGs like Procter or Reckitt (i worked for 11 years ago) run thorough competitive analysis all the time on a regular basis. Again it should not guide your decisions, but you should feel you know you competition so well you can anticipate their own next move. So integrate as part of your outlook calendar or whatever tool that has your attention. Just to give you example: i have a special tab in netvibes that helps keeping me track of our portfolio's competitors activities and that monitors anything they say or is said on them in blogs using Wikio search RSS feature. I also keep track of anything being said on Twitter on our companies using Summize. I also use Alexa (although it is totally unreliable) and compete that have good widgets to keep track of everything.
Also attribute the responsibility of doing this to more than one person in your company. this should be part of the DNA of the company and everyone should feel responsible for understanding what your competition is doing better or worse than you at any level.
Note: this post is part of a category of post called "
execution is the key" where i share my insights and own experience for basic strategic/tactical/operationnal tasks
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