23 Sep Scoping Out the Competition
This is the first in a series of blogs looking at one of the most important and often least considered aspects of any business plans – Competitive Analysis. Each part examines key steps to knowing where you stand against your competition and how that analysis informs your potential position and the likelihood of success in the marketplace.
However good your product or service is and however well devised your strategic capability, ultimately that is all relative as arguably, all organizations are in a competitive position relative to each other. Even if you have a new and unique offering never seen before you are competing against other options for your target markets’ disposable income, including sticking with their status quo or worse still not spending it at all!
Finding out what your competitors are doing in your proposed market and how they are communicating their offering to your intended customers is a fundamental step for every start up. A fundamental that is often either ignored or poorly executed. Mainly this is because it’s hard and not always clear who your competitor is. Competitors may not even be in the same business as you. Chocolate manufacturers saw sales decline as kids used their pocket money for mobile phone top up. More recently adults are looking at healthier snack options for themselves and their kids. Much as we all like the sweet stuff intensive media coverage and peer pressure is encouraging us all to reduce sugar, eat healthy and avoid obesity.
It’s also worth remembering that organizations compete not just for customers but also for resources and funding. Of course, you may well have no customers…yet. In which case it’ll be less about what your offering can do, at which price and more to do with the benefits for your target customer. Who’s your target customer? What problem are you solving? How will they benefit? And the million-dollar question. Will they buy what you have to offer?
Before we go there, let’s go back a step or two and look at how to identify who are your competition? What we need to know about them, and how to compare ourselves to the marketplace.
Who are your competition?
Competitive analysis is an assessment of the strengths and weaknesses of current and potential competitors. It will help you to understand the market you are entering. The position of other players, customers and suppliers. Plus give you a better idea of how your key competitors will react when you enter the market. The more you understand their offering, the better you will be able to exploit their weaknesses to gain customers and protect your business against attacks.
A good competitive analysis informs both your offensive and defensive strategy. Enabling you to identify opportunities and threats. By the end of it you want to be able to clearly illustrate the distinct competitive advantage your offering will have over the competitors you have identified.
It’s not super easy to find accurate, actionable information. Not easy but oh, so worth it! Taking stock of the market and looking at your competitors’ journey to date will also enable you to see what worked for them and how to avoid the early mistakes they made. Another competitor who is often left out is customers maintaining the “status quo” and taking no action. With either you or your competitors. No spend is one of your biggest competitors.
Only marginally better than not doing a competitive analysis is doing one badly. In some ways it can be more dangerous as it can lead to complacency. Too often start up competitive analysis is based less on real world comparability and more on blind optimism.
How to Conduct Your Competitive Analysis
Have you identified your companies top ten real competitors?
To really discover your competitors and where you have the potential to stand you first need a very good understanding of what you are doing. This is where you go back to basics and make sure you can succinctly answer:
- How I’m going to solve it? (What is the product idea?)
- Who has this problem? (Who exactly are my customers?)
- How can I be sure the problem is valid? Have I spoken with real people who have this problem? (Spoiler: if there are successful competitors, it’s probably a valid problem.)
The key part of this exercise is the solution. This is where you start to understand who your real competitors are and it’s often much broader than the companies offering, more or less, the same as you.
And don’t ever say you don’t have competition.
Quick: Try to name a successful business that doesn’t have competition. I bet you can’t do it. But it’s amazing how many business plans claim there’s no competition for their new business idea. That normally means you either don’t understand your business or have a business nobody else wants.
Neither option is good.
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