"As an entrepreneur, if you think that you don't have any competition, then it means one of two things:
- What you're working on is not worth working upon or
- You don't know how to use Google"
– Guy Kawasaki had once told this to Peter Panas and me during a global student business plan competition years ago, after we had just pitched the business plan for Securamed at the Stanford global e-challenge in Singapore. Competitiveness is the essence of any business and you need to know the competition to be competitive.
It must be obvious that you need to know who your present competitors are, but it is even more important to know the following three facets about your competitors:
- How will your competition react to your strategies?
- What is your strongest point and your competitors' weakest point?
- Who is likely to be your competitor in the short term vs the long term?
In this this post, I'll share my thoughts on #1 – proactively predicting the competitor's moves/reactions:
Just knowing the names and basic offerings of your competitors is never enough. Basic information about the obvious competitors is typically very easy to find. If it is a large company it is pretty straight forward to find the basics from the company's website. If the competitor is a public company, then it is even better. For large companies, which are private, you may find the basic information from the Dunn And Bradstreet reports. For large companies, which are publicly listed, most information is available from the EDGAR reports or the annual reports. Hoover's database (easily accessible from any decent library) is also very comprehensive. It starts getting trickier as the size of a competitor starts decreasing. Not only can a smaller company harder to spot, but their strategies/reactions are harder to predict. Most effective small companies are fairly agile and can adapt easily to changing market conditions.
Despite the size of the company, there are two proven ways to learn the most about a competitor.
One, be a customer of the competitor. Eat the competitor's dogfood. Empathize with the experience offered by your competitor to their customers. Use the competitor's product. Talk to their customer support personnel. Post a question on their help forum (if one exists.) I'm not suggesting espionage. There are legal ways of purchasing and using a competitor's products. Don't hide your identity. It is OK to say that you work for your company and disclose who you are. The competitors assume that you know everything about their product, anyway.The goal of this exercise is not to find the good things about a competitor and copy them. The key is in understanding the guiding principles of the competitor's execution strategy. Is the competitor focusing a lot on customer service? Is the competitor's product sold on the merits of its user interface? How has the competitor's product matured over time? Has the backend being made more robust or has the competitor focused more on improving the user interface over time? What are their customers/users liking/disliking about their product (can be found easily through newsgroups/blog posts, etc.)? Buy the best possible version of the competitor's product and renew your service subscriptions. Keep up with the competition as a pro-customer and get a pulse of their business.
Second and most important aspect is to really really know the people involved in the competition. Is the CEO of the competition a strategiest or a people manager? Is he/she a technologist or a marketer or a deal maker? What does the DNA of the competition's leadership look like? Is it dominated by technocrats or sales people? Where have most people worked before (this gives a pretty clear picture of their work-style or their approach?) Who is likely to succeed the current leadership? The goal of this exercise is to really understand how your competition is likely to react, when you execute your strategies. For instance, if you introduce a new product, is the competitor likely to introduce a more technically robust product, or is it likely to strike a deal with another competitor to combat you or is it likely to reduce the price of their offerings. These things can only be found out by investing heavily in understanding the minds of the key leaders at your competitor. All decisions and strategies are implemented by people and not organizations/companies. It is important to be able to understand their value system, their guiding principles and their likely reactions. If you know the likely reaction from a competitor, you can always be prepared for it or even use it to deceive the competition. Data about people, their past experiences and their workstyles can be easily found on LinkedIn/facebook. Be aware that the competitor would also be trying to sum you up, so control how you project yourself through LinkedIn/facebook/blog posts/replies to newsgroups, etc.
If you play any competitive sport, these things may seem like "common sense", because it is common sense. Remember to use it. Tennis and chess provide a very straightforward way to simulate one:one competitive environment and practice your strategies. My most favorite board game – RISK, is the best way to simulate competition amongst multiple players and try out strategies.