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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:

 

 

 

 

 

 

and

 

 

 

 

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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8 Responses to Competitive Analysis for Startups: The Goal

  1. 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?

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  3. Caroline Lavergne says:

    This is a fantastic post. “We’re INTEGRATED”: HA! classic. But why are you not impressed with my positioning map??

  4. raymond says:

    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.

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  8. Jurjen Braakhekke says:

    Good analysis – for startups as well as for incumbents !