Who Do You REALLY Compete With?

13 Mar 2012

When I meet a CEO for the first time, I often ask him or her a deceptively simple question ‘who is your competition’?  More often than not I get one of two answers: (a) ‘we don’t have any competition’, or (b) ‘we primarily compete with competitor A, competitor B, competitor C and competitor D…’

Both answers are shallow and short-sighted.

Let’s take the first response ‘we don’t have any competition’.  Trouble with this answer is I can only conclude one of four possibilities:

  1. They don’t know their market very well and haven’t done their homework.
  2. They’re trying to deceive me somehow and are not telling me something that they have already discovered about competitors in the market.
  3. They’re probably doing something that doesn’t matter — they’re the only one doing this because a market for what they do doesn’t exist (‘uninformed teams creating uninteresting offerings chasing uninhabitable markets’), or
  4. They’re pure genius; they’re actually proposing a new idea that has never been tried before.

Generally not a big fan of the ‘no competition’ angle!

So let’s take the second response, they rattle of 4-5 competitors and tell me why they’re better than each of them.  This usually goes down the path of features/functions and what their product can do incrementally better vs. the named competition. Companies typically make the argument they have better product than the competition. (Really?  Half of all products in any category are statistically below the median, but I digress.)  So a company makes a claim that they are a product innovator, they compete with 4-5 named customers, and they are winning deals.

So far, so good, right?

In our work helping companies understand their strategic positioning, we very often uncover two additional ‘competition’ factors companies get blindsided by.

First, most companies don’t have an appreciation of all the companies that market/brand/message/position in their space.  A company that names 4-5 competitors might actually have 30, 40, or even 50 competitors that market/brand/message/position just like them.  On one recent assignment, we identified a whopping 108 competitors for a client who said they only had 3 primary competitors.  (We actually stopped at 108.)  Our research team was then able to identify key customers, key technology partnerships, etc.  We asked the GM of this business unit if all 108 were competitors.  He said he only saw the 3 he named in competitive situations so that is how he defined his list.

Hmmm, think about that response.  If you’re not seeing companies in deals competitively then they’re not your competitor? Perhaps there are a lot of companies closing business in your space not seeing you either?  Our point is competition thus isn’t defined purely as who you see competitively on deals. One of the greatest sources of market disruption comes from companies once cited as ‘low end’ and ‘can’t do what we do’, only to move up market quickly and dominate.

Second, most companies don’t fully understand and appreciate substitutes for their offering.  We’ve worked with three different clients recently that were all basically selling against Excel.  When first asked the ‘who are your competitors’ question, each CEO gave us their 4-5 primary competitors.    Reality was in all three instances, Excel was the primary competitor and 4-5 in each instance we’re all struggling for a much smaller percentage of the market.  Yet none of the three client CEO’s fully recognized how embedded Excel was as a competitor – it was already installed (and perceived as ‘free’), it was already being used to do similar things each of the three CEO’s was proposing, and it didn’t take a few months and hundreds of professional services hours to get up and running.  A very steep climb for each company competing against Excel-based alternatives.

Short of it is competitors and alternatives to solving the problem your company purports to solve is a lot more complex than most companies fully appreciate. Dig a little deeper with customers and find out how they’re thinking about various alternatives to solve the problem you are selling a solution for.  You might be surprised.

Failing to get right a broader perspective who you compete against means you’re potentially leaving a lot of money on the table.

Up and Right!

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