Your competitors want to eat your lunch so how do you stop them? Or better yet, how do you eat their lunch? Well let’s start with ‘do you even have any competition?’
In the Chasm from Jeffrey Moore, we learned that in the very early stages of any kind of market, you just don’t have any competition. You’re the only one providing this innovative new solution, nobody else can. In that circumstance you just don’t have any competition. So, the first question is do you have competition? The second question is who are your competitors?
In this blog I’m going to tell you how to select the right competitors to focus on, how to needle their weaknesses and avoid having your own weaknesses needled back.
Let’s start by looking at who your competitors are. If you’re in a really mature market where the buyers already know what they need, they’re just trying to work out whose product or service they are going to buy to meet that need. The buyers shape their own concept of what they need and your job is just to provide a solution.
Your competitors are like vendors. But, if you manage to get your buyers a little bit earlier than the need definition stage, you’ve got a good opportunity to change their concept of what it is that they need. And, very likely there’s other ways to solve or to meet the need than just what they might have thought about.
Often in those circumstances, your competitors are not just companies but also dissimilar organisations who can meet the need in a slightly different way. What if you get the buyer even earlier still, when they’re at the troubled stage? You know I’m troubled about this problem, and I know what I need and I’m looking at your product. We’ve taken one step back.
But, what if we took a couple steps back and got back to the gap stage. If you can help shape the buyers’ concept of what the problem is that they ought to be solving, then you’re dealing with a different set of competitors again.
Now a good sales person is going to do that anyway, even for the really matured buyer who says I want X do you have X? A good sales person is going to bring them back a step, shape the conflict with a need. Maybe back a step even further, and shape the concept of what their problem is.
A good marketer is going to do the same thing. Clearly they’ll use different devices, different mechanisms and different tactics, but we need to bring the buyer back to the problem stage.
So the question isn’t ‘who else does what I do?’ That’s how we traditionally think about competitors and it’s not what I want to encourage you to think about. Instead, think about ‘who else can solve the problem that I’m focused on solving?’ That’s who you have to beat.
So who then is your real competition? Well let’s start with the question I asked you earlier ‘do you even have competition?’ Or is the market at a stage of immaturity where there just aren’t any other ways to solve this problem right now? If you do have competition, then I want to encourage you to think like a buyer and not like a seller;
What is it that you need to solve this problem? Who else can solve this problem? Who are the vendors that you would talk to?
Don’t just think about like-minded companies. Frequently, the other ways to solve the problem are with completely alternative solutions. Include these in your list. You might end up with quite a long list. Make sure you include in that list ‘do it yourself.’ Often, particularly in professional services, buyers think ‘I could solve this problem with my own people, my own labour, my own ideas, my own technology.’ Alternatively, buyers may choose to do nothing. Who else can solve the problem? This is the question, NOT who does what I do.
So we need to get a long list of all of the possible providers of a solution to that problem, and all the different ways it can be solved. This includes do it yourself and maybe even do nothing (maybe that’s a big competitor). Get the long list together and identify the five of those alternative solutions that you believe are
a) the most threatening for you, and
b) the most viable for the customer.
Then rate them. So how do we rate competitors? And set a strategy according to the strengths and weaknesses that we identified?
Ask five questions of each of the competitors
I’ll list them out shortly but first I want to say what we’re not going to do. We are not going to build a SWOT (strengths, weaknesses, opportunities, and threats) analysis. The problem with SWOT is that it invites some often arbitrary thinking. A strength may not actually matter as strength, or it might genuinely be a strength but it still may not matter because it’s not a big enough strength. I’m going to give you a different way of thinking about these strengths and weaknesses.
Let’s start with this question – Think about all of the companies who’ve previously solved the problem that you want to focus on. Let’s say there are one hundred of them. The market might be a thousand, but one hundred companies have already solved this problem one way or another, well or poorly.
Out of those one hundred companies have a look at the top six competitors. Out of you and the five others (the top six), who has solved the problem the most often? Give them a ten because on the factor of share they are the strongest. Now, who solved the problem the least often? Give them a one maybe. The first question is share, and then which of your six competitors have solved the buyers problem the most often? Give them a ten and rate the others accordingly.
Next question is about your unique selling proposition or USP. Who out of the six companies has got the greatest answer to that problem, the most compelling answer to that problem? Give them a ten. Who is it that has the best solution? Give them a ten and give the weakest solution somewhere between one and five. And rate your other strength; the other USPs for the other competitors.
Third question involves recognition. How well does the market recognise those strengths that are in the USP? You might have the most amazing product but the market doesn’t know it. You’re going to rate yourself very poorly on that factor of recognition. We are not asking about brand recognition generally, but recognition as a solution to solve that problem. Ask yourself who would the market go to?
Next one is cost. I’m going do this one fairly briefly, it is slightly complex. Cost and price are fundamentally different things. As a vendor I’m going to charge you a certain price when I sell you a product. My costs are my own business and I want to ask you a question about cost, not price.
Okay, who out of those six companies has the lowest cost base to solve that problem? Maybe they have got offshore labour, or maybe they have got some clever technology. They’re factors that would give one company a cost advantage over the others. I may not change their price, they might actually meet the market price but have a cost advantage. What I’m looking for is which of those six companies has the greatest cost advantage. Give them a 10. Then rate the others.
Final question is about references. Although we have kind of alluded to references in share, and we have kind of alluded to references in recognition, this is a quite distinct question. Who can tell the best story about having solved the problem before? These guys might have great share, but there customers are not happy so they can’t tell a good story. Who can tell the best ‘I’ve done it before’ story? Give them a 10. Who can tell the weakest story? Give them between a one and five. Now rate the others.
What you will end up with is a grid that describes strengths and weaknesses according to those five factors for the six companies. Now you can work out what you should do. Pick just the most important strengths and the most important weaknesses, and build a strategy to address those.
We don’t need to deal with every competitor, and we don’t need to deal with every strength and weakness. Just address the biggest strengths and the biggest weaknesses for you and the competitors. We need to build a strategy to address those weaknesses if they’re ours, or to take advantage of our strengths if we have them.
How we do all this in the funnel plan…
The competition is an important part of strategy. First question though, remember I’ve asked it a couple of times today, do you even have any competition? If you don’t then you’re probably going to want to hide the competitive analysis. Just use that in the funnel plan as a general note section.
Now let’s assume that you do have competition and that you want to rate and build a strategy around it. Go to the competition section and enter the names of your competitors. Then you’re going to rate each of the competitors on each of these factors, one factor at a time. Start with share then move on to USP.
The sensitivity indicator lets you work out ‘do I want to think of only three or four strengths and weaknesses, or do I want to ten or fifteen?’ You can adjust this sensitivity so that it only shows you the greatest strengths and weaknesses. Fiddle around with that until it looks about right and you’ve got a meaningful number of competitive strengths and weaknesses to focus on. Remember, you can’t focus on everything. Then build a strategy.
Now, how do you translate your strategy into a plan of action? I’ll address that on another day but for now, may your funnel be full and always flowing.