Off to the Races, Part 5
In my prior installments on Running Out of Cash, Burnout, and Market Dynamics, I discussed how you could control the pace by making sound decisions based on actual data from customer interviews. By using a disciplined approach to setting priorities, you’ll quit spending on things that don’t move you forward.
The race against competitors is different.
Your competition isn’t limited to other companies. Start by understanding specific products aimed directly at your target market. During the market validation phase, you likely reached one of three conclusions: they had the problem you hoped for, didn’t have it, or wasn’t a big enough issue to warrant paying for a solution. “Your biggest competition is a customer doing nothing” (Bill Aulet, author of Disciplined Entrepreneurship).
Who are your competitors?
Most new founders jump straight to identifying companies as competitors. Start by looking at your potential customers’ products or services. How closely do those products align with your target customers’ needs, and how do they solve the problem?
Is your solution significantly better?
Your product needs to be significantly better for your customers to make the switch. If the customer has invested in an ecosystem that enhances the effectiveness of their current product, they are unlikely to pay to switch.
A long list of features won’t help.
Features that don’t directly solve your customer’s problem aren’t of value and will detract from your Customer Value Proposition. Founders in mobile tech often make the mistake of adding a long list of features hoping that some of them might provide an advantage. Know your customer’s needs and focus on solutions, not added features.
“If there is any one secret of success, it lies in the ability to get the other person’s point of view and see things from that person’s angle as well as from your own”
— Henry Ford
Rank your competitors.
Research the companies behind the competing products. Study them to understand how they went to market. What are they charging? Is their market still growing? What are customers saying about them? Dig up product reviews. Do all you can to know them as well as you know your own company. Learn from them.
“But I don’t have competitors.”
If you’ve set out to solve a real problem, you’re in denial if you think you don’t have competitors. How are you the only person to have recognized the problem? What are the odds that out of the millions of companies started annually worldwide, only you are working to solve it?
Consider the number of applications Y Combinator, a tech accelerator based in California, as an example. “Our batch program funded 750 companies in 2021 — the most in a year. The YC admissions team sifted through tens of thousands of applications, and the selection team, including all of our Group Partners, reviewed thousands of apps until our eyes blurred.” – YC Year in Review.
Now factor in the other 7,000+ business incubators and accelerators (university-based and private) operating globally. That’s just the tip of the iceberg – over 80% of startups evolve without participating in accelerator programs.
You have competition. If you think you don’t, you’ve misread the market. You should be more worried about not seeing competitors. If competitors are growing their customer base, you can assume they’ve already validated the market, and people are buying.
Where do you stand in the race against competitors?
If the products you’ve identified as your closest competition have been in the market for five or more years, your market might already be saturated. Entering an already saturated market is extremely difficult. Tesla was able to enter a crowded market with a unique business model.
Remember all those mobile phone manufacturers? Apple, then a personal computer company, repackaged several solutions that a vast and diverse market needs into a single, easy-to-use device. Each solution was already on the market (pagers, Sony Walkmans, digital cameras, and voice communications). Combining them into a single product changed the communications, music, amateur photography, and digital communications industries overnight.
Don’t waste time if the market is ripe for your product. Assume others are also working in hopes of filling the same need. Move fast, get a foothold in the market and innovate better solutions.
How will you catch up?
You might not be able to or need to. Don’t forget that over 90% of innovations are developed by startups that exit by being acquired long before most of us know about them. If you have a superior solution, keep pushing and consider an exit by acquisition or licensing as an alternative to competing with a large company with instant access to a loyal and huge customer base.