Studying your competition is an ongoing pursuit in the entrepreneurial context. It is not something you do sporadically. Throughout the venture realization process, you identify and monitor all major and emerging competitors. You determine their strengths and weaknesses and consider how they will react to every one of your strategic moves. What some call competitive intelligence will be an ongoing process for you as an entrepreneur and business owner.
These “competitive intelligence” activities have always been important, but they need to keep up with your competitors is ever more critical in today’s business environment. There are many reasons for this, including more “educated” customers and competitors with greater access to product performance information. Intuitively, you already know this. You take advantage of the extensive and inexpensive product information as an integral part of your purchasing behavior.
As noted in the post about market sizing, similarly, there are several points within the venture realization process where you have the opportunity to learn about the competitive landscape. I will describe a systematic approach to investigating your competition. The approach changes as your venture develop, expanding in both breadth and depth of investigation and monitoring activities. I break competitive analysis activities into three stages: Pre-Screening, Deep Dive, and Post Launch. Within each step, the competitor analysis level expands and the amount of effort you will need to expand on these activities. This article focuses on the pre-screening efforts.
Let’s begin with the early pre-screen activity, as you weigh whether your venture idea is the right opportunity for you. During the pre-screening stage, you incorporate high-level investigation on firms providing your target customer with solutions to their problems. As you list all the assumptions you have about your customer and their experience with a particular problem and its solution, you should assume that there are solutions out in the market.
The first step is to discover the solutions serving your target customer through research on the Internet and early discussions with your network. You want to be armed with this list as you begin your customer discovery interviews, listening for which competing solutions are recognized, used, and purchased by your target customer. There are several reasons for spending time learning about solution options your customer has in the marketplace.
This early investigative effort may serve as a “reality check” for some founders. Quite frequently, founders start to assume that their proposed product solves a significant problem and does so differently than any other offering in the marketplace. Both these assumptions are enormous leaps of faith, but the second one is rarely valid. As you conduct more market research, you quickly learn that there are always optional ways of solving a problem, and this is something that you want to learn more about by interviewing customers. Learning about current competitors early on also prevents what sometimes can be a very unpleasant surprise. I have watched many founders discover a competitor out in the market offering the exact solution they are developing. I have seen occurrences where the competitor’s venture name is precisely the same. The later in the venture realization process that this happens, the more discouraging it may be for the founding team.
Another important outcome of the pre-screening process is identifying early all solutions that your target customer may be applying to solve the problem in question. These optional solutions are either direct or indirect. For now, think of direct competitive solutions as solving the problem exactly or similarly as you are proposing. An indirect solution solves the problem with a different approach than your conceived product. As you dive deeper into market research and customer discovery, you will see how satisfied the customer is with various solutions and the advantage they may have in the market.
Understanding the relationship between the importance that the customer places on solving the problem and how satisfied they are with current solutions will help you identify gaps in the marketplace for you to exploit.
There are several research strategies that you can use to find your direct and indirect competitors. As a starting point, this is an excellent time to identify the industry or industries that your venture and competitors best fit. Sometimes this is not as easy as it seems. Start by looking at the North American Industry Classification System – NAICS. https://www.census.gov/naics/?input=bicycle&year=2017. Updated every five years, the database is comprehensive, providing classification and data by business establishments and economic activity. While the search can be overwhelming at first, stick with it. It will reward you with a better understanding of the competitive landscape and businesses that provide direct and indirect offerings.
Let’s look at a couple of sample startup ideas – a new Brazilian Nut Milk product and commuter e-bike venture. There are several categories associated with the manufacturing of dairy and non-dairy products. Just a quick review provides several keywords that facilitate your search for current solutions. Would you have looked up fluid milk substitutes before checking this database? The milk substitute market is expected to grow to $27 Billion by 2022. With this keyword, you will start to understand the major and emerging competitors in non-dairy beverages and alternatives made from nuts, grains, and legumes. The NAICS site gives you a start by providing top businesses’ profiles by annual sales for a specific code.
The last NAICS update was in 2017, so e-bikes or equivalent are too recent to be represented. But there are straightforward bicycle and motorized vehicle classifications that will give you plenty to consider. For example, Trek, a major e-bike retailer, is classified under ‘Sporting Goods Stores”. You can then look up Trek in any number of financial information sites, such as Dun & Bradstreet, and find their major competitors. Additionally, these classifications also give you a head start understanding how the supply chain companies such as bicycle manufacturing and parts are defined and how to explore the current market ecosystem.
A second strategy that can support your search for competitors is to apply keywords that describe your venture and see which competitors emerge from the search. This keyword search is a valuable activity in its own right as you can begin to learn what keywords your competitors are using to describe themselves, giving you insight into their marketing strategies. I use Google Ad Keyword Finder is a good starting point. You can quickly see what keywords are related and popular quickly leading to competitors’ exact keywords. For example, I used Keyword Finder to search for associated keywords to our earlier NAICS term, fluid milk substitutes. One of the most popular keywords was non-dairy milk substitutes. A quick Google search of non-dairy milk substitutes led to a list of top 20 selling brands of milk substitutes, sorted by revenue. When I searched for e-bikes, several competitors popped up as high monthly searches, including Trek, Rad, and even Harley Davidson ( a recent entrant to the e-bike market).
Another quick research method to help search for competitors at this early stage is to take one of your known competitors on Linkedin. Go to the company page and then scroll down to similar pages. Most likely, you will find a substantial list to review. Check out Oatly and Trek and see what you discover.
Preliminary Research on Existing Solutions
During this early pre-screening competitor analysis, you can look for competitors from a product category perspective. This analysis broadens the lens to include potential solutions that your target market may consider optional solutions. What should this early competitor research look like at this pre-screen stage? I find it helpful to start with product or service level research. Begin with the most specific product offering and see what competitors are offering within the same customer segment, essentially the same product as you are considering. So if you are thinking about building a business that provides an organic milk beverage made from brazil nuts, are there any firms offering brazil nut milk? Want to create the latest e-bike for urban commuters? Then, start by looking for all e-bikes currently provided as solutions to people who cycle to work.
Once you complete your review of similar product offerings, expand the search for optional solutions that may also fit the customer’s needs. If you are creating this new Brazilian nut milk product, you may want to look at rivals offering nut-based milk products, in general. This list includes companies that provide almond or cashew milk, as an example. From here, you can look for any competitive milk products that serve your target customers’ needs with similar attributes and features. If you determine that your target customer is looking for ways to add protein and calcium, you may broaden your search to include other milk products such as yogurt or kefir drinks. For commuting e-bikes, you can expand your search to include non-e-bike alternatives, such as road, hybrid, or gravel bikes.
The above analysis focuses on direct solutions, solving customer problems with similar functionality and attributes. By broadening the lens further, you can move to products that solve the customer’s problems with a different approach to functionality. Direct competitors solve the customer’s needs with another product or service other than what you plan to offer. If the customer is trying to add protein and calcium to their diet in our milk example, they could select from other products with similar outcomes, such as drinks or calcium-fortified drinks. For commuters, maybe they can look beyond the bicycle category and explore mopeds and scooters.
At this stage, I suggest that you list all the competitors you can find offering products from the above three categories, the same product as your venture, within your product category, or offering products that fill customers’ needs more generically. For each competitor, list product name, brief description including features attributes, and pricing information. Additionally, keep their website and other social media information readily available for future research and monitoring. Consider categorizing each competitor as either an established firm or a new entrant. This designation will help you predict what actions various competitors may take once you enter the marketplace.
The above preliminary research efforts should give you a reasonable understanding of the current competitive landscape. There is much more you can glean from a deep analysis of each competitor. The following post will continue to explore how to conduct a deeper dive analysis of your competitive landscape and apply the results to your market entry strategy and plan.
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