In business school I took an entrepreneurship class that was taught by a prominent venture capitalist. On the first day he puts up a slide showing the survey results of 500 startup investors:
The question: What do business plans and/or pitches you see fail to do most?
The answer: Provide a detailed and complete competitive landscape.
Entrepreneurs are great at conveying their product design and management team when presenting their pitch or writing their business plan. However, when the time comes to discuss the competitive landscape of their industry, investors are often left wanting more.
Why should I perform competitive analysis?
The simple answer is to be able to explain why customers or investors should choose your product or company over the alternatives. The more nuanced answer is that a solid competitive analysis sets the foundation for your business strategy. Doing the research helps inform you on:
- Which product features to prioritize
- How to create brand messaging that stands out
- Choosing the best pricing strategy
Take the holistic view
I think a lot about the opportunity cost of potential customers when helping clients understand their competition. Taking this approach means you are also considering indirect competitors in your analysis.
For example, I have a client launching a new Edtech product that matches experienced school educators (principles, teachers) with other educators looking for virtual professional development. This platform helps experienced educators make extra income while providing newer educators with affordable and accessible professional development options.
For this platform to work, experienced teachers must be willing to use their free time to coach other educators. Educators looking for professional development also need to determine that my client’s platform provides the best value for their money. When considering the opportunity cost of my client’s potential customers, we classify a competitor to be any company that:
- Wants the free time of experienced educators
- Provides professional development to educators
Tactics for performing competitive analysis
You can learn a ton through internet research. Below is a list of my favorite tactics:
- Look at their website: This is obvious, though still worth mentioning. The first thing I look for is their pricing information.
- Read old news articles on your competitors: A great way to learn about why founders started their companies. Typically the language founders use in telling the story of their companies is similar to how they position their brand.
- Analyze Quora: Quora has become a place where companies respond directly to customer questions or challenges. Very interesting way to learn how companies position their products.
- LinkedIn / Indeed / Other job sites: A great way to see what your competitors are hiring for. For example, if they have a lot of sales positions open, they are most likely preparing for growth.
- SEO tools: There are a ton of tools out there. Irina Weber has compiled a good list, so I won’t reinvent the wheel here.
No matter how robust your competitive analysis is, it isn’t the end-all / be-all. You should still test assumptions and talk with customers. However, with a solid competitive analysis in place, you will feel confident talking about how your company and/or products differentiates from the alternatives in the market.