Sports Betting Hall of Famer Sue Schneider is back with more monthly insights from the world of startups. This time she delivers some tough love for founders who don’t do their research.
As we’ve been exposed to more startups at Defy the Odds in the past year, it sometimes amazes me that they often lack good competitive analysis. We can’t understate how important this is to your planning process, your deck and your mindset overall. It’s critical for every aspect of your strategy — from investment to positioning to getting to market.
Often, in some initial discussions, the product or service the startup is proposing sounds very familiar. We’ll ask if they were aware of this company or that company with a similar product and the answer, unfortunately, is often no. This is a disturbing response for a number of reasons.
Don’t set yourself up for failure
To be blunt, if you had money to invest, would you put it into a startup that doesn’t appear to know the industry they’re entering?
The competitive market analysis is critical to your presentation whether to investors, prospective customers or potential partners. When you don’t identify competitors, it illustrates to these key people that you don’t really understand the market and that would be viewed as a weakness in any SWOT analysis. It’s also a chance to identify similar types of businesses and differentiate what makes your product superior.
Looking at others’ products, strategies and competitive advantages will do nothing but help you refine the story you have to tell about your company. Sales, product development, marketing and pricing are all insights informed by who has walked this path before and who is pitching against you now.
If you don’t bother to understand competition, let alone analyze the ecosystem and your place in it, you’re losing a lot of opportunities. This exercise helps you make informed decisions on product development and pricing in particular as well as marketing. A robust review and competitive analysis should also include opportunities and threats which will help avoid costly mistakes. That means that you could be passing up prospective partnerships with companies that may be complementary.
Learn from the mistakes of others
And, of course, if a competitor is very similar, you need to give even more attention to discussing what sets your product or service apart. This could be pricing, speedy integration, legality, additional product features or other items that should be pointed out in your presentation materials.
Many startups don’t even bother to understand what they are up against now or what has succeeded or failed in the past and why. This takes some research by the founder and his or her team but it really is important. Perhaps there was a company similar to the startup’s that went belly up in the past.
Rooting around to find out why so you don’t make the same mistakes is very important. You can make your own new mistakes but learning how not to repeat a failing history of another company will save you a lot of time and money, as well as your investors’.
It’s also critical to keep that competitive analysis a dynamic document. Keeping up with industry newsletters is key to staying informed on insights into competitor strategies, market trends and customer preferences. Our industry is always changing and adapting with both new products as well as ongoing regulatory changes so staying on top of that news is very important to making adaptations to your analysis and finding new opportunities.
Ongoing conversations with customers and investors, whether current or prospective, are key to this as well. What attracts them to your competitors? Are their needs being met? These questions should be part of your conversations so that you can continue to adap. If you’re looking to build a position in the industry and keep it, this ongoing process should be built into how you’re developing your company.
How to approach competitive analysis
The U.S. Small Business Administration had some basics to offer on the topic of competitive analysis which should include:
- Market share
- Strengths and weaknesses
- Your window of opportunity to enter the market
- The importance of your target market to your competitors
- Any barriers that may hinder you as you enter the market
- Indirect or secondary competitors who may impact your success
There was also a good article on LinkedIn on the topic from Pablo Cruz Pou.
The author’s main advice is sound regarding what’s included in a competitor analysis framework includes:
- Business & Company metrics: 1.1. Company overview 1.2. Funding 1.3. Revenue & customers
- Product: 2.1. Product features 2.2. Pricing 2.3. Perks 2.4. Technology
- Customers & awareness: 3.1. Share of Voice 3.2. Sentiment 3.3. Key topics 3.4. Geography 3.5. Social media platforms
- Marketing: 4.1. SEO 4.2. Social media 4.3. Advertising 4.4. Influencers and other partners 4.5. Content Marketing 4.6. Customer acquisition 4.7. Sales 4.8. Customer service 4.9. Unique strengths
Again, it takes some research time but you can find this easily through LinkedIn, Crunchbase and other readily available resources. But, you need to have the will to make this an ongoing dynamic part of your company planning. It’s a must.
