You’ve picked a problem to solve and you’ve identified the market. Great! However, did that preliminary Google search really yield no results? You must ask yourself, who is your competition?
Who is your competition?
Many entrepreneurs operate in a vacuum. They generally assume that their solution is undeniably better than anything in market and it blindfolds them from reality. You may indeed have the greatest product solving one of humanity’s biggest problems, but you cannot underestimate your competitors. Let’s take a look at how to define the competition.
Step One: Identify them.
Seems simple enough, but it may not be so clear. In fact, other firms are undoubtably approaching the problem from a different angle than you are. That’s why it’s so important to do exhaustive research on these companies before executing on your model.
Step Two: How do they create value?
Once you define your competition, you have to understand how they create value for their customers. What type of technology are they using? Are they B2C (business-to-consumer) or B2B (business-to-business)? How do they integrate with their customer? Are they a stand-alone product/service or do they require technical integration with an existing system? What is their sales distribution model? Do they use a lot of intermediaries to distribute their product/service (e.g. intensive distribution) or is their product available through a limited number of distribution partners (e.g. selective or exclusive distribution)? Go deep or go home!
Step Three: What is their business model?
Sometimes competitive business models are what really make products or services enticing. Perhaps they are a low-cost producer and offer competitive pricing to their customers. Maybe they offer their service for free for customers to “try before they buy”. Maybe they offer discounts for longer term subscriptions or service agreements. At the end of the day investors (cash earned) and customers (cash spent) need to know this information to make informed decisions about your product or service.
Step Four: How are you different?
This is the most important question you’ll answer for customers or investors. Once you’ve identified the competition and how they execute on their business model, you have to demonstrate how your product/service is different and superior. The easiest way to do this is to list general attributes (e.g. pricing, integration, etc.) and walk through points of differentiation with your audience. If you do this effectively, you’ll likely make a successful sale or pitch. Go get em!