Startups are all about resource optimization in an uncertain environment. They need to allocate time and money wisely in order to earn money quicker than they burn it. But most of the startups I have seen make the same single dangerous mistake... Let me tell you about it.
Young hires want to develop before they understand the competitive landscape. Then they build something nobody wants.
Startups hire inexperienced staff. And when you are young, enjoy coding, and are full of energy, you want to jump to project planning and product implementation according to “a vision” of the product/strategy. That’s a very, very big mistake!! Before defining the product, you need to understand the competitive landscape. Otherwise, you have a significant risk of building something that:
- does not match the market’s needs (because you have no experience in this area and are building something that does not match the current standards for your industry) ;
- Or, worse, is something for which there is no market (because there are free alternatives or the alternatives are thousand times better, etc.)!
One of the reasons why people do not analyze the competitions is, in my opinion, the fear of discovering that their product is not as good as their competitors’ product. But you cannot hide from reality — it’s better to face it and improve quickly or pivot your plan, if required.
Another reason is that they simply do not know how to analyze the competitive landscape. So let me help you on this one, by sharing a method that has worked for me.
|By Denis Fadeev (Own work) [CC BY-SA 3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons|
My method to quickly assess the competitive landscape
Analyzing the competition can be difficult, because you may not necessarily have a clear idea of who your competitors are, especially in an emerging market where all the actors are still small. But I think my method is gonna help you.
The strengths of this methods are the following: (1) it minimizes your effort to be notified of competitive changes thanks to alerts (2) it helps you identify competitors you do not know.
- (takes a few minutes) - Write down a description (just a few lines) of the competing product you are analyzing: name, price, function/main features, unique sales proposition — how you think it differentiates itself from alternatives.
- (takes less than 1 hour) - Write down a list of the main competitors’ products you have identified. Follow them on Twitter and set up Google alerts notifications for each and every one of them, to keep track of their announcements. Identify their key product managers on LinkedIn and see what they say about their product/company.
- (takes a few hours) - Google your product description and keywords. See if you can identify more competitors, browse their website to understand their positioning, size, and location. Set up Google alerts on them. Use visualping to watch their key website pages such as product features and marketing pages.
- (takes a few hours) - If your industry is already mature and you are competing against publicly traded companies, read their SEC filing/annual reports to understand their vision of the product and how they differentiate themselves).
- (takes a few hours) - If your industry features industry groups, attend one of their gathering to identify the key stakeholders. Try to talk with as many people as possible.
- (takes a few hours) - Regularly ask your customers: “Do you work with other partners/suppliers for this product besides us?” and “What do you think we should improve in order to satisfy your needs better?”
- (takes a few hours) - Report your findings broadly inside your company to ensure that everyone is aware of the market reality (of course, this is to be done in coordination with senior management). Do not waste your work by keeping what you have learned only for yourself. This means creating a presentation. Fortunately, there are plenty of good competitive landscape analysis templates in convenient PowerPoint formats.
|Top-10 startup mistakes. (credit: ipconfline)|
Do not analyze only your competitors: analyze the market!
In your competitive landscape analysis, it’s extremely important that you analyze the market too. You do not want to be in the all-too-common situation where your product is far better than the competition but you realize too late that the market is very, very small...
I recommend that you add the following items to your competitive landscape analysis:
- High-level estimation of the market size.
- Simple revenue projections to see if you would get sufficient revenues through this product
- Pessimistic market growth assumptions. I say be pessimistic here, because people are often unrealistically optimistic about market growth to justify working on things they like to do even when they do not make sense business-wise.
With these parts of your analysis, you are good to start working on your product roadmap, and you will see that your technical requirements will be much better aligned with the reality of the market than before.
Have fun, and if you liked this post, please share it. Thanks!