No business operates on an island and no business is original or unique.
If you think you are, you are in trouble or protected by a massive bank balance or government license.
For the rest of us, we swim in a sea of competitors and every time they eat, we don’t.
Also, if you are not growing, they are eating your lunch, be sure of it. They might be doing it through product, service, business model or smarts.
Listen to Pavlo Phitidis unpack why knowing who they are and how they are doing matters in this podcast from The Money Show.
Competitive analysis and competition for the big 4 or 5 anything is easy. There is a tonne of data, they are incestuous and have no ability to protect IP and mostly they are listed with public information freely available. Think of any big bank, mobile network or insurer for example!
In the small and mid-tier business segment, besides the tens of thousands of competitors that we face up to daily, there is scant data to do a proper analysis and there are simply too many. So where do most of us begin?
Most of us start our businesses based on an interest, skill and insight. For example, if you are a petrol-head, love cars and develop insight and knowledge on cars, you are likely to find yourself in the auto industry. Perhaps the tyre industry. As you begin your business, you attend trade shows, exhibitions, and events. You subscribe to the TyreWeekly trade magazine. You even take a few courses on rubber and rims.
This creates for each of us a frame of reference against which we see your businesses, the industry and, how we grow and compete. In many ways, we become trapped, much like a person walking the same path daily for years eventually creates a ditch preventing you from seeing left or right. We lose the wood for the trees.
So, out of necessity we do a competitive analysis. We may go to a trade show and see our competitors with their products. In many cases, that competition is evaluated on a feature-for-feature basis. This leads to a feature-for-feature investment to one-up your products or services against those of your competitors. A better tyre, a coloured tyre or a different tread and for a while, you have an advantage, until your competitor has to respond and the battle begins again. It’s expensive and futile and everyone loses. The same goes for price. Competing on price is a never-ending battle until someone runs out of money. When they do, the price has been dropped to such a degree that there is little profit in the industry, making your daily grind, a grind.
If instead of seeing your business as a product, with a price, you saw it differently in relation to a customer, your competitive evaluation works differently and will give you a very different outcome.
It’s hard to get right because everything that moves, needs a tyre, right? If you only have a hammer in hand, everything looks like a nail. But, using this example, the tyre industry is full of differentiation. You have cars, used and driven by many different people for different reasons. The same with vans, trucks and lorries. You have industrial yellow metal, airplanes of different sizes and hundreds of different trailers. The list goes on.
Stepping away from a tyre and looking at your business as a customer begins a very fruitful journey. Since nobody spends anything unless it solves a problem (consciously or unconsciously), picking out 2 or 3 different types of customers in the tyre industry and then deepening your understanding of them takes you out of the product-price cycle and brings you into the problem-experience cycle. For example, in the grain farming industry, you have a few weeks that determine whether you will live or die based on your irrigation capabilities. Understanding that means that the big circular, mobile irrigation equipment has to work. If your tyres have been sitting out in the sun for months, cracking and weakening, and you need to irrigate, is there a cost that you would not pay? Understanding your business like that means you can better identify your competitors, evaluate them more closely and then add the features of service that will get you ahead of them specifically and directly.