Competitive Juices

Whatever the motivation, be it insomnia, perversion, or ADD, if you are a regular reader of my Musings, you know that about the only three things I care about when crafting a company’s strategy or assessing a company’s probability of success are the three Cs:  Customers, Competition, and Chemistry.

Over the past few months, Tom Garland has performed an excellent (if somewhat fishy) job of identifying techniques for rooting out and validating pain points with-in potential customers to ensure that there is someone out there who will allocate scarce budget dollars to buy whatever you are concocting.  In the next few Musings, I want to expand this to talk a bit more about how to ensure they’ll buy your widget rather than someone else’s.   In other words, how to assess and beat the competition.

When thinking about competitive situations, I tend to put companies into one of five scenario categories:

1)      There is no direct competition.

2)      There is direct competition, but they are rarely seen at the sales level. 

3)      Competition is fierce and comes from many different angles.

4)      Competition is fierce but has narrowed down to one or two other players.

5)      Competition is unseen.

For a successful company, these five scenarios actually align well with the phases of lifecycle development of a high-tech company and the market it participates in.

Most marketing and competitive strategies focus on techniques related to Scenarios 3 and 4 above, where the competitive issues are most apparent.  I have some thoughts to add when in these situations as well.  But to add context, I’d like to go through each of these scenarios (or phases) in sequence.

Scenario 1 – No Direct Competition

Not every company experiences Scenario 1.   Scenario 1 occurs if one of the following is true:

a)      You’ve identified a new and emerging pain point that others haven’t, and have been clever enough to build a viable solution to gain the early lead in the market – a lead that you hope will result in market domination as the market expands and rest of the world tries to jump on the bandwagon later. 

b)      You are addressing a small niche that nobody else cares to invest in. 

So, if you truly believe you have no competition, it is necessary to step back and determine whether that is because you are in state (a) or (b).  What you do next depends critically on that assessment.

Let’s take the high road and assume that you are in state (a) above.  You’ll have a sense of that because the large majority of people you identify who are experiencing the emerging pain point are buying your product with price or ROI proofs rarely seen as a buying obstacle, and competitive comparisons or bake-offs never occur.  If it doesn’t seem eerily easy at this stage, you may not be in state (a).  Sorry about that. 

But even if you are in state (a), you don’t want to be in the Scenario 1 phase for long.   Although it sounds perverse, the main thing you need to do is if you are in this state is create competition.  Buyers hate to feel that there is only one solution out there or that they are veering from the industry trend in some way.  They need to see other people recognizing and addressing the same issues that they see.  And the way they address it can’t be just by buying products from you.  Markets rarely expand if there is only one vendor out there educating the market and if there is only one choice once customers “get it.”  Early on in the development of a market, owning 50-75% of a market is better than 100%. 

Competition can be created in two different ways, and you’ll probably want to do both.

First of all, competition will naturally be fostered as you pursue your main marketing imperative when in this Scenario - market pump-priming.  Most of your marketing energy will be devoted to educating the market on the needs, and of course, solutions (which you happen to sell).  You’ll need to be comfortable with educating other vendors at the same time you are educating customers because there is no way to avoid that.  If you are successful at creating a sense of momentum to your market space, this will result (later) in the creation of companies building competitive products and coming after you as the well understood and visible pioneer.  So be it.  That is actually a good thing for you.  You just need to make sure that your product, after several releases, hardened by field use, and shaped by real customer feedback, is a better choice than the newbies as they bring their 1^st release products to market later.  Simple, huh?

But this is actually doable because for a period of time you “own the microphone” in terms of educating the market.  As you do that, you need to set the criteria for solution quality that best fits your positive differentiators and try to minimize the value of anticipated competitor differentiation – even before anybody else has brought anything to market.  Obviously, there is some guess work involved in pulling that off.

Another trick is to foster the sense that customers do have options by identifying for them a method or two that they could pursue to address the issue without buying you or any other shrink-wrapped solution.  This usually involves some kind of system integration, usually with a hefty amount of custom coding or scripting and probably some manual management operations.  By putting this alternative approach out there, you get to show that you understand the issues and can conceive of alternatives – perhaps having implemented them yourself in a prior life which led you to the concept of your product.  It should be pretty easy to articulate the virtues of your solution vs. this approach.  Hence you’ve created your own competition that you can easily defeat. 

But the real key of course is rapid capture of customers, truly meeting their needs, and then feeding off the reference-ability that comes from that. Tied to that is channel development and lock-in. 

Scenario 2  - No Competition Reported By Sales

More often than not, there is some existing competition.  But many is the time I’ve met with (or led) teams that could articulate the capabilities and messaging of competitive choices down to the color palette of the bezel, the version of merchant silicon used in their design, and the draft version of emerging RFCs supported, but whose sales teams reported rarely running into the competition at the customer level.  This is not “we have no competition,” but  instead “we never see the competition in the marketplace.”

There was a time in my career when I thought this situation was very odd.  I always felt I was being lied to or the team had their heads in the ground.  But now I recognize this is a common symptom of a very specific phase in the development of new markets.  And that phase is when several vendors get started at roughly the same time (which is very common), and the market opportunity is much bigger than their combined sales/channel bandwidth.  Typically the emerging market may presently only be about $25-100M in size, split between 5-10 leading contenders.