Don’t believe anyone who claims that they don’t look at what their competition is doing. Agreed, there’s a fine line between doing a healthy amount of competitor analysis and being completely obsessed by what the competition is doing but I believe it’s important to understand how your product differentiates from similar products.
Competition is good. Product isn’t a zero sum game and it’s important to understand the competitive landscape that you operate in and to figure out your product ‘niche’. I try to do a competitor analysis of some form or other on an ongoing basis, as your competitive landscape is bound to evolve.
Before delving into ways of analysing competitors, let’s first look at the ‘what’ and ‘why’ of competitor analysis:
- Understand where your product fits – Reviewing competitors helps to understand where your product sits within the market, analysing and comparing on aspects such as features, price, perceived benefits, etc.
- No need to look at ALL competitors – Realistically speaking, it’s impossible to keep up with all of your – direct and indirect – competitors, all the time. When you narrow things down, you’re likely to find that a small percentage of companies in the market either scoop up most revenue or are direct competition in your specific market segment.
- Treat competitor analysis for what it is; valuable guidance – Instead of getting obsessed with your competitor(s), get obsessed with your customer! I can only refer to a quote from the wise Sun Tzu in “The Art of War”: “If you know the enemy and know yourself, you need not fear the result of a hundred battles.” I find it very helpful to understand the competitive landscape and the position of my product or service in it, without becoming completely distracted by the features a competitive product does or doesn’t offer. You don’t want your competitors to dictate which features (not) to include, and cause ‘featuritis’ as a result!
- Find the perfect niche for your product – The likelihood is that your product will be targeting the same customers that other companies and their products are already serving. Your product needs to be exceptional and differentiated enough for customers to consider switching. Look at the market and ask yourself: “are we solving the same problem, but differently?” or “are we tackling a different customer problem altogether?”
Now, let’s look at some common tools you can use to analyse your competition:
Fig. 1 – SWOT analysis
The SWOT analysis is probably one of the more traditional ways of studying and comparing competitors. It might be an older method, but SWOT still holds true and is a tried and tested way of understanding your competitors:
- Strengths – Specific characteristics and attributes which give a company competitive advantage. For example, one could argue that design, brand, a loyal customer base and innovation are key strengths of Apple.
- Weaknesses – Specific characteristics and attributes which reduce the competitive strength of a business. For example, major debts and inadequate online presence hinder lots of today’s retailers to compete effectively with Amazon.
- Opportunities – Advantageous situations or circumstances that can create new competitive power for businesses. Think, for example, of entering new geographic markets, new customer segments or new product opportunities.
- Threat – Disadvantageous situations or circumstances which can hamper companies in their ability to compete. For instance, I expect ‘Brexit’ to hinder UK companies in attracting talented new recruits or operate globally.
Fig. 2 – Kano analysis
I’ve written previously about conducting a Kano analysis as I find this method very helpful when looking at the competition from a customer point of view. Understanding what the “basic needs” and “delighters” are in your market, will help understand:
- The position of your product – Understanding where a product sits vis a vis customer expectations.
- Which battles (not) to pick – Where do you want to play and what will you playing for? Are you happy to just focus on so-called ‘hygiene’ factors or do you want to focus on more uncharted territory?
- Potential product opportunities – Where are the opportunities for improved or totally new products, and why?
Fig. 3 – Ash Maurya’s “Lean Canvas”
Plenty of companies use Ash Maurya’s “Lean Canvas” to better understand your product and market, which is great. In addition, you can also use the Lean Canvas framework to compare and contrast competitors. For example, what’s the dominant channel of companies X and Y, and how does their path to customers compare to yours?
Direct customer feedback
My favourite way of analysing competitors is to hear directly from customers. For example, when I worked at a digital music service, I ran sessions simply observing people using the likes of Spotify, Rdio (which died a few years ago) and Soundcloud. This way, my colleagues and I could learn first hand about how people felt about our product in comparison to the competition.
With digital products and services, it’s harder to do a traditional “bind product test” but you can still observe and listen to people testing different products which are all trying to solve a similar problem. People will tell you why they think product A is better than product B, especially when you make it clear that you don’t have an allegiance with any of the tested products!
Fig. 4 – Blind product testing – Taken from http://www.bloncampus.com/columns/fundamental/why-blind-testing-is-important-in-product-research/article7976927.ece
5 Forces of Competition
Fig. 5 – Michael Porter’s “Five Forces of Competition”
I can imagine that you might have come across Porter’s “5 Forces” before. Like the SWOT analysis, the 5 Forces approach is a longstanding one which helps companies understand their sources of competitive rivalry and which factors they need to concentrate on in order to gain the upper hand.
Main learning point: Don’t shut your eyes and avert looking at the competition! Equally, don’t get freaked out by competitive products or services. Instead, analyse the competition to get a better feel for whether and how your product differentiates. You can then use these insights to focus more on delivering customer value and creating strong points of differentiation.