Big companies with products in established markets worry about the competition. In fact, at the larger companies I’ve worked at we’ve had entire teams dedicated to figuring out what the competition was up to. Startups on the other hand often spend way too much time worrying about the minute details of features and functions that their competitors deliver. In my opinion the only way that startups should look at their competition is through the eyes of their customers.
Customers Will Give You The Big Competitive Picture
In the very early stages of a startup looking at competitors is a distraction from the job at hand, which is figuring out if your offering is a fit for a particular market. If the focus is on customers, you’ll hear first-hand what customers see as the alternatives to your offering. This list usually will contain a couple of companies, along with some more difficult competitors like “do nothing” or “build it ourselves”. The list is interesting because it tells you what category your customers place you in, what budget they will pull from to buy you, what existing products they might replace with yours. It doesn’t of course tell you what exactly to build.
The Small Stuff Doesn’t Matter for Startups
In mature markets many products get bought based on nothing more than company reputation (including the customer’s history with that company) and a feature/function checklist. Almost by definition, startups don’t make it on the list and if they did, they would lose the checklist war. Less mature markets are a whole different ballgame – reputations matter less and the checklist changes all the time. Startups can bring a whole new approach (a new business model, a new way of solving the problem, new economics or a new something else) that makes the checklist irrelevant. For most startups, your offering will have to be so obviously differentiated from what’s in the market today in order to be successful, it won’t matter what little features and functions your competitors offer. Sure, you’ll have to watch them to see how they react to your approach but they likely won’t even notice you exist until you have some traction in the market. They won’t notice because they are spending all their time looking at what their competitors are delivering and making sure they stack up well in a checklist.