"COMPETITION ANALYSIS? WE DON'T NEED IT!"
I often hear these or similar sentences in my work as a startup coach. In the pitch deck of startups in the early phase, it is noticeable that the competitive analysis section in particular is either completely missing or has been designed with little thought.
However, the competition slide is a standard component in every pitch deck template. You will often find a matrix with 2-5 competitors. These are compared with your own startup based on various characteristics (see example graphic). In principle, there is nothing wrong with this (or any other) presentation per se. If the comparison axes or categories have been worked out on the basis of a valid analysis.
Typical presentation of a competitive analysis in a pitch deck[/vc_column_text][vc_column_text]Wenn man als Startup Coach dazu allerdings Nachfragen stellt, erntet man häufig fragende Blicke. Völliges Unverständnis oder sogar eine leichte Empörung. Denn schließlich „sind wir die einzigen, die das (so) machen“. Und „Konkurrenz gibt es in diesem (neuen/ innovativen/ einzigartigen) Bereich einfach nicht“.
THE ADDED VALUE OF COMPETITIVE ANALYSIS FOR YOUR STARTUP
It is understandable why, as a founder, you are not keen to find out that you are perceived as being equal to or even worse than other offers on the market in some areas. But finding out exactly that is essential.
Because even for a Blue Ocean[1] and avoid the competition, it is first necessary to understand the current dynamics, standards and rules of the competition in order to make an informed decision about what you want to do differently as a founder. And despite wisdom such as "Obsess Over Your Customers, Not Your Rivals" [2], a basic understanding of who the competition actually is and how to differentiate yourself from it is necessary for your own self-image, communication with stakeholders and various strategic decisions.
A good competitive analysis and the associated positioning can offer particular added value for start-ups, even beyond the general advice that any kind of decision can generally be made better if it is based on solid information. This includes
- Building an understanding of the competitive environment,
- Inspiration (copying is allowed and also avoiding the mistakes of others),
- Basis for discussions with investors (clear positioning in the market and a good understanding of competitors and rivals impress in every pitch),
- Development of stronger, more competitive business models through a review of feasibility. For example, in the area of pricing and revenue models,
- Basis for dialogue with customers (you should always have the advantages and disadvantages of other offers available),
- Support in the search for potential partners and co-operations (because some companies that are initially identified as competitors may also offer themselves as partners).
THE PROCEDURE
DEFINE STARTING POINT, OBJECTIVES AND APPROACH
In principle, the purpose for which you are approaching the competitive analysis must be defined. For example, the general positioning or the review of the (or parts of the) business model, such as the pricing model. Furthermore, the framework conditions and the starting point of the analysis should be defined. For example: who is responsible for carrying out the analysis? Where will information be collected? Which market problem, customer segment and solution do I currently assume? This may well change as a result of pivots. And thus also change the competitive landscape in which the start-up finds itself.
FIND COMPETITORS AND RIVALS
The next important step is to identify competitors. Because there is no such thing as no competition. If you as a founder have the feeling that you are without competition, it is important to honestly question whether there is or can be demand for the product you are offering. Various lines of thought can help with identification. The most important competitor is the status quo of the customer, i.e. "how does the customer solve the problem today". But what else does the customer spend their money on or how else do they spend their time? Which companies are in the same industry? Do they use the same distribution channels? Do they have the same customer group or use the same technology? It is also interesting to know who could potentially become a competitor. Or which company has already tried to launch a similar solution on the market and failed (and why)?
COLLECT INFORMATION
Information must be collected on the identified competitors and rivals. Please note: this list is probably never complete and must be constantly updated. It makes sense to create a database so that you can refer back to it later. Every startup needs to think about how it collects information on the individual competitors: an internet search is quick and certainly provides some initial information, such as size, age, investors, customer segment and value proposition, but the information is not always complete. Insights gained from interviews with customers or (employees of) the competition are more time-consuming to obtain, but significantly more valuable. In principle, information should be collected on all components of the competitor's business model.
ANALYSE INFORMATION
Sharing and discussing the information obtained is helpful in order to derive insights from it. Analysing the information should lead to an overview of the competitive environment. It also helps to recognise existing standards, trends and critical success factors. It is important to keep an open mindset here. How to avoid a pure confirmation of already prevailing opinions. As well as recognising any new opportunities.
DEVELOP YOUR OWN MARKET POSITIONING
Based on the analysis, your own product and the start-up can be positioned and differentiated. Positioning must be clear and unambiguous. Whether this has been successful in individual cases should be checked with investors, industry experts and/or, of course, the customer. The distinguishing features must be chosen consciously. These should be:
- Being recognised by the customer
- Be important from the customer's point of view, and
- Not easy to imitate.
CONCLUSION
Analysing the competition is an unloved task in start-ups. This is because it requires considerable effort. It must be carried out carefully in order to achieve meaningful results. Used correctly, competitive analysis can become a useful tool for your start-up. It can be used to generate ideas, recognise competitive advantages and convince investors. In other words, an important building block for success!
Guest article by Nadja Hatzijordanou
Team leader and main contact person for the e-school