A summary of my personal experience and our firm’s perspective on what practical steps early stage startups should take for competitive intelligence.
Competitive Intelligence for Bootstrapping Startups
For the last 16 years, we have worked almost exclusively with bootstrapping startups. I enjoy working with entrepreneurs and helping them understand how prospects and customers view their product in the context of available alternatives.
We see teams make two basic mistakes
- An overly broad definition of their “circle of competence.” When they narrow their focus to capabilities they can execute with distinction; they chase fewer opportunities that they are unlikely to win. In addition, their thinking shifts away from “everyone is a competitor,” and they are able to partner with a broader set of players.
- Looking at things as zero sum instead of win-win, not only with customers but also partners and even potential competitors. The key to success, especially in early markets, is co-creating value and taking a smaller share of a larger pie.
How we analyze specific competitors
We will often analyze specific competitors and competitive situations to help our clients craft and execute responses. Once we have a shared understanding of the current landscape, we forecast the likely evolution of existing and emerging technologies and business practices. We work primarily with software startups, so we are less focused on cost and margin questions and more on features, services, and support. We help our clients answer the following key questions related to competitive analysis:
- What are likely capabilities that competitors can offer our prospects today?
- What promises are competitors likely to make about the near term evolution of their offering over the next six months to two years.
- What technologies are likely to mature in the next six months to two years that we should be evaluating? What can we use internally to increase productivity? What may enable product or service differentiation? What will we need to counter–or at least match–if our competitors adopt it?
- How can we craft offers that will be difficult for competitors to match? In particular, because they lack a critical capability that we have, or because our offer will cause problems for their business model.
- Win/loss analysis: why did customers choose us or choose a competitor? This is probably the most significant source of insight for a startup. We interview customers to glean as much as we can about their decision criteria and process. We also interview prospects who decided not to select our client’s offerings to understand their thinking as well.
- Battle cards: what is the best posture to adopt and the best offer to make when we know we are up against a particular competitor? Based on an analysis of the customer’s situation and needs, we ask three questions. Where should we compete to win because we have a better set of relevant capabilities? Where should we gracefully disengage because the competitor is a better fit? Where should we engage to learn more?
- What are likely hypotheses that can explain a complex, fluid, or rapidly evolving situation? Given this list, we can use “analysis of competing hypotheses” to craft probes or discovery efforts to determine which hypothesis is the most likely.
Trade shows and conferences offer insights into the competitive landscape
What’s the best way to take advantage of a trade show or conference? We find trade shows to be a useful source of competitive insights and always have a scouting plan for those we attend.
- Study the attendee exhibitor list and floorplan: research potential partners and competitors before you set foot in their booth. Time is at a premium during the show. Preparation in advance allows you to start the conversation with probing questions instead of basic ones that ten minutes on their website could have answered.
- Before the show spend some time checking out exhibitors’ websites. Especially if you are not familiar with the company and believe it may be a new entrant. We build a spreadsheet the lists products, headquarters, funding, and other key metrics for each exhibitor.
- Walk the show floor. For a large show, this may take two or three multi-hour blocks of time. You can learn a lot just by keeping your eyes and ears open, reflecting on what you see and hear, and working out the implications.
- What are your competitors telling their customers and prospects about their capabilities and intentions? You can learn a lot about a competitor’s strategic intent by reading what they have written and hearing them speak–live or recorded. Pay attention not only to the substantive content of a talk but also the world view they communicate.
- A visit to a competitors booth will often give you a chance to see a new demo that’s not yet up on their website. Act like a considerate guest and don’t get in the way of them speaking to other potential prospects. Always identify yourself if asked.
- Look for innovation in the smallest booths. These are typically located on the periphery of the show floor where there is the least traffic. Other startups can make good partners if you are both careful to align your interests and shared incentives, and require as little additional work as possible.
- Study the conference program and research the speakers to uncover potential partners and competitors. Attending a talk allows you to speak to someone afterwards who may otherwise be very hard to reach. A follow-up email that references their presentation is much more likely to get answered than a cold email. You don’t always have to be there in person: many talks are now videotaped and made available to non-attendees.
- Watch for interesting birds of the feather meetings. Often they will have the most insightful discussions of the whole show!
Counter-intelligence: stealth, ambiguity, masking
In addition to trying to discern competitive offerings and competitor intent, it’s worth spending some effort to make your capabilities and intent harder to discern by competitors. The challenge is balancing the need to protect key learnings and other trade secrets from competitors with the critical importance of leveraging your know-how to maximum advantage in engaging prospects and supporting customers. Unless your know-how is part of a suggested or offered standard in an area where you are attempting to collaborate with competitors instead of competing with them, there is little reason to share it with competitors.
- Offer an estimate of the likely benefits of your solution on the prospect’s business, but focus on inputs and outcomes, treating the core of your offering as a “black box.”
- Prospects who focus on how you do something vs. the results you can promise are much less likely to buy–unless they are concerned about a particular constraint or objective that depends upon your method.
- In an actively competitive situation, for example, you are responding to an RFP, dueling demos, or parallel proof of concept evaluations, the reality is that whatever you tell a prospect is likely to leak to one or more competitors.
- You need to codify your discovery and diagnosis capabilities so that your team operates consistently. But there is no need to disclose an entire discovery checklist to a prospect: only ask the critical questions that are directly relevant to their situation and needs. You can offer a few key questions in writing in advance to demonstrate your understanding of the basics of their situation, but it’s better to do most of the discovery in a conversation.
- It’s not the fastest measure-learn-build loop that wins, but the most effective in a competitive situation. If your next product iteration does not offer a compelling alternative or meaningful differentiation for at least a subset of your prospects, bringing it to market quickly will waste time, effort, and opportunity cost.
There can be a strong temptation to lie or mislead competitors–or to lie to or mislead prospects about competitors. I always assume that everything I do will become known. There is a quote by Jordan Peterson I find useful for sales and negotiation situations
“Tell the truth. Act so that you can tell the truth about how you act.”
Related Blog Posts
- Q: How Much Attention Should I Pay To Potential Competition?
- Erecting Barriers to Competition That Are Difficult to Duplicate
- How To Determine Your Competition During Customer Discovery
- Terry Frazier: How to Do Real Competitive Analysis
- Challenges in Analyzing Market Structure and Competitive Landscape
- Be Wary of Competition That Cares Deeply
- Extracting Insights From A Competitor’s Software Demo
- Planning and Reflection: OODA Loop is More than Speed
- Verify Your Market Insights Against A Variety of Information Sources
- Honesty in Negotiations
Image Licensed from 123RF: Copyright: Anton Lebedev