Startups normally think of competition as “the other companies doing what you do”. They watch their launches, make sure their features at least match, and compare pricing to them. These are the who you focus on, and dream of crushing. They are your closest competition.
It’s a romantic thought: you’re similar yet different, both scrapping it out to win the market. You may even know the other teams personally. When customers compare the two of you, you want to come out on top. It’s Uber vs Lyft, Netflix vs Amazon Prime, QuickBooks vs Xero.
But as a startup, your closest competitors are rarely your real competition 🤔
Your real competition is what your customers do today, that you will replace.
Reed Hastings of Netflix said that Netflix “competes with everything you do to relax”. Their competition wasn’t another streaming service or Blockbuster, but more commonly having a bottle of wine, or going to bed early.
At the beginning, any category-defining company is competing with other categories. Spotify competed with CDs. Uber competed with regular taxis. Wikipedia competed with looking things up in physical books.
As a startup, it’s imperative to find out how your customers solve their problems today. The most common real competition is:
Someone does the job themselves manually. They do this when it’s important, but hard
Use WhatsApp/email/spreadsheets/docs to hack a process. They do this when it’s important, but not hard.
Nothing. They do this when it’s not important problem to solve.
Only once you understand your real competition can you effectively build what customers need, and communicate that to them.
If they solve your problem manually (a job they do themselves, or hire someone), then focus on how much time you can save them. It takes a while to build a product better than people can do manually, so start by showing you offer a “good enough” solution with minimal time required.
If they use spreadsheets and docs to hack together a process, then show how your solution is more powerful. It will probably still require manual work at least at the beginning, but you can help them achieve much more with that effort.
And if they don’t do anything to solve your problem right now… it’s a hard sell. Consider that they might not have the problem you’re solving, or it might be not that important to them. If you’re convinced they are, they just don’t know about it yet (insert Henry Ford quote), the category design is your friend here. Educate people on the fact that a new solution exists, and it just so happens to be yours.