When to Pay Attention to Competitors

Startups get conflicting advice about how to deal with competitors. Well known advisors recommend “use your competitor’s products every day” and others mandate “define your point of view, chart your course, and ignore the competition.” The best approach is a balanced implementation of both schools of thought. The key is to know when to shift from the first strategy to the second.

As a startup founder I know all too well the “push / pull” competition tracking can have on staying to true to a vision, versus realizing that another team might have figured something out before your team did. And all the distraction that ensues reacting to every competitor’s market moves. I realized I was falling into the trap of paying too much attention to what the competition is doing and losing focus on our core ethos.

hypecycle-competitorsAn “easy” rule of thumb is to correlate competition tracking efforts to the stage of the business. The Gartner Hype Cycle is a visual way to correlate when to track competition as your project matures from the “Innovation Trigger” to the “Plateau of Productivity.”

New products enter a market that is either just forming or already established. Rarely a startup defines a brand new market. The norm is an existing market where a startup will use some advantage it has figured out to disrupt the competition. This is Stage 1 in the graphic. For this stage the startup needs to be aware of the players and ensure there actually is a market. Except for the rare moment when a startup creates a market and there is no existing competition, a startup should want to see “some” competition otherwise the team may be creating a product with no customer demand. An early stage investor pitch always needs to describe the competition and how they will be disrupted.

After accelerating past the “Innovation Trigger” stage stay true to the vision and loosely follow the competition. And don’t get too wrapped around axle adjusting the mission / strategy to what the competition is doing. Pay attention to mega trends but not the “ticky-tack” feature moves.

Start dedicated competition tracking as the business enters the “Plateau of Productivity.” The company is larger at this stage with dedicated product managers and marketing managers. This is the time to pay more attention to the other players that survived the journey to the “Plateau of Productivity.” Tracking competition in a commodity market means reacting to price changes, stealing customers from the competition as opposed to recruiting net-new customers, and more entrenched feature warfare.

A real-world example is to study Amazon Web Services. In the early years 2005-2010 AWS charted their own course ignoring all perceived or actual competition. But today AWS reacts to Azure and Google Cloud as “the cloud” has entered commodity status with a handful of providers.

Summary: Early stage startups should stay true to the vision and point of view and pay scant attention to competition. Later stage companies should start dedicated competition tracking as the market becomes commoditized.