One of the biggest mistakes I see entrepreneurs make are thinking that they have no competitors. Not considering your competitors or deeply understanding where they are playing is like trying playing to play football with your eyes closed – you’ll either run in the wrong direction and/or get tackled head on by the opposition.
Every entrepreneur wants to believe their product or service is unique – a snowflake that the market hasn’t seen before. But in reality, even if you have no direct competitors, your customers are still considering alternatives products/services to your offering.
When analysing your competition you not only need to consider direct competitors but also alternative solutions:
A competitor is an organisation or business who offers a similar product or service to what you are offering. For example, a direct competitor to Netflix is Stan or Foxtel.
An alternative is the solution your customer is currently using to solve the problem you’re trying to solve. For example, an alternative to Netflix might be going to the movies or the theatre (other forms
For example, consider Southwest Airlines (USA). The problem they are trying to solve is to transport people from A to B. A direct competitor to Southwest Airlines is American Airlines. An alternative to Southwest Airlines is taking the bus or train, or driving yourself from A to B.
When you consider both competitors and alternatives, you widen the consideration set of solutions you’re competing with and consequently, you can better see where there’s crowding or gaps in your market.
Back to Southwest Airlines. Because they saw not only other airlines as their competitors but also buses, trains and cars, they knew that they needed to have prices that were on par or cheaper than road/rail options. They then organised their internal processes to ensure that their operations run very leanly and efficiently, and hence they can still make a profit at this price.
So who are you really competing with?