robgo nails it here. #1. Comparing feature sets is an easy way to spiral out of control thinking you need every feature under the sun. Often, you don’t need a thousand fancy features to get a job done.
#2. Someone is always trying to beat you, whether you OR they know it yet doesn’t matter. Be the best at what you do (serving your users), or go home.
Last sentence is my favorite…
Thinking about competition as an investor in early stage companies is often a tricky problem.
Occassionally, we will seriously consider investments in companies that that have very obvious, direct competitors. Sometimes, it’s a fast follower in a market that we think can support multiple winners (for example - Reach Local, Yodle, ClickFuel, etc). But we don’t look at too many of these because we are in the business of funding companies that are doing things completely differently from anyone else.
Which leads to the problem: How do you think about competition when you are the first to market or going after a problem in a completely unique way? I have 2 suggestions along these lines.
Suggestion # 1: Think About the Job to be Done, Not the Feature Set
I have to give credit to Clay Christensen on this principle, which he discusses in his various books. One trap I see entrepreneurs and investors fall into (myself included) is to think about the feature set you are building and think “these features are completely unique, therefore, there is limited competition in this market”. Big companies are especially vulnerable to this - since their products are usually much more robust than seemingly insignificant competitors on the periphery.
But end users don’t usually do a feature by feature analysis or build Harvey Ball charts for themselves. End users do think about jobs that they want to get done and what combination of suppliers can fulfill those jobs. Thinking in these terms changes the way you think about your customers, because the same customer might behave very differently depending on the job they need done. As a ZipCar customer - the job I usually need done is to get to a meeting or run an errand. But other times, the job I need might be a fun ride to the cape, or transporting boxes during an IKEA trip.
In all those cases, the “jobs” to be done significantly alters the way that ZipCar should think about their product, pricing, and competitive tactics. ZipCar today is one of the only solutions for one of those three jobs, but the competitive landscape is very different for the other two. This is true in lots of industries - for some jobs, McDonald’s competes against Starbucks (power breakfast), other times, it competes against gas station convenience stores (fast eats on the go), and other times, it competes against Friendly’s (family dining with kids). Regardless of your situation, thinking about the jobs to be done will help you think of your customers and competition very differently.
Suggestion # 2: Don’t Underestimate Any Competitor
If there is anything to learn from YE Yang’s victory over Tiger Woods this weekend, it’s that you must never underestimate a competitor (I lost a $50 bet yesterday because I said there was 0% chance that Tiger would lose). This sounds obvious, but it happens all the time. I’ll often forward along new competitors I see to executives or entrepreneurs I know. Sometimes, the conversation goes something like this:
“Thanks for passing this along. But these guys are not doing x, y, and z. I don’t think they can be successful”
To which I would respond:
“Are you guys doing x, y, and z?”
“Not yet, but we are launching x in a month and y and z later this year.”
“If the competitor were to look at your website, would they know that you are going to launch x, y, and z?”
“Of course not. Why would we give away our plans to our competition?”
This is only slightly facetious. But hopefully it makes the point. Some competitors are bound to have smart guys who are working their tails off to eat your lunch. If what they have doesn’t blow you away, you have to assume that they are working on something that will. Or, you have to wonder if they are trying to solve the same job as you are, but in a different way or in a different sequence of steps. Either way, you have to respect your competition - big and small - and assume that somewhere out there, there is an unknown Korean guy practicing 3-hybrid shots out of the rough, getting ready to take you down.