Assessing the competitive environment allows you to determine if your idea is truly unique.
One of the initial assessments entrepreneurs pursue as part of their concept validation is understanding the potential competitive environment. Assessing the competitive environment allows them to determine if their idea is truly unique or if others have already identified the customer pain and resolved the problem. Sometimes the assessment reveals that the need is already being met by a product/service solution from another player. This may indicate the concept lacks potential as a scalable opportunity.
However, if it is clear that there are no obvious services that meet customer needs, then it may have potential for a significant market opportunity. On the other hand, if others have recognized the need but adequate solutions are not yet available, then there is an equally valuable market opportunity. As a result, it’s prudent that the entrepreneur develops a high level analysis of the competition within their industry.
For the concept level opportunity, this would involve a high level assessment including the following steps:
1. Identify Potential Competitive Offerings
The entrepreneur’s first step in competitive environment assessment of their concept includes identifying potential competitive alternatives and substitutes that already exist. After summarizing a listing of potential competitors and their competitive offerings, the entrepreneur should seek to understand how, if at all, the competitors compare to what they are envisioning.
To accomplish this, entrepreneurs should develop a Competitor Offerings Grid Analysis. This analysis enables comparisons amongst various product offering attributes from a variety of competitors. Completion of this grid will enable the entrepreneur to determine how their solution compares to those already in the marketplace. It will help them understand how their product or service is different from existing and potential new players.
2. Intellectual Property Reviews
A review of previous technology patent filings with the appropriate regulatory agency is another appropriate step which should be pursued. Utilizing this patent review to develop a high level Competitor Patent / IP Summary may confirm “gaps” where technology similar to the entrepreneurs’ idea does not exist. It may also identify solutions previously developed from a potential competitors’ technology and enable the identification of key patents it possesses related to and protecting a competitive offering.
3. Technology Stack Assessment
Competitors with internet and mobile technology should also be reviewed to determine the technologies they deploy. A Technology Stack is the infrastructure provided by a fusion of software and programming languages used to create websites and / or mobile applications. By assessing and comparing competitors technology stacks, you can unveil a substantial amount of useful information. This includes the technological prowess of their programming capabilities and the scalability of their offering based on their technological capabilities.
4. Porter’s Five Forces Analysis
The Five Forces Analysis is a framework attributed to Harvard University Professor Michael E. Porter for analyzing the level of competitive intensity and attractiveness of an industry. It supports analysts in developing an understanding of the forces that impact the competitive nature of a business environment.
There are 3 horizontal forces:
- The threat of established rivals
- Substitute products and services
- New entrants
And 2 vertical forces used to assess industry rivalry:
- Bargaining power of suppliers
- Bargaining power of competitors
In addition to providing a stronger understanding of the competitive environment, this will be helpful in developing the startup’s “Go to Market,” and monetization strategies.
5. Identify Competitor’s Team Members
Identifying the players involved, their experience, potential connections and access to resources is another component entrepreneurs should consider.
Developing a Competitor Team List includes listing:
- Key members of executive management
- Significant advisors on the competitors’ team
Including a brief bio of each will help with this effort. This list should also include any significant “hiring in process” identified.
6. Identify Competitor’s Investors
Similar to a competitor’s team members and advisors, identifying their investors and amounts invested will provide valuable insight. This will give a comprehensive understanding of their level of financial resources, their connections through investors, and the experience the investors bring to the table. A Competitor Investment / Investor Summary includes an estimate of the funding received by a competitor and a listing and brief summary of each investor that will enhance the managements’ understanding of potential rivals.
7. Identify Competitor’s Customers
Understanding a competitor’s customer base reveals insight into their level of development. A Listing of a Competitors’ Customers includes identifying, summarizing, and discovering the apparent basis of the supplier/customer relationships. In the future, this becomes a valuable asset as the entrepreneur develops their “Go to market” strategy.
This list is not a comprehensive analysis of the competitive environment, however, it will create a foundation for the entrepreneur to make future decisions.