HOW WE THINK ABOUT COMPETITION
We get a lot of questions like:
“Who are your competitors?”
“Who do you compete with?”
“Do you get nervous about your competition?”
“How do you think about competition?”
All of those questions are valid and should be asked of any company whether you are looking to work with a company in a particular space or to invest in a company that is competing in an industry. But, ultimately, how people usually answer the first two questions is with a list or a chart that shows all of the competitors and then why their particular company is better or different. That’s a great exercise and gives plenty of insights.
But, to us, the fourth question is the most compelling. So, we figure it’s good to share some highlights of how we think about competition.
At Legion, We Have A Broad Set Of Competitors But Everybody Else Does Too
Legion owns multiple ventures and each of those has competitors. And, often times we get questions about how we compete with so many competitors. But, there is a fatal flaw in that question. One of the things we see so many companies try to do is to compete across a ton of industries, with a bunch of different product lines and a massive range of marketing tactics. So, the flaw is that people assume that most companies have a small and very defined set of competitors because they have focus. And, this couldn’t be further from the truth.
Caleb on our team recently described it like this:
Which one has more competitors — 1) A restaurant with menu items from 5 different cuisines; or, 2) The total of 5 different restaurants who each focus on one kind of cuisine?
On the surface, it would seem that 5 different restaurants would have more, right? But, no, they both have the same…And, this is the trap that SO many businesses fall into. They try to do 5 different things so end up having 5 different groups of competitors.
Part of our playbook at Legion is for each of our products to do what they do…WELL…and in a FOCUSED WAY. So, to us, even though we have more ventures than many…we don’t necessarily have more competitors than most other companies.
Look Inward MORE THAN Outward
So many people in business and life obsess about looking outward. They want to know how they can compete with the other team or company. And, while this can help you to understand where your competition may have weaknesses, we think this is less powerful than truly understanding your strengths. If you truly focus on your strengths and how you can turn those into untouchables points of brilliance, don’t you think you will earn enough customers to build a nice business.
So many people and companies spend their time copying what others do, talking about how other companies have weaknesses and their marketing talks about how their “Features & Benefits” are better. That will get you a certain distance, but we believe to win…it’s easier to focus inward to being the absolute best at what you choose to do rather than look outward and get distracted.
Ultimately, competition isn’t just companies doing the same thing you are doing but also the way people were doing things before you and your competitors existed
Uber understood for long enough that Lyft wasn’t their main competitor — people relying on cabs or on owning their own car to get around town was.
AirBnB understood for long enough VRBO.com wasn’t their main competitor — instead they focused their efforts, product and marketing on why people would be okay with and, ultimately, embrace not just looking to stay in a hotel.
At Growth Collective, we have competitors that are doing something similar but that’s too narrow of thinking. Ultimately, our biggest competition is companies trying to do marketing by hiring a full time marketing person that is 50% percent good at a bunch of things but not great at any one of them.
If you don’t see competitors in your market, RUN
When we first started as entrepreneurs, we would meet with investors and they would ask us if we had competition. We would immediately answer that there weren’t many competitors or that the idea was so new that there wasn’t any competition.
In time, though…we have learned that if you find a market that there is no competition….RUN…AS FAST AS YOU CAN. Competitors in your space means that the space is worthy of building a business. If you don’t see competition, it’s often (with some exceptions) because nobody will really ever want what you have or the industry is too hard to make money because margins will always be too slim, or the market has already passed the space by (and people are solving their problems in new and better ways).
Competition is a good thing. It shows that others see value in the market. And, equally important, it shows that you won’t be the only one to create the market. Starbuck got a head start, but it was Starbucks along with a whole bunch of other chains and independent coffee stores that created the market for premium coffee.
It’s Okay To Give Away Ideas Because The Best Teams Win
We have done a lot of mentoring over the years and we have noticed so many early entrepreneurs be afraid to share their ideas. They think their ideas are so brilliant that they can’t possibly fail. But, we have come to believe that the best businesses are a combination of, at least, a decent idea AND the best team to execute that idea. If you gave the idea of Tesla to anybody else, it wouldn’t have become Tesla. If you gave the idea of Stripe, or Spotify, etc…to anybody else…those companies wouldn’t have been nearly as successful.
So, instead of holding on to your idea too tightly, it’s important to share your ideas so that your ideas and vision can attract great people to help.
Small Companies Can’t (And, Shouldn’t Try To) Compete On Price
This should be an obvious one — but, unfortunately, it’s not. As a small/early company, it’s impossible to compete on price. You don’t have scale, you need margin to grow, and, unless you are really good at raising TONS of money, you can’t live with losses for very long.
Competition In More Mature Markets Is Usually Broad, So The Way To Compete Is To Go Narrow
As markets mature, there usually are a couple players that make it too difficult to compete in the broad market. So, as markets mature, you have to compete in more narrow sectors of those markets. For example, people thought of e-commerce as an industry for so many years. And, then ten years ago, people declared that Amazon had won e-commerce. At the time, it seemed like people thought that there was no way that anybody could compete with Amazon in e-commerce. But, the last ten years has been the greatest time for e-commerce start-ups in history. Why? Because they became really good at focusing on more narrow segments of the e-commerce market and people have come to realize that e-commerce can be a part of (and even disrupt) any and every industry.
We could go on for days about competition and this probably begs even more questions…but, for now, we’ll leave it at that for a few ways we think about competition here at Legion.