Does Competition Really Matter In Business?
The other day I was creating a new account on LinkedIn.
I set the industry as marketing and advertising because I owned a marketing agency prior to starting my tech company - Condensr.
The number I saw when I toggled the industry was astounding.
LinkedIn told me that there were almost 10,000,000 others on the platform who were also in the marketing and advertising space.
I smirked and went on with my day.
It sort of explained why owning my marketing agency was a nightmare.
I'd reach out to up to 100 prospects daily to no avail.
Getting people even merely interested in "growing their business on autopilot" was near impossible.
Most of those almost 10,000,000 others who are in the marketing and advertising space were probably doing the same thing.
Prospects were getting sick and tired of the constant nonstop messages they were receiving from these 'marketers.'
I didn't have a strong unique selling angle.
I even know how it feels.
My inbox and social media still gets bombarded by others who call themselves 'coaches/consultants.'
The one thing I've learnt is that a lot of people message you to start a conversation, but it's always the same thing:
- "How are you?"
- "How's business going?"
- "What do you do?"
No wonder I wasn't successful, everyone does the exact same thing!
Prospects are not idiots, They're humans, and usually, business owners who know a thing or two or else they wouldn't be capable of running a business.
Trying to start a conversation doesn't work, just tell them exactly why you're there and how you can help them.
In the book 'Fanatical Prospecting' Jeb Blount explains this in much more detail.
I remember when I first started in business with the same misconception as probably every other person in the world.
'You have to build something that no one has ever done to stand a chance.'
So initially, I thought that I was doomed.
I would think hard about different things that I thought didn't exist and then find out they actually did.
It was heartbreaking.
The only thing I thought was really left for grabs was AI and curing cancer or other uncured diseases.
It's taken me a while to learn that this is far from the truth.
In fact, some have gone as far as to say that those who are first to market are actually at a massive disadvantage.
The competition will come crawling through like zombies before you even know what hit you - especially if the business you've created is seeing strong early success.
I've even heard that Uber was not the first to market - but they managed to spot an opportunity being terribly executed.
When I made the switch to Forex, that's when I finally took a breathe and realised I don't really have competition in this space.
Essentially, the more people who actually do the same thing as you in Forex or similar markets means you've got the better chance of making profit.
The more people who sell, the lower the price will be.
It's all about which side has more capital flowing through it.
And now finally, when I decided to start my tech company - Condensr - I initially knew of 2 real competitors that I had.
I was scared to do lots of research because I didn't want to uncover the fact that I might have a lot more competition - massive mistake.
After a while, I realised that I may have some more competition, but still less than 10 that I knew of.
Whilst doing customer discovery interviews, it felt like every new person I spoke to had unmasked a new competitor that I didn't know of prior.
And with every new competitor, my anxiety and stress grew more and more.
So does competition really matter in business?
The first argument is that it's actually beneficial - to you and your customers.
The reason it's beneficial for your customers is because they have both variety & choice and they also have lower prices to work with.
Imagine if Apple or Samsung were the only mobile phone manufacturers in the world, buying a phone would cost a fortune.
The more companies there are in a specific field, the lower the price people would have to pay since the supply is higher.
So how is competition good for you?
Firstly, it answers your biggest assumption - would people pay for this sort of product or service?
Without competition, you'd essentially be the first to market within a particular industry.
This would raise many questions and you wouldn't be sure if people are even looking for what you're building.
The reason Uber succeeded for example is because people are inherently lazy.
Its so much easier and more convenient to go on your phone and request a ride then it is to go and find a black cab.
On top of this, they made it accessible to everyone. Uber is much cheaper than a black cab too.
After Uber, many other companies followed - none of which were as big because Uber managed to hit the nail on the head.
The benefit that these other followers had was that they already knew that an Uber-type product is highly demanded and people do not mind switching as long as they get similar quality, for a cheaper price.
Uber model businesses are now similar to the toast situation - they mainly compete on price.
This is partly why Uber is not profitable at this moment.
Luckily we are in a time where consumers are happy to try different options.
All you really have to do is choose a problem that you think is being solved in an inefficient way and do it better than the competition.
Customers spend money to solve problems.
You need to find those inherent problems and solve them more effectively than others in the market.
This could be 1 or 2 features different from the competition, which you do better.
There's another argument I wanted to quickly touch on.
What is your actual goal with the company you're looking to start?
Are you looking to make a comfortable $10,000 per month and live a stress-free life?
Are you looking to make $1 million per year and have ultimate freedom?
Are you looking to make a lot of money ($10 million +) and give back as a philanthropist?
Or are you looking to build the next market leader, the next unicorn company that disrupts a market? ($1 billion +)
The answer usually lies in these given fields.
For example, I know that I can live a comfortable life with $1 million per year, but I'd want to earn $10 million per month in order to truly make a difference not only in my life, but the world too.
With a goal like this, it's probably not possible to reach this level with something like a marketing agency.
But building a lean tech company (or more) would almost guarantee I reach my goal.
So answer this question - what is your goal?
Then you can figure out if how much competition really matters to your business.
The next argument that I wanted to introduce is the market size argument.
This has been one of my favorite arguments because I'm in a massive market with the tech product that I'm building - Condensr.
The market cap argument states that there's usually enough space for lots of winners in a given market.
Going back to the Uber example, they have 75 million riders around the world. If we look at the population of people who travel, this is a massive industry going in the billions.
This is why there exist companies that try to compete with Uber.
With my business - Condensr - we are serving entrepreneurs. Particularly early-stage entrepreneurs.
If you search up 'how many entrepreneurs there are worldwide,' you'd get an answer close to 600 million.'
Our biggest competitors have around 20 million members with other smaller companies not reaching 1 million users.
This means that with the right product, there is still enough room to grab (theoretically) 580 million users discounting the competitor's users.
Referring to the graph above, only 3% are actively buying or looking for a solution and these have the best shot at being early adopters.
On top of this, during my customer discovery interviews, a lot of people did not mention that they knew of my competition.
This can be inferred in two ways.
- There is definitely enough room in this industry for more players
- The problem that this business solves is not strong enough so people haven't gone out of their way to search for this solution.
My counter is always that there are over 20 million users already using a solution like this meaning that it definitely is a problem to people.
This is why this should be inferred on a case-by-case basis.
Your business may be wildly different to mine, so do the research and come to a conclusion on if this also applies to your industry.
On top of this, if you're in a growing industry (mainly tech, online learning etc), you should rest assured that there is definitely going to be enough space for you in this market as the industry grows.
Going back to the earliest example with the coaches, consultants and the marketing agencies, there are still 1000s of (maybe more) winners in those given fields.
Whilst in technology, there will most likely be a lot less businesses doing the exact same thing as you.
It always will come down to these main things:
- Are you solving an urgent or important problem?
- Are you solving the problem better and more efficiently than current market solutions?
- Is there a big market for what you're doing?
- What is your goal?
If you're able to confidently answer these, there is no reason why you can't enjoy a piece of the pie.
There are some rare instances that I have noticed arising recently.
Following the launch of Uber Eats, there has also been many food delivery apps - the biggest being, well, Uber Eats and DoorDash.
However, recently I have noticed at least 5 companies doing the 'groceries in minutes' business.
No differentiation in unique selling point, no differentiation in service.
It would maybe take another few hundred words to fully list out the competition in this space, but the biggest I know of is 'Getir'.
Is this due to a large market size?
Customers being more forgiving and open to options?
Now it's your turn to start thinking: What is your goal and industry?
Did you learn something valuable from this post?
Share all your answers below!
Till next time,
Post a Comment