People are natural and creative problem solvers. If there are lingering problems of importance, they’ll usually find ways to reduce or eliminate them. The severity of the pain determines how far people will go to solve the problems. This is crucial to understand when considering your competition. You always have competition, whether they’re direct competitors, who offer similar products, or indirect substitutes, that solve the same problems with different methods. Much more than your direct competition, the array of solutions in use defines your competitive set. The best way to arrive at a comprehensive list of competitors is to answer the question, “What pain am I trying to solve, and how do people solve it today?” This open-minded approach can lead to major breakthroughs. Southwest Airlines, for example, got its start by competing against cars, not other airlines. For the same price as a car trip Southwest could get you to your destination in less than half the time. They reframed the competition. While airlines all compete for air travel, it’s easy to forget that there are a bunch of ways to travel, including trains, rental cars, buses, or boats. How are your potential customers solving their problems today? That’s your real set of competitors.
In the Customers & Competition chapter, you will explore two important fundamental components of a winning business model – the market (customers) and industry (competition). Your startup must be different in a way that’s important to your customers. Without meaningful differentiation, you’re forced to compete on price, which puts your startup on death row.
In this chapter, you’ll learn how to use your competition to gain an advantage, how to break down a market, and why that’s so important for customer acquisition.
Most importantly, this chapter gives you the opportunity to step away from your idea and take a broad look at your proposed battlefield. As Warren Buffett famously said, “When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is usually the reputation of the business that remains intact.” No matter how good you are as an entrepreneur, it’s hard to succeed if you pick a shrinking market or a cutthroat industry. Avoid the most common pitfalls and learn how to identify promising opportunities with the strategies in this chapter.