A few weeks ago, there was an article that came out called "Google Currents, Onswipe's Nightmare?". I'm also preparing for our first board meeting with newly elected independents and one of the points we are talking about happens to be competition. As you start to grow competition becomes a healthy thing to think about. Here's how I think about competition as a cofounder and CEO of a growing venture backed startup:
Don't Worry About Google
Almost every growing startup comes to a point where they have to worry about "what if Google does it." If it is a market worth getting into, then Google or someone else as large as them will almost certainly get into the market. What you aren't remembering is the fact that it is probably going to be a smaller effort with little or no budget inside of the larger company. The main focus of any large company is their main profit driver, which is almost certainly not your startup's experimental business model. Microsoft, Google, and every other large company lacks the main asset of a startup: speed. By the time that a larger company really puts momentum and force behind competing against you, then the game is most likely over for them. Google took over seven years to truly compete against Facebook, which had 800 million users at that point. Everyone heralded Facebook Places as the end of Foursquare forever and that they should pack up shop. A year later, Facebook Places has faded into obscurity while Foursquare's traffic has soared. When a large incumbent comes into your space, largely ignore them and use the press for validation.
Find A Giant As An Ally
The enemy of my enemy is thy friend. If a giant such as Google comes into your market to compete against you, odds are one of the other giants are taking notice as well such as Amazon, Yahoo, Microsoft, Facebook, etc. . They might be planning to come into the market as well or already exist in the market with a flawed product. You should see this as the opportunity to partner with one of the other larger companies out there. You get massive distribution and they get the benefits of being in the space without a loss of speed or manpower. This route can also be one that leads to an acquisition at the end of the road.
Copycats don't have the roadmap
Before someone like Google comes along to compete with you, a slew of copycats will spring up. We recently had this happen with Onswipe as an unoriginal 100% ripoff popped up using our name to gain press with a shoddy product. Along the way, a copycat will constantly try to play fast follower by copying your latest and greatest feature. The problem is the fact that, copycats are always one step behind and often stay that way. They never started out creating the company as a problem they wanted to solve, but as a way to capitalize on the great opportunity that you shed light upon. The copycats will create confusion in the marketplace, which should be your greatest worry. Potential customers may ask how you are different than them. The way to combat this is to sell more than just the current snapshot in time, but the longer term vision. Since the copycat does not have your startup's longer term vision, you can out sell them.
Mis-education creates false competitors
If you are similar on the surface to another company, the press and potential partners may be fast to label you competitors. Many people think of Flipboard as a direct competitor to Onswipe. This happens because we both provide beautiful interface on the iPad, but our businesses are entirely different. The same false competition between Facebook and Twitter happened many years ago as both were thought of as Social Networks. Over time it has become very clear that Facebook and Twitter are two very different companies. To combat mis-education in the market, you should have a simple and clear 2-3 sentence reasoning of why you are different. Over time as both companies in a space mature towards their individual visions, it will become apparent to anyone the difference between the two companies. Up until that point, it will likely take a mix of explaining the difference to the market while having many one on one conversations.
Don't try to win on features
Competitors will try to constantly battle you by adding an incremental amount of features. It's tempting to want to constantly play a game of one-upping a competitor with features, but that usually results in a product that no one wants. It's the path that many tablet makers have taken when competing against the iPad. There is a constant game of one-upping on features like processor speed or 3D screens, yet nobody has even come close to overtaking the iPad in the tablet market. Why is this? Everyone is trying to BE Apple, not BEAT Apple. When it comes to features, march to the drum of your own roadmap and vision.
Price wars are a race to the bottom
Many entrepreneurs think that a competitor will come in and beat them on price. You may lose some customers, but in the long haul, a competitor can't be you by just being cheaper. If a competitor does come into your market and competes solely on price, do not be tempted to constantly lower your price to beat them. Instead you should fight on product quality and the true return on investment for the user. When it comes to a competitor that comes into your market and offers a product for free that you have charged for, then you may have a problem depending on what type of business you are building. If you are building a company built upon fast growth, then your business model may be flawed in the first place. If it's not, then you should dig in deeper as to why the competitor is offering the product for free. They will eventually have to turn a profit, whether it is by charging YOU or someone ELSE.
Larger companies are often slow, though large in size. They may ENTER your market, but they will often not have the speed to STAY in the market. Speed comes in a few different varieties when competing against a large company like Google or Microsoft. The first variety of speed is iteration. How fast can you iterate on a product after market feedback? A large company is going to have to stick to a much larger roadmap and won't be able to turn a ship on a dime. The second variety of speed is feature addition. Large competitors won't be able to add features as fast as you and will most likely be trying to play catch up to what you already have.
Focus on the normals
Pinterest has become a huge success and has < a href="http://allthingsd.com/20111222/pinterests-growth-hockey-stick-would-make-a-great-craft-project/">grown tremendously over the past year. The largest part of Pinterest's success story has not been its adoption by the inner circle of Silicon Valley or sex crazed college students, but those of women from Middle America. Most competitors will come into the market and try to create buzz amongst the early adopters of the tech community. Instead of falling into this trap, try to attract the normal users of the world ie- women in the midwest or a teenager that wants to find new music. It's hard to reach this audience and once you have a grasp on it, it will be hard for a competitor to come in and compete against you.
Cash matters when scaling
If you have started to grow and a new competitor comes into the market, it's wise to have enough cash on hand to really ignite your growth. Everyone thinks that products take off and that it's all taken care of. There are always financial barriers in place when rocket fueled growth kicks in. If you are lucky enough to hit that point, you want to make sure that you have the cash to leave your competitors in the dust.
You are your biggest competitor
You are often your biggest competitor. You should not completely ignore your competition, but the biggest battle happens inside of the four walls of your startup's office. Startups come down to pure execution of a strategy on a daily basis and maintaining the faith for the long haul. Most startups don't lose to competition, but because they lose the will to fight.
Avoiding the build versus buy problem
Many startups will not be competing with other startups, but with the internal development teams of their larger customers. Moveable Type lost the blogging wars to Wordpress by not moving themselves towards being a fully flexible platform. Instead of having conversations that are a build versus buy scenario where it's either your startup or your customer's internal development team, you should be positioning yourself into a build OR buy scenario. In order to do this, your product needs to become a platform that others can build upon to meet their needs. This will let you grow overtime to meet the needs of any customer without sacrificing your own roadmap. This will often require you to sacrifice some short term gains for long term sustainability. Any and all changes you make to your software have to be applicable to the greater good of the platform. That means no custom development and no bending to the wills of customers crazy demands.
Bring traffic to the table
The largest successes of the past few years have been audience driver. Twitter and Facebook have been killing search as a referral source, while YouTube has opened brought forth a new audience for professional and amateur creators alike. Tumblr has seen widespread adoption by major publishers due to the viral nature of the platform. Pinterest is getting adoption by mainstream fashion brands due to its ability to drive more traffic than Facebook.
If you can bring traffic to your users, then they are going to be addicted to your service like crack cocaine. Once network effects kick in, a publisher is very unlikely to leave your service.
Bring money to the table
Most partners want two things. The first thing I touched on before, which is traffic. The second and most important is M O N E Y. If you can make partners money, then they are likely to side with you and stay when a competitor comes along. Cash is a powerful force and if your company can be a direct or indirect way for people to make money, then you are going to be hard to unseat. Everyone thinks that Google won the search wars by having JUST the world's best algorithm. They had a great product, but they gained distribution by powering search for publishers. With this, they were smart enough to make money for publishers and win the search wars.
How have you dealt with competition in your space? Another interesting angle that I wish I could analyze is, what it is like to enter the market as a competitor to an existing incumbent. Whatever the scenario may be, the most important of the 13 lessons above is to remember that you are your own competitor. Keep fighting the fight and be prepared for the war, not just the battle.
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By now you've probably heard of Answers OnStartups, the new Q&A community for any topic about startups and entrepreneurship. If not, here's Dharmesh's announcement.
I have the good fortune of being asked to co-moderate the site with Dharmesh, probably as a result of the popularity of a few provocative but useful guest-posts here on OnStartups. (Note to those of you hoping to expand your influence in the blogosphere and beyond -- take the advice from Leo and Darren and Mary and, I suppose, me: Guest-posting is a good way to do it!)
But, you know, it's not a competition. Yeah, right. That's why there's voting and reputation, 'cause it's not a competition. Riiight.
As some of you know, there was an unexpected problem with the site at the beginning. See, Answers OnStartups is built on the same technology as StackOverflow, through Joel Spolsky's StackExchange program. (Yup that's our Dharmesh on the front page! Which reminds me, that's a good lesson in marketing. Q: How do you get your name and URL on the front page of a high-traffic, highly regarded, high-SEO website like StackExchange? A: Write a fantastic (but honest) review of the product and give it to the owners. Make it so awesome that nothing they could say about themselves would be as good or believable as your words. Then they'd be foolish not to!)
(And since I'm on the subject, and since I've already interrupted myself with this many parentheticals, you might be interested to learn that, technically, StackExchange is FogCreek but StackOverflow is Jeff Atwood.)
Anyway. Where was I? Oh yeah, problems bootstrapping the site.
See, Answers OnStartups has an automatic permissions system where you have to have a reputation of at least 15 to vote, and 50 to leave a comment. Even more for things like inventing new tags. It's smart because it prevents people from (too easily) gaming the system by creating accounts and tearing up the place anonymously.
That works well at StackOverflow because they get a million hits per day (literally), so if you start contributing properly you get up-voted fast (sometimes in a matter of minutes). Very quickly an earnest contributor is granted these permissions.
But at Answers we had a bootstrapping problem. All these kind and wonderful folks came to use the site... and essentially couldn't do anything. The only people with rights to up-vote were Dharmesh and me (because we are blessed moderators, pronounced "bless-head"), and even then we were limited to 30 per day.
So all the initial members had to run around and up-vote each other for about a week, and newbies would come in an invariably ask questions about why no one is voting, which, ironically and usefully, got them a lot of votes.
The lessons from this little mishap:
- When you use pre-packaged software, you get the limitations along with the upsides. Just remember though, had you rolled your own you would have a different class of bug, probably worse.
- It didn't matter in the end, because what we're really doing is building a friendly community for startup discussions, and little problems like that aren't going to matter assuming you have intelligent members. And if you don't have intelligent members it's not going to work anyway. In other words, don't sweat the small stuff.
- Had we built our own, others would have beat us to the punch, and we would have lost the war.
As proof of that last point, there's now another StackExchange-based startups Q&A site! I'm not going to link to it because I don't want to give them the credit -- which I admit is kind of crappy of me, but in my defense I am writing in the throes of passion and cannot be responsible for my actions. Not buying it? Fine, but I'm linking to our question about it.
Anyway Answers OnStartups is better because we have a totally killer user base. Active users you've probably heard of include:
(I linked to their Answers user profiles too so you can see they're actually active, not just name-dropping.)
(I love the phrase "name-dropping." It sounds like you're taking a dump on the conversation which, often, you are.)
But perhaps even more fun is meeting all sorts of folks who aren't already famous but who are running interesting startups and have terrific, new things to add to the conversation.
Over the next few weeks, watch this space for highlights of these users, as well as highlights from some of the more action-packed discussions that are going on.
To whet your appetite, one of the most popular questions is: How do you pick a platform for a Web 2.0 startup company?
See that link for the full discussions, but here are some highlights:
- The platform is not as important as other factors. There are hugely successful companies based on any technology you can name: Java, .NET, PHP, Ruby, Python, Perl.
- A major factor is existing competence. If you know a platform/framework well already, that trumps other considerations because it means you can get started fastest. Speed to beta is part of success.
- If you have no existing competence, it's most important to find/hire the best possible developers. Because it's always hard to find awesome talent, whatever platform they love is the right choice.
- It depends on whether you need to get something running ASAP or whether long-term maintainability is necessary right from the start. If the former, Ruby and PHP generally get applications going fastest. If the latter, Java and C#/.NET generally have the best tools for that sort of thing.
- Both Sun Startup Essentials and Microsoft BizSpark make certain application stacks particularly attractive. If you like the other benefits afforded by those programs, either are a good choice.
- Pick a framework that will stick around for the long haul. Ruby on Rails isn't going to be ditched. ASP.NET won't be ditched but Microsoft is a moving target. PHP itself is stoic but any particular framework is more questionable. Which community do you think has longevity?
- If your startup fails, which technology will leave you best positioned for future projects?
As with many questions on the site, there's usually not one right answer. As it should be.
So join the conversation! Come visit Answers.OnStartups.com and see what all the fuss is about. It's fun.
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I’ve been working in and around startups for most of
my professional career. A topic that often comes up in startups I’m
advising or considering an investment in is: “How will the big guys
respond?”. This is an interesting question and for all the obvious
reasons, should not be dismissed as being irrelevant. Too many startups answer
the question on big competitors either inaccurately or inappropriately. [Note:
I use the phrase “big guys” throughout this article as informal
short-hand. No gender bias is intended.]
Instead of the common arguments of why one of the big guys
(Google, Microsoft, Oracle or whoever) can’t/won’t compete with
you, it’s sometimes helpful to answer a slightly different question and
look at this through a different lens:
Here is what BigCo would have to do to win
in this market. First, they’d have to <x>. Then they’d
have to <y>. Finally, they’d have to <z>.
You get the idea. Instead of making decisions on
behalf of the other party, let them decide on their own how hard it will be for
BigCo to do x, y and z. As a potential investor/advisor, I like to see
the startup founders have an objective stance on competition and can accept
that one thing those of us that have been around the block know a wee bit about
is the realistic impact of competition from big players.
Having said that, I came across an interesting article
recently that should provide some comfort to startups. It was interesting
not because it revealed some startling fact, but because I was not all that surprisng.
The title of the article is “190,000 Office Live beta accounts
left in limbo.” It was penned by Phil Wainewright whose blog I
follow regularly and who I believe has a reasonably balanced view on things. If
nothing else, at least his arguments are usually pretty objective. The
best I can tell, neither Phil nor I hate Microsoft (quite the contrary, I’ve
been a customer for years, build on top of their platform and own Microsoft
The thing that leapt out at me about this article is that the
article didn’t leap out at
me. I have read about similar things all the time with big software
companies – particularly those that deal with smaller customers. This
brings me to a couple of points I’d like to share with you:
- When the ratio of the size of
the software company and the size of its customers is very, very large (as
in the case of most big businesses selling software/technology to small
businesses), there’s the danger of a lapse in customer service. In
the aggregate, they do really well. But, often, individual customers
or groups of customers can get really, really screwed.
- The reason for the above is
that as a company gets larger another important ratio starts to slide downward.
This is the ratio of the number of people in the company that
genuinely care about customers to the number of customers.
So, when you’re up against big competition, try to
figure these ratios out. What’s the company size / average customer size and
what’s the people that care about
customers / total number of customers. Of course, the latter
is not easy to come by in terms of hard data, but simple looking at the world through
this lens is helpful.
I generally tend to believe that the fiercest competition
for a startup often comes from other startups, but that doesn’t mean the
big guys should be ignored. Often, the most reliable source of competition eventually is the big
companies. This kicks in if and when you become moderately successful
(and thereby the big guys start to care enough to come after you).
What are your thoughts? Any war stories from the
trenches in having gone up against competitors many, many times your size? If
so, would love to hear them and any other comments you might have.
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As a software startup guy, I’ve been intrigued by what the folks over at 37Signals are doing for a long time. I interviewed Jason Fried (CEO of 37signals) for my graduate paper on software startups earlier this year. (I’ve written a couple of articles about 37signals in the past, including a couple of things I disagree with them about).
I read somewhere (can’t recall where) that as a startup you ideally want your competition to be big and stupid. Big, because then your smallness is an advantage and stupid because, well, because it’s useful to be smarter than your competition. If the competitor is big and smart (like Google), you’ve got a problem. Big means they have resources, smart means they know how to use them. However, the scariest kind of competitor for a startup is one that is small and smart. Like 37signals.
Here’s why I think you don’t want to compete with 37signals: It’s not about the fact that creating simple, usable software is really, really hard (which it is). It’s not because they have really bright people (which they do). It’s because the company is a marketing machine. 37signals squeeze more marketing value out of every dollar they don’t spend than any company I’ve ever known. They’re getting an immense amount of return on an investment they’re not making. That’s why it’s really, really hard to compete with them. This kind of marketing magic is hard to replicate. I’d argue that for many software startups, the difference between success and failure is now no longer just a matter of “the better product” (if indeed, that was ever the case), but better marketing.
What their marketing savvy buys them is a lower customer acquisition cost than other startups. This is why VC-backed companies are going to have a tough time going head-to-head with these guys. If you have the money, you can “buy” customers and market-share (to a degree), but you can’t buy a low customer acquisition cost. The only way to get there is to really buy a lot of “scale” (and that is very hard to do and often a dangerous strategy). What I find particularly intriguing about the strategy at 37signals is that they’re able to get this kind of marketing and PR value despite not having a “network externality” or “network effect”. In most cases where you hear about efficient marketing and customer acquisition, there’s usually some value to customers/users “passing the word around” and getting their friends/colleagues/family to also be customers. This is what causes the “viral” spread. 37Signals doesn’t really have this. Just because you use Basecamp doesn’t mean that I’m going to be any more likely to use Basecamp.
On a related note, I think it’s important to note that 37signals made more money on sales of their “Getting Real” book (which is well worth the read) than most early-stage startups are able to raise in seed round funding after months and months of PowerPoint pitches. Instead of trying to find investors, they spend their time building stuff, sharing their passion and knowledge and constantly promoting themselves – and the money showed up at their doorstep. This type of approach really warms my heart. There is no better form of funding than sales. It’s like a loan that pays you interest.
So, my hat is off to the folks over at 37signals. It’s great to see a small, immensely passionate group succeed. If you have thoughts about what you think makes those folks “tick” (that can be inspiration to other startups), please leave a comment. Will plan to capture these and some of my own thoughts in a future article. I think there’s a lot to be learned here. I already have the title of the next article planned out.
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All of my prior startup experience has been with
bootstrapped startups (i.e. no VC funding). As such, I’ve had to
deal the situation where I found myself competing with rivals that were much
better funded. For purposes of
this article, I’m going to assume that the competition is another startup
(and not a large company with much better funding). The dynamics of
competing with a large company are different and I’ll save that topic for
There is no pat answer to responding to this situation (if
there were a standard answer for anything, it probably wouldn’t be
interesting enough to write about anyways). But, I do have some thoughts
on the topic based on some of my own experience – both within my own
startups and those that I’ve been involved in.
For example, my first startup, Pyramid Digital Solutions was
in a small enough niche that it had little competition in its early
years. But, later, in 1996 we broadened our product offering and pursued
a larger market (creating specialized web applications for our vertical within
the financial services industry). Eventually, we found ourselves
competing with three
startups that each raised over $25 million in VC funding. Even for that
time, $25 million was a fair amount of money. One of these startups was a
direct competitor and the other two were indirect competitors. As you
might imagine, this had us a bit worried. We were selling to large
financial institutions and were constantly dealing with the issue of a weak
balance sheet. When we were enjoying a competition-free existence, this
wasn’t a big problem (the number of alternatives was minimal, and we were
clearly the best choice). With VC-funded competitors, this changed.
Customers are rightfully comforted when dealing with startups that have venture
investors. It removes a lot of the risk from the equation that the
startup will die in the near-term. A lot of the sales we lost were not
because we had an inferior product (we didn’t), but because we were a
I’ll tell you how all this turned out for me at the
end of this article.
Competing With Venture Funded Rivals
- Resist getting distracted: When you first learn that one of your
competitors has raised VC funding, it’ll be hard to ignore.
And, you shouldn’t
ignore it. But, you shouldn’t let it distract you too the
point of inaction. It’s important remember that just because
they have fresh cash in the bank doesn’t mean that they’re
going to be able to do something with it immediately. But, you
shouldn’t dismiss this event. When a rival raises money,
it’s a big deal.
- Talk to your team: One of the biggest challenges this kind of news
has is the potential effect on your team – particularly your
management team. Though it’s possible that the competitor will
use some of their new cash to try and lure members of your team away
– this is not as likely as you might think. The bigger issue
is that your team may lose faith in your ability to compete in the face of
well-funded competition. Negative morale can become a serious
issue. I would advise having a discussion with key members of your
team and keeping them aware of what’s going on.
- Their incentives are impacted: If a startup raises VC funding
(particularly when it’s a large amount), the management team’s
equity interest dilutes. In the short-run, this will have little
impact (because the team is still basking in the glow of the new cash).
But, as time progresses, you will find that it may get harder and
harder for the team to be motivated as the chances of them making any real
money have gone down. For example, by raising $25 million, our
competitors basically raised the bar for what type of valuation they would
need to exit with in order to see significant cash at the time of a
liquidity event (acquisition or IPO). Based on the terms of the VC
deal, they may have needed to exit with valuations exceeding $50 million
for it to deliver significant cash to the founders or management
team. Once the going gets tough (and it usually always does), the team
will figure out that the likelihood of a big exit is low. This
shifts their incentives. It’s important to keep this in mind.
This is one of the best things about a bootstrapped approach. Even
if you make a modest exit, you still
make a fair amount of money. This keeps the founders motivated the
whole way through.
- Don’t compete on price: One of the things your better
funded rivals will likely do (very quickly) is focus on building market
share at the cost of revenues and profits. This manifests itself in
two forms: a decrease in price or a an increase in what is provided.
For example, if you’re selling into the enterprise market,
your competitor may give away free services, customizations or
implementation projects. These can be expensive, but they can afford
it. It’s generally a bad idea to try and match their price
and/or terms. You won’t be able to outspend them (without
raising capital yourself). You need to find a different strategy.
- Determine market validation: One potential piece of good
news when a competitor raises funding is that it may be a sign of
validation for your market. VCs are generally very smart people and
would normally not invest large sums of money unless they saw at least the
potential for a large market opportunity. This could be good
news for you (particularly if you’re looking to raise funding too).
- Check out the investors: It is always a good idea to learn as much as you
can about the investors that funded your competitor. What other
companies are in their portfolio? Who’s the partner that is
sitting on the board? What is her background? One of the
biggest impacts a VC can have on a startup (outside of the cash) is the
network and contacts that they bring to the table. If the VC is well
connected within your industry, you may see your rival closing some deals
that you’ve had a hard time getting done.
- Be cautious of partnerships: It’s possible that
you’ll consider forging partnerships as a way to respond to the new
market threat. In fact, you may even enter discussions of partnering
up with one of your rivals that just received funding. Though you
should always look objectively at such opportunities and judge their
potential value to you, I will share one thought. In my 12+ years of
experience in startup-land, I have found that crafting a partnership that
actually delivers value is very, very difficult. Usually they end up
being grossly asymmetric (one party needs/wants the partnership much more
than the other) and as a result ends up not creating the outcome that was
originally planned. Not sure why that is, but it’s just been
my experience. Your mileage will vary.
This is obviously a difficult and complex topic (so
it’s hard to provide any real definitive tips or guidelines). Hope
the above has helped.
As for my own story, I am pleased to announce that it had a
happy ending (for us, not our competitors). One startup shut-down
completely. One of the others scaled back considerably and ultimately
shifted back into a consulting company. The final one was put up for sale
by the VCs that funded it. I ended up being the winning bidder and
acquiring the technology assets as part of the auction (and ended up paying
considerably less than the capital they had spent to build their product). Net
result: We essentially won that battle. Not due to brilliant
strategy or execution on my part, but I’ll take the win anyways.
I’d rather be naïve and win, than brilliant and lose (most of the time).
Moral of the story:
Just because you’re running a
bootstrapped startup doesn’t mean that you can’t compete
effectively with better funded rivals. The key is to think through the
implications and not get too distracted. Chances are, even a smart
competitor won’t use the cash as wisely as you fear. Your goal is
to survive the short-term because life usually gets harder for them in the
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I posted a blog article this morning on our partner internet marketing blog
(Small Business 2.0) titled “Understanding RSS: A Quick Guide For The Insanely Busy Executive
”. I’m guessing that most of the OnStartups.com readers already know what RSS is and are using it daily anyways, so the article will likely not be of that much interest to you. On the other hand, if you’re not using RSS, go read that article first, because I’m not going to be able to sell you on the concepts of this article if you’re not already using RSS.
So, let’s now assume you’re already using RSS. Chances are, you subscribe to a blog here and there, a news site here and there and perhaps even a social news site like digg or reddit. That’s great. I don’t need to sell you on the utility of RSS for this kind of “keeping up with the news”.
But, RSS doesn’t need to stop with tracking the latest news (both personal and business). It can also be used as a way to track what is going on with your competitors.
For example, let’s say for whatever reason you were competing with my current startup HubSpot
. Here’s what I would do if I were you:
- Make sure to subscribe to the RSS feed for the HubSpot blog. This one is obvious. If I’m a direct competitor, you’d want to know every time something new was posted. You should also track the comments on the blog entries to see what kinds of things are resonating with our target market.
Note: It is entire possible that your competitor doesn’t have an RSS feed (or doesn’t even have a blog). If I wanted to be controversial, I’d say that you don’t need to worry about these types of competitors because if they haven’t figured out yet the efficiency of online marketing, they likely won’t be successful anyways. But, I don’t want to be controversial, so I won’t say that.
- Subscribe to a Google search RSS feed. Basically, this is the equivalent of doing a regular Google search on a specific search term and getting an RSS feed for the results. You can add a feed URL like this: http://news.google.com/news?q=startup+hiring&output=rss (Note: I’m using the sample search term “startup hiring” on the off-chance that you actually are a competitor. Don’t want to make things overly easy for you).
- Figure out who else is writing about the particular target market segment (other bloggers, analysts, community websites, etc.) and subscribe to their feeds.
So, what are your secret tips for tracking competitors (clearly, RSS is not enough)? Or, are they so super-secret that you can’t share them?
On a related note, stay tuned tomorrow for a more lengthy (and substantive) article on the issue of competition.
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The blogosphere is buzzing today with Google’s announcement of their new “Google Apps For Your Domain”.
I can’t help but wonder if whoever was responsible for this name (or lack thereof) didn’t derive some inspiration from the “Snakes On A Plane” movie title. Honestly, this naming style doesn’t really seem effective to me (but then again what do I know). Google’s big enough now that they don’t need a real name for a product offering, regardless of how difficult it makes it for everyone. Since Google is Google, doing a Google search on “Apps On Your Domain” unsurprisingly leads to...Google.
Regardless, the real question is, what does this mean for startups?
Answer: It depends.
Clearly, Google’s announcement is targeted at the two primary competitors in this space: Microsoft Live and Zoho.
But, I think this announcement impacts anyone selling web-based offerings for information management to small businesses. These would include offerings like Yahoo! Small Business, GoDaddy, JotSpot and anyone in the “Office 2.0” category offering web-based collaboration tools for small businesses.
If your startup falls into one of these categories, there’s no need to panic (yet), but it may help to think now about ways to get yourself out of the headlights. I broadly categorize your options in to one of the following:
- Narrower Market Focus: By focusing more intently on a smaller target market base, you can find “white spaces” that are easier to defend. The big guys are not really equipped to address these smaller, more niche markets.
- Broader Service Offering: Big players often are seeking immense scale – which generally means more automation and less service. If you can package your offering with a degree service that is necessary to get customers to start beginning deriving value, this could differentiate you. (I’m not advocating creating products that mandate service, but solving business needs that can’t be completely solved with software).
What are your thoughts? Does Google’s new announcement mean anything special for specific startups out there?
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In an article I wrote last week about the demise of Kiko
(a web-based startup in the calendaring space), I hinted at the possibility that one of the reasons for Kiko’s demise may have been the entry of Google Calendar. I further suggested in a bit of blogging sensationalism that “Google was the new Microsoft” (when it came to competition). I was positing that much like startups of a decade or two ago took efforts to avoid being in the direct path of Microsoft, startups today should be watching Google and avoiding direct competition.
Richard White, one of the Kiko team members wrote an article describing the “Actual Lessons From Kiko
”. I’m not going to spend time arguing about what are actual lessons and what are not (though I will contend that you don’t actually have to have been part of the company to learn lessons from it). What struck me was this piece of the article: “Did Google Calendar kill Kiko?”
. The simple answer that Richard provides is “No.” The slightly longer answer is “No, because we repositioned Kiko to take advantage of a market that most other players, including Google Calendar, were neglecting”
. The article goes on to talk about international users, date formats and supporting languages other than English.
I think there is an important point here. Competitors do not have to compete for customers to hurt your startup.
Simply changing your strategy (or even asserting that you’re not really directly competing) does not completely take away the impact of competitors, especially ones like Google. Five Ways Competitors Can Hurt You
The following are five ways that competitors like Google can affect your startup. Only one
of them actually involves competing in the classic sense (i.e. taking away your potential customers).
- Taking Away Customers: This is the most common and obvious ways a competitor can hurt you. They take away potential customers and grab market-share. When most people think about competition, this is what they think about. This is indeed an important consideration, but not the only one.
- Scaring Investors: When someone like Google is even perceived to be competing with you (whether you meant it or not), they can have a very direct impact on your ability to raise capital. There are many VCs that will attribute significant risk to the fact that you’re competing with Google and label you as “too risky” to make an investment. Note that they are measuring risk on a relative basis. It’s not that they don’t think you have a chance, it’s that of the other hundreds of startups they’ll look at, someone else is perceived to have lower risk. Net result for you is the same. You don’t get the check. Of course, not all startups need to raise money (but many, like Kiko, do).
- Grabbing The Stars: This one is subtle. Lets say you are working on really cool technology that is very, very hard to do. Chances are, there are a limited number of people in the world that are the ideal candidates to join your team. These are the would be rock-stars of your domain. If Google (or some other large competitor) is also in the same category, you will possibly be competing with them to recruit your best people. Though there are pros and cons to you vs. a Google, you’re deluding yourself if you think this doesn’t play a role. For example, my current startup is not creating any particularly sophisticated technology (no video pattern matching or anything like that). We are also not competing with Google in any significant way. But, two of the last three people I attempted to recruit for my startup were seriously looking at Google as an alternative. If I were hiring particularly specialized resources, the competition for people would have been more acute. Though I can claim that there are advantages to working for my startup (instead of Google), I accept the reality that working for Google has its perks.
- Raising Market Expectations: We live in a fast-paced, highly competitive atmosphere. It takes a fair amount of innovation to capture market interest and get customers. There are just so many alternatives. As such, when a big competitor enters your space, it often raises the bar for what customers expect from you. Although I’m not suggesting that you should enter into a feature-war with this new competition, the reality is that some percentage of your users will raise their “mental bar” higher for what it’s going to take to earn their business (or usage). Raising the bar can occur in multiple dimensions. One is features and capabilities, and the other is price. If your competitor is offering a free product (and you’re not), it puts additional pressure on what you can charge. Once again, you may be in a different business, but it still doesn’t change the fact that you might be forced to charge less even to customers that you may not have lost to the competitor anyways.
- Fear Uncertainty and Doubt (FUD): We’ve had this one around for a while (many of you may remember it well from the old Microsoft days). In many cases, competitors don’t actually have to release a product in order to compete with you. They just have to “announce” it. This creates FUD. FUD creates a problem for you, because you need customers now. Another aspect of FUD is that when there is no real product behind it yet, the market can attribute whatever features and benefits to the product that they choose. Since it doesn’t exist, it’s easy to do this (and often, the vendors supplying the FUD can help this process along by hinting at features and release dates).
So, getting back to the story of Kiko, although Google Calendar may not have actually directly competed with them (by way of taking customers), I think it’s naïve to simply make the assertion that “Google Calendar did not kill Kiko”. Perhaps it didn’t kill Kiko directly, but maybe it took enough oxygen out of Kiko’s atmosphere such that survival and growth was simply not likely (or so difficult, that it wasn’t worth the fight).
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