This article also appeared in Finweek Magazine in their 2-Jan-2014 issue
Defeat your competition, is what we often hear in business. No company wants competitors, right? Wrong. Competition is good for your business. Here’s why.
- The first mover doesn’t have the advantage
Being first mover for a new offering in a new industry without competitors isn’t as sexy as it’s cracked up to be. The first mover must educate the market, create and prove the business model for their new concept, and experiment with pricing. Few people know that your type of service exists, never mind knowing that it is a term they can search for in Google. As counterintuitive as it sounds, the second mover actually has the advantage. Why? Because they only need to tweak and improve what the first mover has done, in order to become market leader. The first mover has already done the hard work. A classic example is Facebook outcompeting MySpace.
This is a view shared by veteran US entrepreneur Norm Brodsky. In 2007 he sold CitiStorage, a New York based document-archive business for $110 million. When rivals started to enter the records-storage business, Brodsky was happy. “In a young industry like ours, you had to spend an inordinate amount of time and money just explaining what you do and why prospective customers should pay you to do it,” he said. “The more competitors you have, the easier that task becomes. Competition makes comparison-shopping possible, which simplifies your sales pitch. All you have to do is explain to a customer why you’re better than the next guy.”
We saw this with BidorBuy. Their launch in South Africa in 1999 was easier because eBay, founded in 1995, had already educated the global market about online auctions, paving the way for BidorBuy.
- Competition helps us grow
For a long time I resisted the idea of tracking my running times while jogging. And my times stagnated. Then I started using Endomondo, a GPS-enabled mobile app where a computerised voice on your cellphone tells you how fast you’re running each kilometre, and what your total time is at that point. Within a few weeks of using the app, my times came right down. Why? Because I was competing with myself, and pushing myself to beat my personal best times.
Where would we be without rivals, be they external or internal? Competition is what pushes companies to do better, to outshine their rivals in order to win over customers. Without competitors, ours business get complacent, stagnant and inefficient. Just look at monopolies like Eskom or the ANC as our relatively unchallenged government ruling party to see this in action.
However, here’s the caveat: there must be a balance. Too many competitors can commoditise your industry to the point where it is almost impossible to differentiate yourself. The South African recruitment industry is a prime example.
- Competition is good for customers
When companies compete with each other to win our business, this forces them to improve the offerings and service levels to customers. It also drives down prices for customers. We’ve seen this in the computer industry, and it is starting to happening with tablets too.
- Competitors will be the ones looking to buy your business if it succeeds
Established industry giants often deal with smaller successful upstarts by acquiring them, so the existence of strong competitors gives entrepreneurs more exit options when it’s time to move on.
- Competitors validate your offering
Every good business has competitors. If there are no competitors, take it as a warning sign that your business is not worth fighting for, or that there isn’t really a market for your product.
- Competition pushes the human race forward
Without competition the Americans would have never landed on the moon. Why did they go to the moon? Because of national pride. They simply had to beat the Russians, their fiercest competitors, to it. As brutal as it was, the Cold War lead to some truly extraordinary technologies and elevated mankind to new heights. Thanks to the intense rivalry between the two world leaders, we now have faster jets, space-age technology, GPS and the Internet. As self-improvement blogger Shaun Rosenberg points out, mankind owes much of our current technologies to competition between people, between companies, and between countries. As people compete, they create and the entire world advances as a result.
- Competition forces us to be more innovative
When competitors are vying for your spot, you have to think smarter and explore new ways to come out on top. If everybody lost their competitive drive, our world would be a completely different place to live in.
“Thank G-d for competition. When our competitors upset our plans or outdo our designs, they open infinite possibilities of our own work to us.” – Gil Atkinson
Competition is the lifeblood of invention. Without competition we wouldn’t have the iPhone, computers, cars or the Olympics. If competition wasn’t stretching us further, we wouldn’t need to branch out and create new things.
So what is the key take away? Stop worrying about your competition. Instead of focusing on destroying them, rather focus your energy on your customers and what they need, and on constantly improving what you offer them. But you can only do this if you service your customers better than any other company. You need to keep your offering alive and relevant in their minds, so that your customers don’t switch to your competitors.
This is not to say that you should ignore your competition. It’s important to monitor what the other players in your industry are up to and to benchmark against them. Retain your competitive spirit, but focus your energy and time on customer satisfaction, not on beating competitors.
Jack Welch said: “If you don’t have a competitive advantage, don’t compete.” So if your business has a strong differentiator that customers will pay for, don’t be afraid of competitors – welcome them.