On Competition
One of the feelings that most entrepreneurs experience at some point is that of competition. (Actually, if you don’t ever feel that you probably aren’t going down the right path.) Most great ideas have not one competitor but a number of them. There were at least 50 video sharing sites that were diretly competiting with YouTube to be king of that space (check out this old TechCrunch article for an early comparison). Google was far from the first search engine.
The question is as an entrepreneur how will you react to news of another company doing the same thing as you (or something similar)?
A couple of days ago we got wind that there is another company that is planning to launch a platform somewhat similar to ours. There have been a couple of instances of this happening before in our young life but this is by far the most solid one we’ve come across. Started by some of the sharpest people on the planet…backed by a significant amount of capital…a sense of scope that seem to be almost as big as ours.
So what was my reaction to finding this out?
Joy. 
There are two main reasons why I get fired up about competiting with really sharp people. The first is validation. One of the nice things that Sergey and Larry had going for them was that they didn’t have to convince anybody of the need for a search engine when they were developing Google. Once you have strong competitors in your space it becomes less about whether the idea makes sense and more about whether you can be the ones to successfully pull it off.
Validation is great when you’re pre-launch because often it may be tough for a potential investor to see your vision. Seeing that there are other sharp people interested in similar business ideas often gives them a level of comfort. That’s not to say you necessarily need that. Just that it can help in raising money. (Of course, it’s not always helpful as there are definitely investors out there who don’t relish the thought of putting money into start-ups that have strong competition.)
The second reason is that I believe that competition is probably the main driving factor in fostering innovation. Established companies have a clear sense of who their competition is and what they must do to succeed. Start-ups don’t always have that. Once a few players show up on the scene it’s easier for a company to tell how it stacks up and just how easy or hard it will be to dominate the market. I feel like there should be a Sun Tzu Art of War quote here but it’s escaping me…
I’ve been on a caffeine-esque high in the last 48 hours after learning of this new competitor. I love that feeling. I’ve always had a sense of urgency about what we’re developing but it has been heightened lately. And I’m starting to thinking bigger than I ever have about our idea knowing that (a) some of the smartest people in the world are thinking along the same lines as we are and (b) we’re going to be competiting against these people.
So without further ado let me give you my five tips for dealing with competitive situations:
1. Be honest, realistic and transparent about your competition - Don’t pretend like they don’t exist while at the same time don’t overestimate their impact. Great businesses are almost always formed in competitive environments and First Mover Advantage is often overrated (brush up on Fast Follower theory if you haven’t recently). And be transparent. Communicate with employees and investors about the threats on the landscape. They’ll appreciate you for doing so.
2. Learn from your competitor’s mistakes - If they get to market/revenue/profitability/etc. before you consider that a blessing. You’ll have the opportunity to learn from their miscues. One of my favorite things is seeing new companies launch sites and trying to predict how well they’ll do. Do this enough and you’ll start to develop a keen sense for factors that lead to success and failure. No one predicts it perfectly all of the time but the best entrepreneurs and investors are experts at analyzing new businesses and being able separate the wheat from the chaff (yeah, I’m using way too many cliches in this post…).
3. Don’t emulate your competition - Too many people get way too caught up in what the competition is doing. You see this a lot in software development. People think that just because their competitor included a feature that they need to too (the dreaded “We Have to Win the Battle of the Feature Matrix” syndrome). Rather than overly focusing on your competition spend time with your customers instead. I love this quote from Nivi’s blog:
“Even in the fact of massive competition, don’t think about the competition. Literally don’t think about them. Every time you’re in a meeting and you’re tempted to talk about a competitor, replace that thought with one about user feedback or surveys. Just think about the customer.”
– Mike McCue, CEO Tellme Networks, Former VP of Technology Netscape
(Note: Tellme was recently acquired by Microsoft for close to a billion dollars.)
4. Realize that the world is abundant - In our soon-to-be-posted Manifesto you’ll notice that we’re big believers in the theory of abundance. In other words, the pie is not fixed but rather growing and our actions help in part to grow it. If you operate from a scarcity mentality (”Someone else has to lose in order for me to win.”) then competition should scare the shit out of you. Otherwise, it’s merely something that drives you to better actualize your vision.
5. Never quit until your vision becomes a reality - As an entrepreneur you either have a vision of a world that’s better because of your company or you don’t. If you don’t, quit now. Seriously. If you do then the only point at which you should quit is when someone else has something that is as good or better than your vision. 99% of the time your competitors will have a vision that is different than yours. 99% of the time it will be (at least in your eyes) worse. If that’s the case there’s absolutely no reason to let up.
In the end if someone does a business that’s your vision but better then there’s one emotion you should feel.
Joy.
Because if the vision was strong enough and important enough to you to dedicate your life/career to it the fact that it came true should make you really happy. Sure, you might not be buying the Ferrari or mansion anytime soon but there are plenty of ways to make money in this world and you’ll figure something out.
So relish competition. It’s one of the things that makes being an entrepreneur so incredibly fun. After all, I’m pretty sure a guy like LeBron James woke up this morning hoping that the Spurs bring their best game into the Finals. That’s what will make make hoisting the championship trophy that much more sweet for him. The same will be true for you.
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January 31, 2008 at 5:24 pm
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