Understanding your competitors — both direct and indirect — gives you insights necessary to gain market share and improve visibility into likely future market shifts. Building a competitive analysis is also an excellent way to engage your employees in a meaningful way and get them thinking beyond your organization.
In business, competition is never as healthy as total domination.
Widely seen as one of the great investors of our time, Peter Lynch ran Fidelity’s Magellan Fund from 1977 to 1990, posting an average return of 29 percent and beating the S&P 500 11 of 13 years. His quote about competition sets the stage for looking at building a competitive review as a step toward building a plan to dominate your marketplace.
Who are your competitors, what are they doing, and how should you respond to their moves? Developing a complete understanding of your competitors helps you identify what you need to do to dominate your marketplace and, importantly, helps you identify open spaces where you can operate with limited or no competition.
Middle-market companies are particularly vulnerable to competitive pressure. As a middle-market player, you are likely to lack the revenue diversification needed to survive a competitive attack on your position. You are also far less likely to have the resources needed to stay on top of the competition and are typically so focused on just running your business day to day that staying abreast of the competition feels like a luxury you can’t afford. Because of these factors, you are vulnerable to external threats that can threaten your enterprise. Get ahead of that by focusing on your competitors in a structured and ongoing way. It’s time well invested.
One of the tactics I’ve found very productive is to engage employees across your organization in the exercise. Assign staff members a competitor to monitor. Give them a framework for monitoring competitor activity, and hold periodic review sessions. It’s a great way to get multiple people in your company engaged in thinking strategically and focused outside the four walls of your office.
Whom to look at?
Clearly you need to assess your direct competition. What companies provide similar products or services to your customers? If you operate in a big industry with plenty of competitors, apply the 80/20 rule and focus on the biggest ones to make the project scope manageable.
But don’t just look at direct competitors; the indirect set is sometimes more important and often more illuminating. Who out there may be poised to disrupt your market? What other products and services are competing for the same share of customer wallets? As an example, if you ran a record label, your direct competitors are the other labels. You certainly want to know what they are up to, but you should also be tracking streaming services and other entertainment outlets that soak up your customers’ discretionary entertainment dollars.
What information should you gather?
For each competitor, gather data focused on:
- marketing channels, messages and tactics
- products and services offered
- strengths and weaknesses
- key brand differentiators
How do you gather it?
In today’s ubiquitous information world, it’s hard to keep anything secret, and source materials are abundant. One of the best ways to gather information is to talk to your sales reps and your customers. They will have a good idea about what your competition is up to. Additionally, use these sources to gather information:
- product Samples
- sales literature
- articles — blogs, magazines, and newspapers
- annual reports
- trade associations
What will you learn?
One of the best outcomes of a competitive review is coming away with a rich understanding of how you stack up against the very people you are battling for market share. You will start to build an early warning system so that you aren’t caught off guard by moves your competitors make; you can develop effective countermeasures to help you keep your share. You will also better understand your real competitive advantages, allowing you to exploit competitor weaknesses to your advantage.
A structured competitive review is a key part of building your strategic plan and a great way to engage your employees in a valuable exercise. If you need help getting started, reach out to us and we’ll help you down the road to Capture Your Future.
Capture Your Future is a series of articles bringing you practical insights gleaned from over 20 years of building strategic plans for divisions of big public companies, medium-size privately held companies, and nonprofit organizations. Along the way we’ll share some lessons we’ve learned from doing the right things, and sometimes the wrong things, in building good strategic plans.
Other posts from the Capture Your Future series: