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market research Competitors & collaborators
Conducting market research on key competitors and collaborators within your industry is a crucial part of the business plan. Here, people usually worry that providing detailed accounts of their competitors would put them at a disadvantage when seeking an investor. After all, who would want to invest in an industry that is already so over-saturated? While a common concern, this is the wrong mentality of approaching the market research for your competitors. Judges and institutional investors are rarely unaware of competition. In fact, whatever business idea you end up pitching, it is unlikely that there isn’t already some other business that is doing something similar already. Therein lies the critical importance of competitor research.
Competitor research is not about convincing people that you are better than your competitors. It is nearly impossible for you to be “better” than your competitors who have spent years or perhaps even decades developing their business and their market share in the industry.
The core insight that the competitor analysis seeks to provide is instead about explaining how you are different from your competitors, what unfair advantages you truly have in strengthening this difference, and why this difference is a market opportunity.
How to select competitors for analysis
One of the most important parts about conducting a competitor analysis is knowing which competitors to analyze. Misselecting or conducting a competitor analysis by casting a wide net (including all competitors you can think of) may take a lot of time and resources but provide very limited insight in return. As such, selecting the right competitors plays a big role in the quality of your analysis. It will also determine how you will perceive your company and the final analysis thereafter.
If you look purely at just companies within your industry, you may find over 5,000 companies. Almost every product category is made up of many many different players who offer a variety of solutions. It is unreasonable and unproductive to analyze all of them. Thus, an ideal competitor analysis includes three to five companies that represent the biggest threat to your business. So how would you choose these five competitors?
In order to know which competitors are relevant threats to your company, you need to first clearly identify your company’s positioning. Start out by answering these three questions about your company. Here, be as clear as succinct as possible:
Customer
(WHO)
Who are your target customers (and companies)?
Problem
(WHAT)
What core problem does your product solve for your target customers?
Product Category
(HOW)
How do you solve this problem? Are you solving this problem with unique technology or process?
From here, you can start to identify director competitors. Direct competitors are companies that sell to the same customers and solve the same problem using the same or a similar solution. Follow the diagram below to get a clearer picture.
Here, you can group your competitors under 4 categories:
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Direct Competition = same customer + same problem + same/similar solution
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​Direct competitors solve the same problem for the same customer using the same solution. By solution, I mean a similar technology or approach to the problem —  one that seems indistinguishable to the customer. For example, Uber and Lyft are direct competitors.
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​Different Problem = same customer + different problem + same/similar solution
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​Some competitors solve the same problem with the same technology but focus on a different customer. For example, Zum provides schoolchildren with rides to school, solving a transportation problem for kids and parents. Zum solves a slightly different problem too: safety. Safety is the primary concern for parents when it comes to kids riding back from school. However, it’s ultimately grounded in the same tech as Uber.
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​Different Customer = different customer + same/similar problem + same/similar solution
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​Some companies solve the same problem for the same customer but using a different solution. It can be different in terms of technology or process. For example, Chariot provides group transportation services for commuters and employees, using a completely different approach to solving the same problem for the same customers of taxis.
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​Different Solution = same customer + same problem + different solution
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​The table below summarizes how to evaluate companies for competitive analysis selection. This approach is not ideal and might not work for every company since each one operates in its own complicated ecosystem. But it provides a basic framework for selecting competitors.
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After breaking down your competitors into these categories, it is also important to return back to look at your direct competitors and try to plot their unique selling points against yours. Here, you may start first by looking at what your unique value proposition is, highlighting what makes you unique amongst your direct competitors. Take, for instance, Airbnb’s competitor analysis.
Here, Airbnb provides us with a clear and concise value proposition. These three bullet points are the core values and problems that form Airbnb’s identity as a company.
From this, Airbnb provides us with their competitor analysis, showing us their positioning based on different identifiers.
Identifiers
Notice that these identifiers relate directly to their value proposition.
In the first diagram, we see 2 axes which display Airbnb’s positioning specifically on the “value” of the experiences that they provide. Here, they show that they position themselves as being the “most engaged” to local communities as well as providing the “most unique” experiences, two things that are made possible only by including a wide variety of hosts. Similarly, the second and the third diagram covers other core identifiers within Airbnb’s value proposition including, safety, affordability, and the uniqueness of each accommodation.