Entrepreneurs: Stop Trying to Beat Your Competition
My second startup Echelon recently entered pre-beta stage development, so a lot of my attention to this project has shifted from the “computer science” aspects to the “business and marketing” operations. Echelon is a small AI/Machine Learning firm specializing in split network architecture, using a framework built by my friend and cofounder Adi Sidapara. We provide an API that allows software developers to easily integrate machine learning into their apps. Every time I pitch Echelon, I’m always met with the one question that plagues every fledgling tech startup: “but what about Google or Facebook or Amazon?” That is — aren’t I worried about being sidelined by the competition? It’s a question that I’ve grappled with for a few weeks as I deconstruct Echelon’s competition, such as Google’s Cloud Machine Learning Tool. A few days ago, I finally found my answer. So, without further ado, here’s my quick and dirty guide for finding your company’s competitive position.
Step 1: Know that your competition exists if your customers do
One of the biggest traps ensnaring new entrepreneurs is the belief that their idea is so novel that they have no competition. Take my first startup, Allbeat, which Adi, myself and a few other started in 2015. Our concept was a music-tech company that helped people find new music through eleven second previews (one news outlet called it “speed dating,” but “tinder” is probably a more accurate comparison). After a Google search turned up nothing remotely related to our concept, I started to believe that Allbeat was alone, a strapping pioneer ready to tackle the wilderness of the music-tech industry. As it would happen, the sole competition to Allbeat was the reason that our company was alone. As Bill Aulet, author of Disciplined Entrepreneurship, writes
“Often, your largest obstacle will be convincing customers to make a change from their status quo.”
I found that since my customers existed at all, they were already doing something that our team had to now convince them to stop doing (and as a corollary, get them to start doing what we want them to do). In order to sell the public our product, we had to first sell them our problem.
So when we sat down to do market analysis for Echelon, the first thing we did was think of the status quo which, in out case, put us in a tight spot. It seemed those who wanted to integrate machine learning into their apps probably already knew how to do so themselves, without need for an external service; this lead to one of our cofounders coining the adage “If they wanted to do it, they would have already done it.”
The result of that strategy meeting was a determination to build Echelon’s API in a way that made it so irresistibly simple to use that developers would be hesitant to DIY their own machine learning tools. The key takeaway is that this realization came not from looking across but from looking down, at what our target customers are currently doing to fit their need.
Step 2: Look harder
Some entrepreneurs struggle with only understanding some of the competition against them but are often guilty of looking too narrowly and only focusing on their direct competitors. Joan Magretta in Understanding Michael Porter includes one case study about how airlines flying between Madrid and Barcelona were blindsided by the onset of the Alta Velocidad Española (AVE), the Spanish high speed train.
“Airline executives in Spain may have been defining their competition as other airlines. But customers who switch clearly don’t see it that way…”
It’s important to not only look at the other firms in your industry, but to also look broadly (read horizontally) to those who might be threatening your entire industry. After all, what was Redbox to Blockbuster if streaming services were going to revamp the whole industry anyway? If you are not watching your peripherals for threats to your company, you risk being taken by surprise.
A few years ago, I was working on a project named Drop Sciences, a fire safety company developing MASK, a smoke detector with a chamber that dropped dust masks to help people evacuating high rise buildings survive smoke inhalation (call it my zeroth startup). At first, we thought our major competitors were other fire safety companies — the folks developing new sprinklers and fire suppression techniques. But as we started talking to building owners, we found that it was the building design making us obsolete. New safety standards, as well as better ventilation and larger stairwells, were making buildings more conducive to efficient evacuation. The strongest competitor to Drop Sciences didn’t come from the fire safety industry, but from the architectural firms.
In an effort to avoid repeating the past, I put on a pair of mildly-paranoiac glasses and looked around for unconventional competitors to Echelon. It helps to understand what the weaknesses are in your entire industry, so that your company can be seen at the top even in cross-industry comparisons. In our case, it was the possibility that developers may not need a way to integrate machine learning into everyday applications — that the field would be constrained to hobbyists and laboratories and not in the hands of the general public. Of course, once we reached this somber conclusion, it was difficult for us to figure out what to do about it — for that, we turned to step three.
Step 3: Stop trying to beat your competition (and start trying to add value)
Returning to the question that launched me on this great quest for understanding, how is Echelon going to compete against the larger tech companies? To answer this, I gleaned inspiration from the fictional Dunder Mifflin paper company from NBC’s The Office and its competition with the big brands of OfficeMax and Staples. The reason Dunder Mifflin stays competitive, according to regional manager Michael Scott (Steve Carrell) is that the company provides unmatched customer service, that can’t be replicated by “the big brands.” Though the show is overwhelmingly satirical, this is an important point about companies rise above competition. As Michael Porter puts it, business is not a zero-sum game where only one company can survive and all other competitors eventually fall by the wayside. As long as your company creates unique value for your customer, it will thrive.
“In war, there can be only one winner…in business, however, you can win without annihilating your rivals”
Echelon won’t be able to beat the big companies at their game, but we will be able to win at our game. Profitability is dependent on how your company fits the needs of the consumer. If there is a value gap with what you’re providing, that’s where you’re most vulnerable.
I stopped trying to compare Echelon to it’s competitors on their terms, and started asking about the value that our services provide: easy setup, low maintenance, and yes, customer service. In parallel, we began meticulously modeling our target customers — figuring out what their needs were and how we would be addressing each.
The moral of the story: don’t burden yourself or your company with trying to beat out established firms in some arbitrary metric. Focus on the customer and how you can fit their needs as best as possible, and the “winning” will come on its own.
These three steps — understanding the competition, really understanding the competition, and strategizing to develop unique value — seem like a simple enough procedure to develop a company’s competitive position. However, the truth is that there’s no “one size fits all” approach to entrepreneurship. Echelon’s survival on the open ocean is tied as much to these ideas as it is to the flexibility of its team. Much of what we do at Echelon is “playing by ear” and “trial and error,” and if past experiences hold true there will be both lots of tries and lots of errors. But competition itself is nothing to be afraid of because it shows you are chasing something worth pursuing. And if it’s really the holy grail you’re chasing, you deserve to be leading the pack.