Jeff Bezos said that while so many other companies focus on beating their competitions, Amazon focuses on pleasing and winning over the customer.
Both approaches might look like they are the same but they are not. When you focus on your competition, you will likely lose the customer and still get crushed by the competition; when you focus on serving the customer’s need, you will likely win over the customer, and you will likely crush the competition by default. In business, the customer matters more than the competition. The customer makes your bank account fat, the competition makes your bank account thin. Which is better to focus on? The customer.
However, at the risk of oversimplification, let’s consider how to think about your competition.
1. Your competitions usually have different goals from you.
It is almost always impossible to do something nobody is already doing (even if the thing doesn’t seem like a direct competition it might be a substitute, and a substitute is a competition so long as it takes business away from you!). But even then, all competitors have different goals from each other.
If you really have a “Why” for starting your startup, your goal is likely going to be different from your supposed competitor(s). So, since your mission will usually be different, you should worry more about the intrinsic mission for your company than about those who may seem like they are doing the same thing –who in fact, actually have a different mission than yours.
Focus on your why and that will almost always dwarf your worries about your competition. But that is not to say you won’t think about those who can take business away from you –which is why you need to read further.
2. Race forward – don’t stop to fight.
The way to win the competition isn’t to stop, focus on them, and start fighting them. Instead, the way to win is to race forward — so you can pass them. The way to win is to plan well and execute with speed and effectiveness. The way to win is to act and learn faster than the competition.
Statistically, it is likely that someone else has thought about the idea you are working on now, but we all know, ideas don’t have much value – execution trumps everything else. (As Thomas Edison rightly said, “Genius is one percent inspiration, ninety-nine percent perspiration.” ) And it might even be possible that someone else has tried to execute on the idea you are working on but didn’t execute well; and even if they executed well to their best abilities, it is possible you are going to do a better job since you have a different goal, team, experience, and skillsets.
So, if you want to stay ahead of the competition, race forward. Don’t stop to fight. Fighting reduces your efficiency and effectiveness – the two of the most important qualities of all successful startups. That is how Facebook took business away from Myspace. That is how Google took business away from Yahoo. Athletes running a race don’t stop to look at rivals; instead, they race forward to the finishing line.
3. Create what people want – the number one goal of a company is to make what people want.
That is your best strategy for fighting and beating the competition because, in the end, you are not fighting the competitors per se, you are fighting to win over the customer. And our society is such an egalitarian one that people are free to buy any legitimate product they want, (thanks to our evolving and progressive democracy). So if you want to win over the customer from your rivals, do what those customers want and the trophy will be yours to take home.
4. Build proprietary technology.
If your product is really unique and different, you can build a proprietary around it. Google, Twitter, Facebook, Apple, and all the successful companies you know have proprietary technologies.
Peter Thiel said that the only way to achieve proprietary technology is to do something that is at least 10X better than what everyone else is doing. And the only way to do that is to be very unique and different. You can’t achieve 10X better by trying to do what others are doing or by trying to be a little bit better than them. Bruce Gibney, the author of What Happened to the Future, said that all successful companies are sui generis. To beat the competition, be different in valuable ways.
5. Achieve economies of scale.
Most great businesses are built on the principles of economies of scale. Having the economies of scale means that the cost of running your business gets cheaper as you grow and expand the business. There are many reasons for this. At the outset, you have to incur some fixed costs such as costs of machines, computers, and land. But as you produce more and expand, those costs would have been taken care of and you are only running the production costs. And more so, as you produce more, raw materials get cheaper since suppliers will likely begin to give discounts and other special offers as your bargaining power increases. Networks, contacts, skills, and bargaining power may also help accelerate the effects of economies of scale. So, try to pursue a business with the capabilities to achieve economies of scale through expansion.
In some industries, economies of scale already achieved by incumbents often serve as entry and mobility barriers to others intending to come into those industries. So you may also use economies of scale as your competitive weapon against new entrants.
6. Pursue network effects businesses.
Having a network effect means that the value of your business increases as more people use it. When someone uses Facebook, it is more likely that their friends will use Facebook, since that is how they share value among themselves. And that quality makes new entrants into your market stay away since they may not be able to get the kind of user base you have already acquired network effect with. For instance, it is difficult for people to leave their current friends on Facebook to join another new ‘Facebook’. This can only work if the new rival Facebook can get all the present users of Facebook to leave all at once. That is why the company that first gets the highest number of users in network effect businesses almost always wins the race.
There won’t be another successful Facebook. There won’t be another successful Twitter. There won’t be another successful LinkedIn. If you want to win, find a business with network effects qualities, be the first mover, and take advantage of the network effects features there. Such businesses are usually marketplaces and platforms like Facebook and eBay.
7. Pursue branding and aggressive marketing – with the condition that you have a great product already.
If you have a great product, which is the first condition, it is possible to win the competition through branding alone without any conventional product differentiation. Users are humans and they buy stories surrounding a product. So if you can find a way to stand out through branding, it is very possible to win the competition. It could be that you have a unique history such as your background that makes the users view you like a god or some superhuman. For instance, people who subscribe to Apple products don’t just do so just because Apple is the best product in the world (although it might be), but because of Steve Jobs and how people idolize him. The stories surrounding his life is just so amazing to people, so they get inspired and awed. (And don’t forget that we are emotional being, not logical being, most of the time. Behavioral economists would tell you better!)
If your story is inspiring enough or you have a unique message to tell about your product that seduces and entices people, you will likely win so long as you already have a great that solves real problems for your users.
8. The market is so large.
Most markets are so large that you can do the same thing with other people and you will still get a large share of the market. Most markets need a lot of companies to serve them. And don’t forget that markets can be expanded and even new ones created from scratch.
9. Focus on the things that don’t change.
Jeff Bezos once observed: “I very frequently get the question: ‘What’s going to change in the next 10 years?’ And that is a very interesting question; it’s a very common one. I almost never get the question: ‘What’s not going to change in the next 10 years?’ And I submit to you that that second question is actually the more important of the two–because you can build a business strategy around the things that are stable in time.”
The respected business thinker and Collaborative Fund partner, Morgan Housel, has outlined in more detail, the things that never change in business. They are:
- Lower prices than your competitors
- Faster solutions to problems
- Greater control over your customers’ time
- More choices for your customers
- Added comfort to your clients or customers
- Entertainment/curiosity
- Deeper human interaction
- Greater transparency
- Less collateral damage to your customers
- Higher social status
- Increased confidence/ trust
10. Think benevolence, not competition.
In the world of today, the bad guy who wants to kill other businesses rarely wins in the long run. Instead, it is those who seek to empower others that do win. Gone are those days when businesses were used to killing other businesses in order to win the game. Today, it is the companies that expand the pie for everyone that win eventually. This is so because the rule of the game has been rewritten and those who win have to rely on others to do so.
That is how the economics of most of today’s businesses are set up. Many businesses rely on Facebook to survive and Facebook in turn rely on them to survive. The same applies to Google. The same applies to Amazon. So, think benevolence, not competition. Think of how you can expand the pie rather than reduce it. Nobody is saying some businesses don’t get killed by the actions of others, but that shouldn’t be your intention. Your intention should be to serve customers, and if some me-too businesses get killed as a result, so be it!
11. The ultimate hack to beating your competitions is to be so good that none of them comes close to what you are doing.
Build a purple cow company; don’t build a me-too kind of company. Build what people want and let them see it and you are sure to win the race.