Has it been done already? Can it be copied?
[This post is part of a series of blog posts titled “6 Tests to Know Whether You Should Pilot Your Idea” and focuses on Test 2: Competition. The full blog post series is available in a downloadable ebook. Enroll for the online course that covers this methodology: Opportunity Assessment for Entrepreneurs and Innovators. Click here for a summary overview, here for the previous post (Test 1: How to Check Market Potential for Your Business or Technology Idea) and here for the next post (Test 3: How to Check Technical Feasibility of Your Business or Technology Idea).]
Why is this important?
“There is surely nothing quite so useless as doing with great efficiency what should not be done at all.” - Peter F. Drucker
With the world’s population approaching 8 billion, odds are that someone else has had the same idea as you. And you can get so attached to your idea that you subconsciously avoid looking too hard for others doing the same thing. So you have to force yourself to dig.
Don’t fool yourself by saying that there is no competition. There is always an alternative. People are surviving and meeting their needs right now without your product or service.
You also need to think about barriers to entry – what will make it difficult for you to enter the market? What will make it difficult for others to copy you?
“In America, when you bring an idea to market, you usually have several months before competition pops up, allowing you to capture significant market share. In China, you can have hundreds of competitors within the first hours of going live. Ideas are not important in China - execution is.” - Ma Huateng
Competition can be a good thing – it confirms that there is a market. It does not mean you have to stop – you might target profitable niches, new marketing approaches, new branding, new territories, new business models. Or you might decide to tackle the competition head-on and do it better than them.
“I have been up against tough competition all my life. I wouldn't know how to get along without it.” - Walt Disney
But you better be aware of what you are getting into. CB Insights lists getting outcompeted as one of the top 4 reasons startups fail.
How can I check this quickly at low cost?
There are 4 key questions you should answer:
- Has it been done already?
- How easily will others be able to copy my idea?
- What are the barriers to entering the market (for example regulatory approvals, network effects, switching costs, cost advantages, access to distribution channels, patents, brands and economies of scale)?
- How are people getting the job done right now? How are they coping with the problem or addressing the need?
Tips for online research on the competition
Online search engines are the obvious starting point for answers. Some tips:
- Get to know the syntax (things like wild cards and Boolean operators) of the search engines you are using (for example, here is a basic guide for Google);
- Be systematic and thorough;
- Make a list of keywords and generate synonyms;
- Adapt the keywords as you notice what words people use to describe what you are looking for;
- Make notes as you search;
- Try different combinations of keywords;
- Also search patent databases (such as Google Patents) and academic publication databases (such as Google Scholar or JSTOR).
Real-world post mortem – Vidme failed despite having a better product than Youtube
Vidme was a video hosting service that aimed to provide content creators with better monetization and viewers with a better experience than Youtube, using a crowd curation approach similar to Reddit.
Vidme quickly gained substantial traction (becoming one of the top 1000 destinations on the web), which validated the existence of a need and market niche.
However, both advertisers and audiences were reluctant to switch over from the huge platforms of the incumbents. This conspired with high video storage and delivery costs to keep Vidme unprofitable. Additionally, as Vidme founder Warren Shaeffer pointed out “…both Facebook and Youtube actively deprecate content shared from competing platforms…”
Ultimately, this forced Vidme to shut down on 15 December 2017. You can argue that this failure was due to network effects and switching costs (two of the entry barriers mentioned earlier), but both of these arose from incumbent competitors. It is concerning that the big tech incumbents are so embedded that it has become extremely hard for startups to compete, even with superior products or services.
This stifles innovation and means that the incumbents don’t have to work as hard to satisfy content creators. “YouTube’s monetization conditions will not get any better either because it has no reason to – it knows its creators aren’t going anywhere (hence the need for healthy competition!),” according to Uscreen, another start-up aiming to offer improved monetization to content creators.
People are left with few choices except for the mega-platforms, and when the big tech companies decide to offer a new product or service (such as Facebook, Instagram and LinkedIn adding video content), they have huge existing audiences and deep pockets to drive rapid adoption.
The lesson? Don’t ignore competitors.
You should have your own strategy & focus and not just watch and react to what the competition is doing, but don't ignore the competitive landscape.
“The perfect target market for a startup is a small group of particular people concentrated together and served by few or no competitors. Any big market is a bad choice, and a big market already served by competing companies is even worse. This is why it’s always a red flag when entrepreneurs talk about getting 1% of a $100 billion market.” – Peter Thiel, Zero to One.
In the next post in the series I discuss how to test your idea's Technical Feasibility.
Let me know in the Comments section what you think of this method or if you have a good example of where things went wrong based on the Competition criterion.
This methodology is part of a Moolman Institute online course called Opportunity Assessment for Entrepreneurs and Innovators. The course will guide you step-by-step through the 6 tests and provide you with a set of practical tools and templates to make it as easy as possible for you to get to product launch or idea demise.
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Photo of lion by 12019 on Pixabay. Photo of grave by Matt Botsford on Unsplash.