Squashed

Here’s an unpopular opinion: you should study your competition. Business literature has continuously advised us to focus on customers, and I don’t disagree with that. The customer is the one with the problem you’re trying to solve, and the one with the money that will keep you in business. Utterly focusing on the customer, then, is an obvious piece of advice.

“If we can keep our competitors focused on us while we stay focused on the customer, ultimately we’ll turn out all right.”  – Jeff Bezos, Amazon

What about the competition though? Is it worth spending some time to see what they’re doing? Apparently, it is believed that it’s a waste of time – and that the businesses that study their competition only do so because they feel inferior and will always be so. Here’s why I don’t agree with this advice.

Scoot.it is a local (Kuwait) pick-up application for people that want their food prepared and ready for pickup from their favorite restaurants. Let’s assume this is a validated problem for modern-day munchers, and that Scoot.it perfectly solves that problem (I have personally not tried the application). Scoot.it would’ve been all set with solving the problem (customer), right? However, it didn’t position itself in a way to avoid being copied by an existing player in the market (competition), Carriage. All that Carriage had to do was add the option of “pick up” when checking out your food.

Carriage Check Out

Understanding the customer’s problem that you plan on solving is extremely important. It’s also important to prepare yourself to be squashed by existing players with deeper pockets. How, then, should you approach differentiating your product?

First and foremost, and this might seem ironic, focus on the customer. You want to make sure that you’re not just differentiating for the sake of being different from the competition. Maybe there’s a reason your competitors or the businesses you’re looking to displace have avoided what you’re setting out to do. Nothing will work if you’re solving a non-existent problem. Then, you’d want to run through an exercise where you ask yourself: if existing product x were to beat us, how would they do it? Is it easy for them to do so? How much would it cost them to set up the assets in order to solve the new problem we’re looking to solve? What advantages, if any, do we have over them if they decide to push us out of the market? (and trust me, if you’re solving a desirable problem, they will).

Here’s how I like approaching things. Existing businesses have acquired specific assets over their lifetime: competencies and a skillset (people) and non-human assets (a piece of land, machinery, an app, etc.). Those assets allow them to solve a specific set of problems. For example, Carriage is set up with an app, a pool of drivers, and back-end infrastructure (let’s keep things simple). This was initially set up for them to deliver food. However, their assets also allow them to deliver flowers, groceries and other consumables. When you’re a new entrant in a market, you want to ideally solve a new or different problem that would require assets that existing companies do not own yet. This makes it harder for them to catch up.

Al-Rifai

AlRifai is a regional franchise that sells nuts and coffee. It is well known, predominantly, for its nuts. They approached me with a challenge: how might we deliver a differentiated experience through our coffee beans. The consumers’ perception is that an outlet that only sells coffee beans would be superior than an outlet that’s well known for nuts but also has coffee. Instead of spending a lot on a mega-campaign to prove to consumers that AlRifai’s coffee is as good if not better, we asked: what could AlRifai deliver to consumers, as an experience, that others can’t? In the case of this new coffee bean experience, AlRifai is the entrant in the market, and outlets like Alameed and King’s Coffee are the existing players. What I’ve found is that AlRifai has a significant advantage in its variety of SKUs and other products that it could sell with its coffee compared to Alameed and King’s. So the challenge was further rephrased to: What sort of experience can we deliver to consumers by utilizing our advantage in SKUs?

Focusing on the customer is great. Exclusively focusing on the customer and disregarding the market you’re entering and its existing players is asking to be squashed. Always innovate from a point of advantage. Let the existing businesses play by your rules. Don’t play by theirs.

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