I meet a lot of entrepreneurs who start writing code before they know if the idea they are working on has been already executed. They have read their lean startup books and want to rush into creating their Minimum Viable Product. They are missing a simple and important step: they haven’t benchmarked their competition.
So if you have a great idea, before you start your lean customer development or touch any code devote the next 5 minutes to saving you months of time and let’s see how you can become a master at benchmarking without loosing your engineers hat.
What I want to teach is how to analyze and map the competition, how to position your idea in the scenario of its market and competition before you start working on any other aspect.
Extrapolate some keywords from your idea: think of the potential customers, the type of sector, the type of solution and jot down the keywords that come to mind.
Use these tools to find competitors or further keywords:
- AngelList: here you will find a lot of startups that have recently been funded or are applying for funding.
- CrunchBase: here you will find a huge repository of technology companies. The curators associate a number of keywords to each company. Look for those in the “Category” (or keywords) for each company. Look for those to extend your search if necessary.
- Startup Genome: this project is an effort to map startups on a global scale. Contrary to AngelList and CruchBase they have a truly global scope and can help you also find hyperlocal startups
- TechCrunch, Mashable and other tech blogs: search those blogs for your keywords. This can lead to a huge amount of results and you should do this mainly to understand if your idea is being discussed at the moment and how it is framed by the technology press.
You will start finding companies that are similar to the one you are founding. You may come from a place where you have the tendency to focus only on the technology they use. Don’t focus on that. Broaden your scope. Try to understand if they obtained funding (CrunchBase can be useful), who has funded them, how many unique users they have (look for this data on Compete or Alexa), look at their marketing materials (analyze their website, look for conference talks by them), try to understand if they are profitable and how much money they are making or losing.
If you found no company in your space, it means you are not doing your research right. There is a 1 in a trillion possibility that you have discovered a new, virgin, totally unexplored market. In this case you are a genius and should not waste time reading posts by an average person like me. In all other cases you are just doing your keywords all wrong.
Try to understand if the companies you have found have some distinctive traits and if you can distinguish one from another from those traits. Do they approach the market in the same way? Are they focused on a certain type of customer? Are they evolving in a certain direction?
Once you find these distinctive traits try to imagine your idea among those. Where would you find your startup in relation to those other companies? Close to which companies would you map it? You can start with just similarity and just map how close your idea is to other existing products and companies.
But if you have found already some distinctive traits try to map two of those traits on a Cartesian chart.
Let’s say that your idea is a software. In your market you could have two axis where you compare the type of customer and the type of solution. Or where you evaluate size of business and type of targeting. You can be creative about those axis. But usually the most common positioning charts simply feature price and quality.
You should not be limited to X and Y charts, you can visualize your competition in many ways. For instance you layout your competitors using a “petal” slide.
At the end of your exercise you will end up with:
- a list of who is already on the market.
- an idea of the size of the market
- an idea of your distinctive features (or lack thereof) compared to those already on the market
- a lot of knowledge of how the companies in your market already approach their customers
- a list of funds, angels and advisors of the companies already on the market
- some ideas on how to find experts in your field and maybe also a hint of where to get your first employees from.
Your work is not finished. Now it’s time for really important questions:
- Will you be able to compete? Will you be able to simply match what others are already offering in the market? Are you offering something new? Is that “new” part worth the cost of switching?
- Are you bringing to the market simply some incremental innovation or are you disruptively changing the environment you will enter?
- Would it be better to contribute to an existing project rather than work on the Herculean effort of creating your own company?
Once you are able to answer those questions you are most welcome to pick up your lean startup book and start the process of customer development. Or not!