Market Research

Why Strong Competitors Can Help Your Business Grow

September 21, 2011

For some entrepreneurs and startup founders, the simple mention of “competition” causes paranoia. To them, it’s a dirty word that incites visions of undercut prices, copied ideas, and stolen market share.

In reality, the reaction should be completely opposite. Because believe it or not, strong competitors can actually help your business. They keep you on your toes, provide valuable market insight, and force you to keep your product strategy fresh.

And, as serial entrepreneur and angel investor Babak Nivi writes on Venture Hacks, companies should always assume – and embrace – competition. As Nivi suggests in his post, “if a competitor is going to scare you, you shouldn’t have started a business in the first place.”

The article and some of the comments that accompany it discuss the value of competition and how much businesses should pay attention to it. But I think two points Nivi discusses are particularly relevant for aspiring expansion stage product managers:

  • Never assume you know everything about your competition. In fact, always assume someone is competing with you.
  • Consider your competition seriously, but do not back out of a market because of competitors.

I think the second statement is especially poignant. As author and entrepreneur David Silverman writes for the Harvard Business Review, competition simply means that a market exists for your product. And just because competition exists, doesn’t mean it’s doomsday for your business.

Silverman presents the Shake Shack in New York City as a perfect example. It’s within walking distance of two McDonalds, 10 other lunch hotspots, and within a minute of hundreds of other restaurants. But in spite of all that competition, the Shake Shack’s lunchtime crowd is routinely lined up out the door.

So how, you ask, does that example apply to expansion stage software companies?

Recently, I had a discussion with our investment associates about the current state of the markets. With the rapidly decreasing cost of starting a business, there’s a correlating multiplicity of startups hoping to address any given market.

And because of the agile nature of today’s product management lifecycle, startups are constantly “pivoting” and experimenting with their products and services, which consequently creates even more overlap and competition within the markets.

In short, competition among startup and expansion stage software companies today is unavoidable.

Long gone are the days where a venture capital advisor was assured of a first mover’s advantage in a “greenfield” market. Competitors will always pop up, and most likely they will offer cheaper alternatives to undercut any perceived market leader.

Conventional wisdom may be to despise competitors for doing that, but companies should actually embrace their crowded, competitive fields. After all, the more competitors try to market and flaunt their latest features and functions, the more free “intelligence” you can collect from their marketing and sales materials.

Each competitor’s product is a test of the market’s receptiveness and demand for a solution whose outcome is very easily ascertained. And staying on top on those market trends, brand strategy consultant Michelle Levy tells, can help you make practical decisions around product development, pricing, promotions, and messaging.

Fast moving competition keeps your own sales team on its toes and ensures they will be looking out for competitive intelligence. It also gives your product management team lots of ideas for how to improve your product.

The article, which is also a guidebook for how to conduct competitive research, suggests that healthy competition can open the door to targeting better customers, forecasting a market’s potential, determining market prices and competing product offerings, and discovering new customers altogether.

Of course, those are just some of the many ways that competition can keep your product strategy fresh, and your operations lean and running on overdrive. And on top of all those things, the adrenaline rush that’s sparked by true competition is really the secret ingredient to startup success.

So, do you know who your biggest competitors are?

If you think you don’t have any, you might not be looking hard enough. And if a few strong competitors make you tremor, maybe it’s time to rethink how you view that competition.

Chief Business Officer at UserTesting

Tien Anh joined UserTesting in 2015 after extensive financial and strategic experiences at OpenView, where he was an investor and advisor to a global portfolio of fast-growing enterprise SaaS companies. Until 2021, he led the Finance, IT, and Business Intelligence team as CFO of UserTesting. He currently leads initiatives for long term growth investments as Chief Business Officer at UserTesting.