How to analyse your competitors
How to analyse your competitors
From the beginning your startup will stand in competition with other companies which sell a similar and/or substitute product. You will compete for market shares and investors. So you need to make sure to stand out.
Standing in constant competition with other companies urges you to differentiate your product from others. You need to ask yourself whether and how you can be successful. You need to ask questions like, what makes your product unique? What is new about your product? Can you produce the same or better quality at a lower cost compared to your competition? Can you scale your aspect? Answering these questions will create your product attributes which make you stand out among your competitors and at the same time uncover your own weaknesses. Because of your differentiation you will win market shares and convince your potential investors. Especially to your investors you need to show what differentiates your product from others. In other words, you need to show them where your competitors fail and what you are doing better. This means that you need to know your competitors. You need to analyse them. The competitive analysis will make you gain a strategic overall understanding of your and the business of your competitors. It will show your investors that you have actually looked at other businesses working in your space. You have seen what already exists and you can estimate if your competitors are probably already too headway of you. It will make you understand the complex and multidimensional reality of your business as it continuously evolves. Because of the dynamic markets, it is crucial that you update your analysis each month to observe the developments and to be able to react and adapt if needed.
The Tomatosheet Competition Spider was created to guide you through the process of comparing your business to your competitors. It does so with numerical and visual analysis.
To be able to analyse your competitors you first need to identify them.
The Meeting Cockpit
helps you to
who are your competitors
There are several ways of identifying your competitors:
- Internet research
- At the sales location where you can get your product
- At marketing events
- By buying competitor’s products
- By talking to your customers
These are the common ways of how to identify your competitors. Start with the way which is most convenient for you given your limited resources and add at least one other way to check if you find the same competitors or if other competitors appear.
If you find a large number of competitors you should work with sample competitors each one representing similar other players. For example, if your competitors are restaurants then you most likely have a lot of competitors and then you take for each type of restaurant, like pizzeria, fast food chain etc., one representative restaurant. But you do not analyse each single pizzeria and each single fast food restaurant.
Your competitors are not only companies which are in your field already but also companies which can potentially go into your field. For example, if you are about to create an app or a programme, big high-tech companies can be potential competitors even though they did not create the exact same app or programme yet.
Once you have identified your competitors you need to find common characteristics among your competitors to be able to compare them. It does not work the other way around: first setting the categories and then looking for them. No – you have to identify the categories by discovering patterns among your competitors. Breaking down the multidimensional reality is key to simplify the analysis and to better understand the landscape you are working in. First, you have to summarise the information about your competitors to understand where you are strategically different.
To do so
- Download the marketing material of your competitors.
- Systematically search for the product’s characteristics like size, colour, consumption, price, distribution channels etc.
- Over time you will be summarizing the characteristics and find common ones which you will assess in a further step as you will read below.
These characteristics can develop and change over time so you need to continuously be up to date about your competition and adapt your Tomatosheet accordingly. Maybe you understand the market dynamics better over time but you are never really done with the Competition Spider. This means you need to update your Competition Spider in the first few years each month.
How to use this tomatosheet
This Tomatosheet is divided into a front and back part as indicated in row 5 (yellow).
- In the front part you fill in details about ‘old stuff’ which is rather done by established companies like your competitors.
- In the back part you will fill in information on characteristics which are your innovation and part of your business model.
The scores you assign to each characteristic range from 1-10, 1 being the lowest and 10 the highest score a characteristic can get.
The Competition Spider further consists of 2 parts:
- The upper part (red) is the Strategy Canvas which needs your input and you evaluate your own startup and your competitors based on different criteria like distribution channels, characteristics defining your business etc. Your startup is listed in the first row and in the following ones your competitors.
- The lower part (green) generates the numbers based on the upper part. The lower part is then used to create the graphics value curve and the competition spider.
In the lower part
- the first row displays automatically the scores of your startup, which are the same ones like in the upper part in row 7.
- In the second row the average of the values you assigned to your competitors are calculated.
- In the last row the difference between your scores and the competitors’ scores are calculated so you can estimate based on these numbers if you are doing better or worse compared to your competitors.
Based on the values of the first and second row of the lower part your Tomatosheet draws the value curve and the competition spider.
- These are graphical representations of the comparison of your startup and your competitors.
- The value curve represents your scores in a linear graph while the competition spider makes the same statement but displays the values in the form of a circle.
- Both figures include two lines, one representing the competition and one your business. If both lines are congruent then there is no differentiation between your competitors and your business. It means your business does not stand out and you need to rethink your business idea.
The best version of the value curve is if the competitor’s curve and yours create an ‘X’ shape. This means that you do not have an advantage in ‘old stuff’ but that you have an advantage because of your innovation.
If you want to change your product you should always consult your competition spider and check if it makes sense to add certain characteristics given your competition.
In summary, you have the comparison to your competitors expressed in 3 ways:
- the numbers in the lower part
- the value curve
- and the competition spider.
The Competition Spider Tomatosheet tells you how you are doing in comparison to your competitors and where you are strategically different. Start to use it by
The 5 Competition Spider Principles
- Analyse your competitors and your position from the very beginning.
- No competition is almost impossible.
- Identify how your product is strategically different from others.
- Uncover weaknesses and improve them.
- Update once a month.
Nothing is holding you back anymore to do better than your competitors!
Other Tomatosheets, which are a must-have from the very beginning are the Meeting Cockpit and Financial Plan. The first helps you to structure your meetings and make them effective. The second supports you in making your business financially sustainable. Read her more about them.
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