Competition and Strategy for

Start-ups
Definition of Competition
Competition in marketing is the rivalry between businesses that offer similar products or services to a
similar target audience. The alternatives your target customers has – real or perceived.
By choosing our competition, we make decisions.
• Who do we want to compete with?
• Why? Where are they strong? Weak?
• Why will some set of customers choose us?

• The Better you understand your competition, the more likely you will succeed.
• Statement: “We have no competition”
• Response: “Then there is no market”
Competition Score Sheet
1. What is our core competency?
2. Who are our short Term competitors? Longer Term? A… B…C.
3. What market share do A… B…C. have?
4. Name 5 customers of A…B….C… (if consumer….customer focus)
5. What do they like about A..B…C…
6. What do they dislike about A…B…C…
Plan Drivers
• What are the three major strengths of your #1 competitor (example: excellent product, loyal
customers, fine customer service)
• What you can do, and what do you want to do?
• What creates value for your target customers?
• What are the Alternatives?

• Different
• Product (Quality, Value Emphasis)
• Process (Way to Compete)
• Business Model (Pricing, Distribution)
• Imaging (Perception)
• Other (Geographic)
Do Not Underestimate
• Customers do not change easily
• Competitors have many advantages
• They are hardworking, smart & successful
• They will fight hard to protect their hard fought prize
• They have existing tested products with track record of success
• They have labs with new products
• They have relationships with customers
• They have financial resources & revenue streams
• They have a full existing infrastructure
• They have lots of friends (i.e., moles)
• Once they realize you are attacking …
Competition Steps
• Describe the incumbent competitors—just the major ones
• Number
• Size and market share
• Product and company position
• Technology and likely product roadmap… what will their next product look like
• Describe emerging or potential competitors.. New entrants?
• Stage and backing
• Company and product position
• Technology and likely roadmap
• Position your venture relative to these competitors
• How you will chose to compete (price, technology or customer intimacy)
• Short term and longer
• Projection on who will win in the scenarios and potential alliances
• The biggest competition strategy: What advantages do you have?
• Your job is to upset the status quo… and to redirect it to a place where you competitor is
unable or unwilling to go (for a while)
• Maximise market share
• If the customer will change, why will they choose you?
• Understanding that this your first competitive challenge puts things into a more appropriate
context
• Which segment first? Is this the segment you want? Will it lead to adjoining segments?
• Under what set of circumstances will they try your solutions? Continue
Look at Competitor Through Customers’ Eyes
• Where are they located?
• What is their sales force look like?
• Who are their key customers?
• How happy are their customers?
• Where are they perceived strong? Weak?
• What is their product? Strengths and weaknesses?
• What is their marketing message?
• What are their financial resources?
• How have they responded in the past to competition?
• What is their ownership structure?
• What is their management?
• How do they like to compete?
• What significant changes have there been?
• What is their core competency? Real and perceived?
Then group the competitors together
• Determine Appropriate Groups
• Geographic?
• Size?
• Focus?
• Required
• Time Frame
• How they Compete
• Vulnerable vs. Weak
Definition of “Core”

• Determine what your “Core” is – that being what is it that will give you sustainable competitive
advantage and you will protect at all costs.
• Your core is what you invest your resources into to do better than anyone else and it is what will
give you your unique selling proposition over time if not from day 1.
• It can be IP, special capability, market share, access to key resources (e.g., vendors, buyers, markets,
partners), brand, costs, or other. This is what will give your company a high valuation as well.
• Core matters to you and the customer might not care about it but it will be fundamental to you
creating something of benefit to them
• It could be a capability and not a benefit yet
• Chart Your Competitive Position
• It is good at this point to revisit your Uniqueness. What is it that makes you unique compare to
the alternatives? Most specifically, what makes you most valuably unique to your persona?
• This will come directly from the persona’s priorities.
• Always consider that one of the most compelling alternatives is to “do nothing” and how will
you overcome this? Considering the alternatives including competition, why is yours the best
from their vantage point?
• This will relate back to and build off your Core.
Competitive strategy
• Competitive strategy is about being different. It means deliberately choosing a different set of
activities to deliver a unique mix of value.
• Strategic positions can be based on customers’ needs, customers’ accessibility, or the variety of a
company’s products or services.
• A competitive advantage is a quality or attribute that helps a business outperform its competitors.
It's the combination of marketing elements that sets a business apart and gives customers a unique
benefit.
• Here are some ways a business can gain a competitive advantage:
• Cost leadership: Offer a product or service at a lower cost than competitors
• Differentiation: Create a product or service that's unique or innovative
• Niche advantage: Serve a specific segment of the market better than competitors
• Strategic alliances : Pool resources to undertake a mutually beneficial endeavour
Blue Ocean Strategy
Now for Something Completely Different: “Blue Ocean Strategy”, developed by Chan Kim and Renée
Mauborgne.
• Expose you to a very different approach to thinking about competition
• “How to Create Uncontested Market Space and Make the Competition Irrelevant”
• Example: build a new category.. Apple’s Think Different has made it the most innovative company in
the world
• I phone (Think different, everything different)
• iTunes (Think different, shop different)
• iPod (Think different, listen different)
• Blue ocean strategy is the simultaneous pursuit of differentiation and low cost to open up a new
market space and create new demand. It is about creating and capturing uncontested market
space, thereby making the competition irrelevant. It is based on the view that market boundaries
and industry structure are not a given and can be reconstructed by the actions and beliefs of
industry players.

• Red oceans are all the industries in existence today – the known market space. In red oceans,
industry boundaries are defined and accepted, and the competitive rules of the game are known.
• Here, companies try to outperform their rivals to grab a greater share of existing demand. As the
market space gets crowded, profits and growth are reduced. Products become commodities,
leading to cutthroat or ‘bloody’ competition. Hence the term red oceans.
Red ocean strategy Blue ocean strategy

• Compete in existing market space • Create uncontested market space

• Beat the competition • Make the competition irrelevant
• Exploit existing demand • Create and capture new demand
• Make the value-cost trade-off • Break the value-cost trade-off
• Align the whole system of a firm's activities • Align the whole system of a firm's activities in
with its strategic choice of differentiation or pursuit of differentiation and low cost
low cost
Three Key Points of Blue Ocean Strategy

1. Focus
• Emphasis a few factors
2. Divergence
• Value curves that stand apart
3. Compelling Tagline
• Communicating quickly your difference and value proposition
• “The speed of a plane at the price of a car – whenever you need it”
The Four Actions Framework
• The (Eliminate-Reduce-Raise-Create) ERRC Grid is a tool of blue ocean strategy. It helps companies
differentiate their products and services from competitors by applying four actions to create a new
value curve.
• Eliminate: Which of the factors that the industry takes for granted should be eliminated?
• Reduce: Which factors should be reduced well below the industry’s standard?
• Raise: Which factors should be raised well above the industry’s standard?
• Create: Which factors should be created that the industry has never offered?

• It is a simple matrix-like tool that drives companies to focus simultaneously on eliminating and
reducing, as well as raising and creating while unlocking a new blue ocean.
ERRC Grid of the iPhone
Strategy for Start-ups
• Strategic opportunities for new ventures can be categorized along two dimensions:
• attitude toward incumbents (collaborate or compete?) and
• attitude toward the innovation (control or execution?)

• This produces four distinct strategies that will guide a venture’s decisions regarding
• Customer
• Technology
• Organization
• Competition
The Entrepreneurial Strategy Compass
• A go-to-market strategy for any innovation involves making choices about
• which customers to target,
• what technologies to apply,
• what organizational identity to assume, and
• how to position the company against which competitors.
• For corporations with resources, the four decisions involve analyzing data, engage in market
research and experimentation and prior experience.
• A start-up in contrast, lacks a history and the knowledge it brings.
• Entrepreneurs may feel overwhelmed by the vast number of choices they face, even though some
paths can be dismissed as impractical, and some won’t coherently mesh.
• To sort through potential strategies, every new venture must consider two specific competitive
trade-offs:
• collaborate or compete? and
• control or execution?

• At least four domains of decision making are crucial for every venture to create and capture value
on a sustainable basis. Although any company will face additional choices that are particular to its
context.
Collaborate or compete?
• Collaboration with established players provides access to resources and supply chains that may
enable the start-up to enter a larger and better-established market more quickly.
• However, the venture may encounter significant delays owing to the bureaucratic nature of large
organizations and may also capture a smaller fraction of that potentially larger pie (The incumbent
is likely to hold greater bargaining power in the relationship).
• Competing against established players in an industry means the start-up has more freedom to build
the value chain it envisions, to work with customers that the incumbents may have overlooked, and
to bring innovations to market that enhance value for customers while displacing otherwise
successful products.
• However, it means taking on competitors that have greater financial resources and an established
business infrastructure.
Control or execution?
• Some companies believe that they have more to gain from maintaining tight control over
a product or a technology and that imitation will leave them vulnerable. Thus they invest
in protecting intellectual property.
• Formal IP protection, though expensive, can allow a technology-driven start-up to exclude
others from direct competition or to wield significant bargaining power in negotiations
with a supply chain partner.
• But prioritizing control raises the transaction costs and challenges of bringing an
innovation to market and working with customers and partners.
• In contrast, concentrating on quickly getting to market speeds up commercialization and
development, which typically occurs in close collaboration with partners and customers.
• Start-ups that choose to pursue this route prioritize the ability to experiment and iterate
on their ideas directly in the marketplace.
• Whereas a strategy built on control can delay entry, start-ups focused on getting to market expect
competition and use their agility to respond when competitive threats arise. They move fast and
break things.
• Rather than seek to identify an á la carte combination of choices that are “right” for a given idea,
every new venture can consider the potential for value creation and value capture from the various
options that might be crafted within each of the four strategies:
1. The Intellectual Property Strategy
2. The Disruption Strategy
3. The Value Chain Strategy
4. The Architectural Strategy
The Intellectual Property Strategy
• The company collaborates with incumbents and retains control of its product or technology.
• The start-up focuses on idea generation and development and avoids the costs of downstream,
customer-facing activities.
• The core idea must be of value to the customers of incumbents; therefore, development choices
concerning it will dictate which incumbents are the most suitable partners for the venture.
• In addition, because cooperation requires alignment with the incumbents’ activities, the start-up
will probably choose generalizable technology investments compatible with existing systems.
• Finally, the start-up’s identity will be reflected in its development of innovations that can be
brought to market through chosen incumbents.
• Entrepreneurs that pursue this strategy take maintaining and protecting their intellectual property
very seriously. Carefully conceived patents and trademarks, managed in combination with solid
R&D, can create powerful defenses that allow a start-up to preserve bargaining power over long
periods of time.
The Disruption Strategy
• This strategy is the polar opposite of an IP strategy. It involves a decision to compete directly with
incumbents, emphasizing commercialization of the idea and the rapid growth of market share
rather than control of the idea’s development.
• The start-up strives to quickly build capabilities, resources, and customer loyalty so that when the
incumbents finally wake up, the start-up is too far ahead for imitators to catch up.
• Disruption entrepreneurs aim to redefine established value chains and the companies that
dominate those chains. But the very nature of disruption permits others to follow. Thus the heart
of this strategy is the ability to get ahead and stay ahead.
The Value Chain Strategy
• The start-up invests in commercialization and day-to-day competitive strength, rather than in
controlling the new product and erecting entry barriers, but its focus is on fitting into the existing
value chain rather than upending it.
• Value chain entrepreneurs are driven by the customers and technology of other companies, they
focus on developing scarce talent and unique capabilities to become preferred partners.
• Entrepreneurs who adopt this approach create and capture value by focusing on a single layer of
the value chain (horizontal/vertical) in which their expertise and capabilities are unrivalled.
• The start-up’s capabilities must translate into enhanced differentiation or cost advantage for the
established companies.
• And even if the innovation does enhance the competitive position of the overall value chain, the
new venture can prevail only if other players in the chain are unable to replicate the value it has
created.
The Architectural Strategy
• Entrepreneurs who choose and succeed with an architectural strategy tend to have very high public
profiles.
• This strategy allows start-ups to both compete and achieve control, but it is out of reach for many if
not most ideas and incredibly risky when it is feasible. This is the domain of Facebook and Google.
• Entrepreneurs who follow an architectural strategy design an entirely new value chain and then
control the key bottlenecks in it.
• They may not be the originators of an underlying innovation—search engines existed prior to
Google, and social networks prior to Facebook—but they bring it to a mass market through careful
alignment of customer, technology, and identity choices.
• Architectural entrepreneurs often end up trying to build platforms rather than products.