When the startup company Onvia.com went public the CEO, Glenn Ballman, in an interview on CNBC’s SquawkBox was asked who were his competitors? Without missing a beat he said "we have no competitors", "we are alone in this market space." This is nonsense. All companies have competitors. What made this really interesting was that as he was speaking, the staff at SquawkBox put up a graphic listing four competitors, including bizbuyer.com and buy.com.
I’ve heard this kind of limited thinking before from people in technology companies. For example, once while speaking to Hughes Space and Communications executives about their DirectTV service I heard them admit that while they had competition, it was extraordinarily limited (to EchoStar). Really? What about cable and good old antennas?
What causes this type of thinking? For one, entrepreneurs and managers of technology companies tend to think at a feature level. If another company’s product doesn’t have a similar feature set, then they’re not competitors. This, I believe, is what the CEO of Onvia.com had in mind. I call this "terrestrial" thinking because it’s very grounded. But we know that trees (which are very terrestrial) and forests (which are more "conceptual") are quite different. As I explain later, more conceptual thinking leads to seeing competition more clearly.
Also, technology and web businesses have been told to differentiate their products and to find a market "niche" (or in today’s parlance, a "market space"). But the belief seems to be that if you find a market space that’s vacant, then you have no competition.
Or if the way a business delivers a service is unique, as the executives who promoted the Chunnel (the tunnel between England and France) believed, then again there are no competitors (I guess they forgot about ferries and planes). The same goes for companies who view themselves narrowly, such as the early "information appliance software platform" companies (e.g., Diba, subsequently acquired by Sun).
Many start-ups probably believe they have no competitors because such a belief keeps the troops fired-up on getting that so-called first mover advantage. But that’s not what management says in public. Farzad Dibachi of Diba said as much in the article linked above. The Venture capitalists and the business press don’t like the kind of talk that suggests a start-up has no competition. El Dorado Ventures even publishes this admonition on its website.
The idea that managers think too narrowly is not new. Over 30 years ago Theodore Levitt published his famous article "Marketing Myopia" which showed how companies defined themselves (and their business) too narrowly. As a result, they tended to get wiped out by competitors they could not see. The buggy whip industry is a classic case. People who traveled in buggies long ago were also a market space that needed buggy whips. When cars came along, however, the buggy whip manufacturers couldn’t see that as competition. Electric utilities, Levitt reports, were also prone to thinking they were without competition. But were they? Thinking electric made the utilities blind to chemical fuel cells and solar energy.
This kind of thinking gets companies into major problems because they eventually get blind-sighted by the competition. A far better way of thinking is that everyone is my competitor. In fact, every company does have competition. And the competition isn’t necessarily the kind that will come along in the future. No, they have competition right now. Too see this you have to go beyond the narrow definition of competition at the product/segment or even industry level, and move to the higher level of customer benefits. In this way we’re not seeing competition from the firm’s point of view, but from the view of who pays the bills - the customer.
For example, one benefit that customers care about these days is "entertainment". Any product or service that provides entertainment is a competitor. So, sure, music on CDs competes with the Diamond Rio because they both provide entertainment. But all formats of music also compete with the entertainment of browsing the web, going to the movies, and, if going to a restaurant is considered entertaining to you, then that’s a competitor as well. So even competing for customer’s eyeballs (that now hackneyed idea) is too narrow, if the eyes are seeking entertainment.
Another benefit touted on the web is "belonging to a community" (one purported benefit of such sites as Ivillage.com). But can’t friends, religious centers, school and even therapy groups also provide community? Of course they can and therefore they are competitors too. At the level of customer benefits, every firm has lots of competition.
Some companies, while acknowledging that benefits determine the competition, remarkably still believe they are immune. This became apparent to me during another talk I gave on competition to Northrop Grumman (the makers of the B1 bomber). At the end of the talk they told me that nothing competes with the B1....nothing. But again, they weren’t thinking broadly enough. For at an even higher level of competition (beyond the benefits) competition exists between all firms competing for the same customer dollar. And what competes for the same dollar as the B1? How about roads, bridges, education, the welfare system, and every other government program that exists.
No, nobody is really immune from competition.
