What About Competitors?

Whenever I give a talk to college students, I always get asked about our competitors.  How do we follow what they do?  How do we react to what they do?  What do we do to protect ourselves from them?

The answer is pretty simple: we don’t.

I’m of the opinion that business do not fail because of anything that their competition does or doesn’t do.  They fail because of what they do or don’t do.  The second you start focusing on your competition is the second that you stop focusing on your customers.

You also become a defensive company. You’re reacting to what others are doing instead of being aggressive and executing your vision. They may have some advantages that you don’t, but you have some advantages that they don’t.  Being small and agile is a huge advantage…if you decide to treat it that way and not as an excuse.

Maybe most important is that your competitor probably has different goals than you do. They might have antsy investors. They might be in a ton of debt. They might be burning through more cash than they’re bringing in.  All of those things lead companies to make bad decisions. You have know way of knowing when this is happening.  It probably happens more often than you’d think.  And you don’t want to get caught up in copying those bad decisions.

A few years ago I reviewed Stall Points, an exhaustive study of why companies fail.  One of my big takeaways was:

Most companies don’t fail/stall due to outside factors.  In fact, of the companies who “stalled” (defined as a significant downturn in revenue growth) only 13% were due to “external factors”.  In short:  business owners who blame the economy, or claim market saturation, or the government for failing are usually full of shit.  Most of the reasons companies fail are because they have internal strategic or organizational issues.   Stop worrying about the economy or the competition and start focusing on making your company great.

The same goes for competitors.  They’re not causing you to fail. You’re causing you to fail.

Phil Libin, founder of Evernote shares a similar stance.  In his recent Entrepreneurial Thought Leaders talk at Stanford he said (59:48 in to the video if you’re interested):

But we do have a very specific philosophy about competition which is in all of my previous companies and in the companies that I’ve worked with or at in the past, we always had a list of our enemies, we always had like, oh, those guys, we always had like a list of people that like that’s our nemesis right there. And like we are going to crush those guys. We’ve always had that, one or two companies and it turned out it never mattered, never, not once – not once did the people that we focused on in the competition actually significantly play a role in terms of the success or failure of our company a few years later. It was always something else. And so with Evernote we decided explicitly – again because we are not that smart, it takes us three times to actually figure this out, we said explicitly we aren’t going to look at competition. We’re not going to look at it. We are not going to pay attention to it. Not because we are not threatened, of course we are threatened but because looking at it doesn’t help you, it doesn’t actually make your product better. The only way that you can win, the only way to increase your chances of actually succeeding is just to make a great product and you don’t do that by looking behind you. You do that by typing and looking at a screen. And so we don’t look at it. We don’t think about things that might potentially disrupt us. We do think a lot about partners and how we can work together and we have an API, we have about 7,000 partners. Many of them started as competitors but then wound up working in the ecosystem but ultimately the competitive threat I don’t think is in the top 20 threats to a company at this stage. And especially for of you guys, if you are thinking of being entrepreneurs, I think if you sort of lay out the possible things that can go wrong, that can kill your company, just like write them out in order of probability. The probability of your company failing because some competitor beats you is not in the top five. It’s probably not even in the top ten for early stage. And anything that’s not in the top five, like you don’t have time to think about it. So my advice is don’t even bother.

Now, this doesn’t mean that we don’t occasionally visit a competitor’s website to check what sales they’re running or how they’ve priced out a product. Or that we don’t pay attention to the industry as a whole.

What it means is that we don’t stalk their blogs, social media, and newsletters, and then scramble to change how we make decisions because of something that they announce. We have better things to do with our time.  We have our vision and our plan, one that we believe in, and that is what we focus on executing.

3 comments on What About Competitors?

  1. Mark W. says:

    Adam, I like your observations about the competition regarding different goals and their situations which are an unknown and really not pertinent to your business. Maybe what’s really more important is to know where your business fits or doesn’t fit relative to other businesses and the marketplace. More of a big picture approach rather than reacting to the actions of specific competitors. It may even turn out over time that you’ll find yourself working with or partnering with those competitors as your goals or the market changes.

    • Adam McFarland says:

      Yes, I think you’re right about that Mark. I think that’s something we do now – it’s not like we’re in a vacuum. It’s certainly valuable to have an idea of the market as a whole, which is possible without psychoanalyzing every move of your competition. With Detailed Image the detailing market is so small that pretty much everyone knows everyone anyway (and to some extent, everyone works with everyone). So we have an idea of what people are doing and how it affects the marketplace just through normal conversation with our customers and vendors. Which, to your point, is different than looking at the every day actions of the competition and reacting to them.

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