3 Reasons You Must Do Competitive Analysis
Building a business is work. It requires time, effort, money, and brainpower. But despite the struggles and trials, there is no greater sense of accomplishment than that moment when you realize, for the first time, that an idea has become a full-fledged, tangible, concrete business. And there is nothing more deflating and frustrating than to find out that your idea is already being done by someone else.
But you can mitigate that sense of frustration, improve your idea, and grow your business if you do a little bit of work before starting your business in the form of competitive analysis.
What Is A Competitive Analysis?
If business were a battlefield, competitive analysis would be the recon team. It is the careful and methodical evaluation of your opponent, or in this case, your competitors. It provides the intel on who those competitors are, the tools and assets they have at their disposal, and their size and position in the market.
No military force would ever think about going into battle without this information, and no matter how great of an idea you have, if you don’t understand who else is operating in your lane, then you are potentially setting yourself up for failure.
Why take the time to do a good competitive analysis? Here are three reasons:
1. You have to know who you are up against.
All business owners have been there. They have felt the surge of inspiration that comes with an idea they believe is sure to change the world. The only problem is that in business, the lightening of inspiration often strikes twice, or three times, or more. Good business ideas come from recognizing an absence in the market for something people want or need and are willing to pay for. Chances are, if you have identified the need for a product or service, someone else has, too. That’s not to say that you shouldn’t still pursue your business idea, but if you don’t take the time to look—really look—research your market, or learn who is already out there, how will you be able to strategize a way to beat your competition?
2. It Will Show You the Holes
Competitive analysis does more than just identify the identity of the competition. It provides an opportunity for you to study how they work and their strengths and weaknesses. If we think in terms of going to battle, understanding these things in an opponent can shed light on the best strategy for attack. In business, the same holds true.
Some of the best businesses out there weren’t the first ones to take a great idea to market—they are the ones who identified the best way to serve their customers by taking advantage of the shortfalls of their competitors. If you are just starting out, competitive analysis can identify methods that work in your market and show you the holes in your competitor’s approach that you can capitalize on. For example, if you can identify that your competitor is missing a big section of your target market, it becomes very easy to tweak your approach to make sure you are reaching those people. If they focus on selling a product or service for cheap, maybe you can adjust to focus on personalized service or provide a way to customize or upgrade.
It’s How You Begin to Identify Your Advantage
Once you know who you’re up against and you’ve identified any weaknesses, then you can formulate what makes you better than what is already out there. On the battlefield, if your enemy has huge numbers but a limited supply channel, your advantage becomes apparent and you can use that knowledge to ensure victory. Recognizing and using a competitor’s weaknesses can help your business get a foothold in a new market.
They say mimicry is the highest form of flattery. In business, companies create and duplicate good ideas, but if you are just copying what someone else is doing, what incentive do customers have to use your product or service? Use competitive analysis to find out who and what is out there, then use that information to find ways to make your company stand out.
Competitive analysis is a key weapon in the often tumultuous market we operate in. It is the first thing you should do when considering if your business idea is worth your time, energy, and investment. It can also help you figure out a way to make sure that, as your idea grows into a full-fledged business, you aren’t blindsided by a competitor. And finally, it can help you identify ways to improve your own idea and give you an opportunity to set your company apart from the rest.
