©2010 patrick vernon 1 the competitive landscape
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©2010 Patrick Vernon1
The Competitive Landscape
©2010 Patrick Vernon2
Competitive Landscape
Competition• Alternative ways of solving the problem
Competitive Advantage• Barriers to entry• Key Differentiators
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Defining the Competition
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Defining the Competition
Need to clearly define the market segment first• As narrow as possible at first (niche markets)
o Bowflex for Teens– Parents with middle-school aged children– Middle school coaches and principles
o Time-release gel for cortisone shots– Orthopedists– Geriatrics
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Defining the Competition II
Direct Competition• A similar product that solves the same problem
Indirect Competition• A solution that solves the problem the same way
Rookie Mistake• “There is no competition!”
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ExamplesBowflex for Teens
Strength training program for middle-school athletes
Cortisone GelLonger-lasting pain relief
Direct CompetitionSame Problem, similar product
Middle school-specific programs
YMCA, Fitness centers
Physician prepared gel preparations
Indirect CompetitionSame problem, different solution
Home weight machinesGyms and fitness centers
CortisoneIbuprofen
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Competitive Advantage
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Key Differentiators
Barriers to Entry
CompetitiveAdvantage
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Barrier to Entry
• Obstacles that inhibit new competition
• A differentiation that competitors cannot easily replicate
• Examples• Intellectual Property Law• Trade Secrets• Partnerships and Exclusive
Contracts• Switching Costs • Location, Location, Location• Talent• Network or Critical Mass
Key Differentiator
• Aspects of product attributes• Value proposition• Two types differentiators
• Delivering more value• Faster• Cheaper• Better
• Delivering value differently• Quiznos toasts sandwiches• Netflix mails movies• Salesforce.com = no software
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Types of Competitive AdvantagesIntellectual Property LawTrade SecretsPartnerships and Exclusive ContractsSwitching Costs Location, Location, LocationTalentNetwork or Critical Mass
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Intellectual Property (IP)Patents
• Composition of matter, methods, designs, systems• Advantage: 20 year monopoly• Disadvantage: Must disclose and expensive to defend/enforce• “Strong IP” usually means good patent
Copyrights• For “works of authorship” • Life of author plus 50-100 years• Relevant for entertainment and publishing• Not effective for software
Trademarks• Word or slogan or symbol that differentiates a company’s
offerings• More relevant for startups: making sure we don’t infringe on
other trademarkso This is not to say that trademarks are unimportant, but they may not provide
an advantage
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Trade Secrets
Type of intellectual property not protected by lawTrade off: not disclosedTechnology advantage may require continuous
investment (Google algorythm)Information (suppliers, customers, processes…)
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Partnerships and Exclusive Contracts
Advantages• Leverage funding to develop product• Leverage partner’s distribution channel• Lock in parts of the value network• Lock out competitors
Disadvantages• May have to lower price or increase service• Loss of control over product development and
distribution
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Switching Cost
If you can’t lock them, make it hard for customers to switch
“Sticky” products• Quicken and TurboTax• Social networking websites• PC vs. MAC
Slow to switch industries• Government• Education• Military• Medical
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Location, Location, Location
#1 issue for retail ventureIncludes “atmosphere” for businesses that sell
experiences (restaurants, theaters, music venues, etc.)
Location may have cost advantages (RTP vs. Boston) or recruiting advantages
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Talent
Beyond the management skills of the teamCompany personnel• Chefs• Designers• Artists• Gifted programmers• Specialty engineers
Outside Talent• Faculty founders as consultants• Scientific Advisory Board (SAB)• Business Advisers
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Network or Critical Mass
Creating value through an interrelated network in which value increases as network increases
Economies of scaleeBay, Facebook, ReverbNation, Client Opinions
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Recap
Intellectual Property LawTrade SecretsPartnerships and Exclusive ContractsSwitching Costs Location, Location, LocationTalentNetwork or Critical Mass
Where are you?
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Competitive Advantage Myths1st Mover Advantage
• Market pioneers end up with arrows in their rear ends• “Fast followers” or “smart successors”
o Market has been educated and validatedo Barrier to adoption reducedo Technologies have been tested and may be cheapero Time for primary learning is reduced
• Only an advantage if you can create barriers to entry:o Switching costs
– Create a “sticky” product– Lock in your customers with long-term contracts
o “Land grab” – get big fast– Economies of scale with sustainable cost advantage– Market dominance
» Very, very hard (and expensive) to attain» Very, very hard to keep without one of the above
Competing on Price• Red flag: naïve entrepreneur?• Must have cost structure advantage
o WalMart, Southwest Airlines
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Key Differentiators and
Competitive Positioning
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Barrier to Entry
• Obstacles that inhibit new competition
• A differentiation that competitors cannot easily replicate
• Examples• Intellectual Property Law• Trade Secrets• Partnerships and Exclusive
Contracts• Switching Costs • Location, Location, Location• Talent• Network or Critical Mass
Key Differentiator
• Aspects of product attributes• Value proposition• Two types differentiators
• Delivering more value• Faster• Cheaper• Better
• Delivering value differently• Quiznos toasts sandwiches• Netflix mails movies• Salesforce.com = no software
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Example: BowFlex for teensKey Differentiator Competition
Integrated hardware (strength training machine) with software (web portal)
Strength training equipment companies
Workouts designed for adolescents with growing bodies
Gyms and fitness centers focused on adults
Low cost for home purchase; home use more suitable for self-conscious teens
YMCA, fitness centers
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Competitive Positioning Graphs and Tables
Product Attribute Table• List the attributes• List the competition• Each cell shows strength/weakness
Feature 1 Feature 2 Feature 3 Feature 4 Feature 5 Feature 6
YourCo
Comp 1
Comp 2
Comp 2
Comp 4
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Product Position Chart/Graph
Determine two value drivers• Price vs performance• Ease of use vs information content• Size vs weight• Quality vs price
Place your offering on two dimensions relative to competition
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Why are these charts and graphs important?
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QUESTIONS
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What’s Next
Today’s Coaching Session• State updated value proposition• Review market segments and ID customers• Review primary market research• Research binder• Work on presentation for next week
o see templateNext Monday (11/15)• Team presentations using supplied template
o 10 minutes per teamSunday, 11/21• Competitive Landscape Deliverable Due
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[Presentation Title]
[Team Members]
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[business description]
[value proposition]
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Market Segment(s), Customers and Characteristics
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Primary Market Research Results
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Primary Market Research Results II
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Potential Risks
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Next Steps