©2010 patrick vernon 1 the competitive landscape

©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

©2010 Patrick Vernon3

Defining the Competition

©2010 Patrick Vernon4

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

©2010 Patrick Vernon5

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!”

©2010 Patrick Vernon6

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

©2010 Patrick Vernon7

Competitive Advantage

©2010 Patrick Vernon8

Key Differentiators

Barriers to Entry

CompetitiveAdvantage

©2010 Patrick Vernon9

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

©2010 Patrick Vernon10

Types of Competitive AdvantagesIntellectual Property LawTrade SecretsPartnerships and Exclusive ContractsSwitching Costs Location, Location, LocationTalentNetwork or Critical Mass

©2010 Patrick Vernon11

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

©2010 Patrick Vernon12

Trade Secrets

Type of intellectual property not protected by lawTrade off: not disclosedTechnology advantage may require continuous

investment (Google algorythm)Information (suppliers, customers, processes…)

©2010 Patrick Vernon13

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

©2010 Patrick Vernon14

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

©2010 Patrick Vernon15

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

©2010 Patrick Vernon16

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

©2010 Patrick Vernon17

Network or Critical Mass

Creating value through an interrelated network in which value increases as network increases

Economies of scaleeBay, Facebook, ReverbNation, Client Opinions

©2010 Patrick Vernon18

Recap

Intellectual Property LawTrade SecretsPartnerships and Exclusive ContractsSwitching Costs Location, Location, LocationTalentNetwork or Critical Mass

Where are you?

©2010 Patrick Vernon19

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

©2010 Patrick Vernon20

Key Differentiators and

Competitive Positioning

©2010 Patrick Vernon21

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

©2010 Patrick Vernon22

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

©2010 Patrick Vernon23

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

©2010 Patrick Vernon24

©2010 Patrick Vernon25

©2010 Patrick Vernon26

©2010 Patrick Vernon27

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

©2010 Patrick Vernon28

©2010 Patrick Vernon29

©2010 Patrick Vernon30

Why are these charts and graphs important?

©2010 Patrick Vernon31

QUESTIONS

©2010 Patrick Vernon32

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

©2010 Patrick Vernon33

[Presentation Title]

[Team Members]

©2010 Patrick Vernon34

[business description]

[value proposition]

©2010 Patrick Vernon35

Market Segment(s), Customers and Characteristics

©2010 Patrick Vernon36

Primary Market Research Results

©2010 Patrick Vernon37

Primary Market Research Results II

©2010 Patrick Vernon38

Potential Risks

©2010 Patrick Vernon39

Next Steps