Competition - The Pros and Cons

Today on MBA Mondays we are going to talk about competition. For most businesses, competition is a given. When I walk to work, I am often struck how many local businesses have competitors literally right across the street. Clearly competition is something you can learn to live with and still operate successfully. In fact, there are some very good things about competition. And there are some challenging things. This post will attempt to outline both.

I was having breakfast with the CEO of one of our portfolio companies recently. And we were talking about how the sales team dislikes competition but the marketing team appreciates it. That gets to the heart of the pros and cons of competition. When your company is competing for a piece of business and you have a tough competitor in the mix, you can often lose the business. The sales team, who is compensated directly on revenues, hates that. But when your competitor spends heavily on marketing its offerings and identifying the pain point both your company and their company solve, that is good for you. It generates additional demand, and some of that demand will come your way. The marketing team, which is always trying to do more with less, loves that.

There are a number of good things about competition. As described above, competitors will invest in marketing and the combined marketing efforts of a number of competitors will accelerate the development of a nascent market. It is very hard to build a market all alone. Also, when a large company enters a market, it validates the market in the minds of many who had not been paying attention to it before. That means customers and also eventual acquirers of your company. And there is nothing quite like a competitor to fire up a team. I've seen many companies start to coast a bit after they have successfully taken control of a market. Then a pesky new competitor enters, takes some business from them, and then all of a sudden the team is fired up again. All in all, I'd rather see our portfolio companies have competitors than be the only participant in the market.

But competition is challenging. First, when you have strong competitors, you will lose business to them, often frequently. That increases sales costs, time to close, and makes it harder to grow rapidly. Competitors will also spread fear and doubt (FUD) in the marketplace. This is particularly galling. I've heard all kinds of crazy nonsense spread by competitors to our portfolio companies. Some of that "crazy nonsense" stuck around for a long time and hurt our portfolio company in the market. Competitors can also strike business deals with powerful allies and gatekeepers who can make it hard and at time impossible to enter certain parts of the market. Competitors are a pain in the rear and make operating a business harder in many ways.

Competitors will also impact your fundraising and exit plans. When you have a competitor that is raising capital, it will often cause an entrepreneur to think they need to raise capital to compete. I don't think that is normally the case, but it is hard to convince an entrepreneur otherwise. That said, competitors will compete with you in the capital markets and the M&A markets. If an investor puts money into your competitor, most likely they will not invest in your company. If a big company buys your competitor, most likely they will not buy your company. This kind of competition is particularly anxiety infusing in the minds of entrepreneurs.

Very few companies will operate in a market for long without competition. Imitation is the greatest form of flattery. So be prepared for it. Make sure everyone on the team knows that competition is both good and bad. Sharpen your elbows and get ready to play tougher in the market. Get ready for cheap shots and lost opportunities. And make sure you draft on your competitors when you get that chance. And most importantly, make sure competition makes your company better. Because it should and that's almost always a good thing.

#MBA Mondays

Comments (Archived):

  1. awaldstein

    Competition is a market filtering process of sorts. In early markets everyone is the competition until your product and the customer need sort ithemselves out. Basically everyone is fighting for early adopters and customers to help define the market spot.You can see this now with the early content curation and the social link communities (like XYDO). Everyone looks sort of alike and almost weekly you can map how the companies are resorting themselves.

    1. William Mougayar

      Arnold,I was going to mention the content curation space as well- as an example where the market players are confusing the space more than helping to define it. Because the barriers of entry have been lowered, and users are suckers for trying something new everyday, this gives the appearance of market traction to some players, whereas in reality they’re sitting on a house of cards.

      1. awaldstein

        The curation space is a jumble, an exciting one though William.Getting market traction will be tough as the competition for my time is getting pulled in a bunch of directions daily. You and the rest of the providers need to find a way of cutting through this.In my opinion, the winners will figure out not only how to scrape context from the web and personalize it for publishing but start to figure out ‘dynamic discovery’ as well.

        1. William Mougayar

          Keep watching us. 🙂

          1. awaldstein

            Make it so William!The entire market needs this solution to cut through the noise.

    2. reece

      Agree – content curation companies are all over the place and I really can’t see the differences between many of them…We’re in the same boat to an extent, but focusing on one medium to give us focus and stand out from the crowd.

      1. awaldstein

        My bet is that over time Reece you will find the context filters in your service going deeper and getting more specific.Like the ‘negative’ keywords approach in paid search. I was talking to someone about this in the wine biz earlier, working down from “artisanal’ to ‘natural’ to ‘organic’ to ‘biodynamic’ as filters. Go too low, the audience is too small. Go too high, the context lessens.

        1. reece

          yup… context filters will get smarter and smarter. can’t wait…

  2. CliffElam

    “the sales team dislikes competition but the marketing team appreciates it”Ha. Sales teams don’t like competition if they feel they can’t win. Else a good sales guy is all about Conan: hear the lamentations ….-XC

    1. fredwilson

      sounds like you have worked with great sales teams Cliff

      1. CliffElam

        Well, I’ve worked at Oracle for a long time and have learned a lot from both our hunters and gatherers. And before that I did a lot of channel and big-company biz/dev+sales for startups. It’s been very educational.-XCPS – I’ze a b2b guy, so take this with a grain of salt, but it is rarely about price. So a salesguy complaining about price is usually mistaken.

    2. reece

      +1 for Conan reference.

  3. Fernando Gutierrez

    Also, it can validate a market when analysing it. If you know someone is already doing a profit there, it means there is profit to me made. Now you only have to outperform the other one in the chase for the rest of the market, and his defense of the part he already owns. Easy!

  4. RichardF

    “In pace, ut sapiens, aptarit idonea bello” – in peace a wise man prepares for war

    1. fredwilson

      great quote. it also makes me think that Ben Horowitz’ “peacetime ceo and wartime ceo” post needs to be considered in the context of that quote

      1. Carl Rahn Griffith

        Look at all the macho posturing of (eg) Hitler and contrast that to the style of (eg) Churchill.Subtlety, transparency, intelligence and guile usually overcomes dark forces.

        1. JLM

          The greatest teaching point in the entire Hitler — WWII saga is to kill the shitheads in the cradle and never let them get out.The comparison of Hitler v Churchill is fascinating in that both were powerful orators speaking to audiences who desperately wanted to believe what they were selling.Churchill’s words literally defeated Operation Sea Lion — the German invasion of England. Proving the word IS more powerful than the sword.BTW, in literally thousands of US Army C & GS College simulations, the Germans win WWII if they only changed the time line of invading Russia and had successfully conquered England. Scary thought.There is a huge parallel with current events in the short term with both Barack H Obama and Osama bin Laden — both charismatic leaders who have delivered essentially empty promises which have devastated their followers.The truly frightening thing is that when you peak behind the curtains, the Wizards are all a sham.

          1. Carl Rahn Griffith

            Great insights, JLM.Now here is a scary thought – just come to mind: How much more effective/wider global reach would Hitler – or ObL/etc – have been if they had ranted/raved/’preached’ in English? Did their native tongues assist only in their alienation and eventual defeat?

          2. JLM

            The German language is a great language for crazy persons and if you ever watch Hitler’s speeches you can see the rhythm of his craziness even if you cannot speak German.If one looks at President Obama and reflects just a bit about the impact of the Internet, it is scary to see what a good speaker he is. Regardless of one’s politics — “hope and change” — huh? Nobody is really that shallow but give the guy his due, he did it.And he will try to do it again.I think it was quite illustrative to see what a pathetic life Osama bin Laden lived with his pathetic little TV and his pathetic remote control. That picture cost al Qaeda all of the 20-somethings in much the same way that Obama’s social media nimbleness gathered in all the 20-somethings.While al Qaeda still has a lot of fangs left, it has lost its allure and will no longer attract the “cool” kids. This is the essence of psych ops. Our intel guys have really played that hand well.

          3. Dave W Baldwin

            The reason competition is so important. If you let a small interest become too monopolized, the inevitable lust/greed of power takes over as all money worries subside.Then their main focus is limiting advancement of progress.And the Wizards jump on the bandwagon.

      2. RichardF

        It’s a great post and I love the fact that Ben quotes the Godfather in it.

      3. JLM

        I like his analogy but I suspect that sometimes one is a peacetime CEO in the morning and a wartime CEO in the afternoon.

        1. Dave W Baldwin

          Hmmm, I’d think you would have the Wartime CEO in morning followed by Peace in the afternoon.

    2. William Mougayar

      It’s amazing how the war analogies are often tied to marketing and business. But is there ever peace in business? It’s a constant fight out there!

      1. Tereza

        Indeed. The term strategy (“strategos”) was originally a military term.

        1. William Mougayar

          Yup, a Greek term referring to the army leader or highest rank officer.

          1. Rayhan Rafiq Omar

            I knew playing Risk incessantly would come in useful one day.

      2. RichardF

        The post that Fred has already mentioned on Ben’s post… covers the peacetime/wartime scenario pretty well I think William

    3. Carl Rahn Griffith

      It’s when the war analogy/metaphor gets misconstrued and used in a crass macho manner that it can be very damaging.Used wisely it can be a very creative and positive mindset.Used negatively it can be very corrosive and divisive.

      1. JLM

        War analogies today are quite odd as so many of our young citizens have been in a war recently. I have 4 war vets in my company right now. All with very good combat records.I recently interviewed a little slip of a West Point woman who had shot it out w/ 3 Iraqi bad men and killed them all while guarding a HVP in Baghdad.That is a very marking experience to say the least.

        1. Carl Rahn Griffith

          Humbling. Amazing people, all. Last week I went to the funeral of a local lady who died on duty. Such people are incredible.…It’s when you get the ‘suits’ – male and female – who have no such experiences acting all macho and playing mental war games I find it disingenuous. They have no comprehension of true valour and ‘war’.And nor do I – I wouldn’t claim to begin to understand such scenarios/bravery, ever.Business is child’s play by comparison. I just wish more of the ‘suits’ would understand that.

    4. JLM

      No truer words were ever spoken. The message of the OBL raid is that the US can find you anywhere, has a long memory and will kill you. A very powerful message. Moreso if the messenger is believable.Amongst the “De Oppresso Liber” crowd, it has always been — ‘sweat in peace or bleed in war’.

  5. Dave W Baldwin

    Good post. You can’t be scared of the competition and/or let the competition set the rules of the contest.On that note, I want to apologize for a couple of comments (last week?) regarding the Android Wifi locater… to see folks talking of learned behavior is on the money. Why else have I stated the only way to achieve the needed AGI is for true interface between human and machine?Thanks for affirming how tough it is regarding the competition who will promote naysayers regarding your message in order to lower the bar in defining the end run goal.

  6. William Mougayar

    You’ve covered that topic extremely well, especially given that you’re seeing it mostly through the lens of the portfolio companies. The relationship between sales & marketing is particularly important in passing information back and forth, not just in seeing it as one group likes the competition & the other not.If you know your market & competition well, you need to have specific knowledge on how to win against each one of the major competing players you’re up against. This approach hasn’t changed for decades and was one of the first thing I Iearned at HP in sales training at age 23.Each competition has one or several weaknesses, and if you know them, you have to sell against these weaknesses to win. You need a list that says “vs. Competition #1, lead with this feature/benefit (because they can’t do it), and vs. #2 emphasize this set of hot buttons, or approach it this way vs. #3, etc.And to complicate things slightly, it also depends heavily if you’re playing offensive or defensive marketing, but that’s for another post.The best competition is a weakened one. Marketing is like air cover. Sales is like the Navy Seals that come for the kill.

    1. awaldstein

      You are touching on one of my hot buttons here.Great salespeople don’t sell against the competition they sell above it. In a perfect world, that value is part of what marketing gives to sales as the ultimate weapon.

      1. William Mougayar

        I don’t think we disagree. Good marketing makes the selling job “a bit” easier. And today’s marketing includes a great web site that sells, and explains the value props, etc…What I meant re: “against the competition” is that your sales approach has to take into account what the competition might be saying, so you need to plant these landmines for them by selling at your highest value point, but also for counting on being rebutted. I have been on both sides – sales and marketing, and I hold tremendous respect for both.

        1. awaldstein

          Got it.I’m just a strong proponent that while sales teams need tools to sell, point by point checklists are the last piece, not the first.The more sales becomes a slugfest rather than a dance, the messier it is.

          1. William Mougayar

            The best sales reps will dance and even sing while selling, but other newer/rookies will need the assistance of cheat sheets and scripted checklists. Reality is that today there are companies hiring lots of “brute force” sales people that dial and sell, equipped with, and blinded by their CRM systems, and these sales people are blocking and tackling from the minute they start. It is messy indeed. I think we’re talking about 2 different types of selling, and the approach will be different depending at what value point you’re selling. I certainly prefer to take the high road than slugging it in the dirt, but one needs to be prepared for both, or prepared to walk away as well.

          2. reece

            relevant: Godin has a post up today on Selling vs. Inviting (re: marketing)cc: @awaldstein:disqus

          3. William Mougayar

            That was an excellent post by Godin. Thanks for pointing it out.

          4. Mark Essel

            @reecepacheco:disqus nice tip of the hat to Seth, I dip into his blog weekly and scan what the wild sage is dishing out next. Always a pleasure visiting his thoughts.

  7. Steve Gurney

    Another benefit of competition is when it comes to demonstrating value in sales process and at contract negotiation.Having competition gives contrast and helps to clearly show value increase in your solution. This helps to keep contract value higher at point of negotiation.

    1. fredwilson

      yup. in a odd twist, competition can help close business buy providing needed contrast

      1. PhilipSugar

        I think that’s because customers always want to choose between A & B. If B is your competitor that is ten times better if B is “no-decision”.If you have no competitors by default you compete against no-decision.

      2. JLM

        This is particularly true in the cell phone business. There is nothing that makes a competitor look good like actually having a contract w/ AT&T.

  8. Kasi Viswanathan Agilandam

    This post really gives lots of wisdom on competition … i would like to share another one .When I was running around for my radiology software product one of the investor said (not a VC) … don’t tell you don’t have any competitor … I will not invest in you or your product. I don’t want to take the highest risk under the sun-light.His philosophy is “if you don’t have a competitor” then it meansi) No known market for that productii) People have tried and left the marketiii) you make something and educate the user and create the market.and all three he does not like to invest.He always tells find “at-least one competitor and create a product with more value” so that educating the customer about the product is shared.(marketing).

  9. Carl Rahn Griffith

    Never underestimate the relevance (still) of good old SWOT analysis.

    1. JLM

      Never, ever desert the fundamentals.

  10. reece

    In building our first business, we had a few competitors (stupidly) spreading FUD.What they didn’t realize is that the marginal sale they might win vs. us actually hurt the entire ecosystem in the long run as customers faced with multiple options tend to forget which company/product does what, get scared of any of the downside and walk away from the market altogether.And at the end of the day, the greatest competition most of us face is ‘share of mind’ anyway.

    1. William Mougayar

      You bring up a great point about mindshare vs. marketshare. Marketing’s success is when you have more mindshare than marketshare. (it makes selling easier)

    2. awaldstein

      In early markets, mindshare is really all there is. Getting the right alpha adopters mindshare that will really dig in, use the product and share through their contextual networks is the win.

      1. reece

        yeah… the power alpha users are great, but it’s when you can hook normalsthat you’re really going to win.**

        1. awaldstein

          Agreed, but the fastest way to get to a million ‘normals’ is to have a thousand ‘alphas’ unless you are unique enough to have buzz create market stickiness.

          1. reece

            i see what you mean.**

          2. Dave W Baldwin

            Good point. I’d say it is best to do both.

          3. awaldstein

            Agreed but early on, I’d rather have 100 early adopters who really use the product than 1,000 Facebook fans that are following the leader to ‘like’ me.Not an either/or but working with companies who have FB like social proof and difficulty finding the utility of that stream. You need huge viral buzz numbers to boil down to value. I’m becoming focused on the differences between broad-based communications and real connections of value.

          4. Dave W Baldwin

            Of course… sorry, I missed the implied FB thing. Just remember with thereal ‘BUZZ’ you can gain thousands of early adopters using the product whobecome attached…

  11. Phanio

    Great post – especially about drafting or letting others in your space help educate consumers. Might even want to include the effects of indirect competition – especially in these times when disposable income is tight.

  12. Tereza

    After years of finding, assessing and going into combat with competitors, I’d observe what’s very different to me in the early stage tech world — it’s the definition of ‘competitor’.In early stage fundraising “competitor” is used very fast and loose. There are also very loose rules of engagement around them. It’s very unclear who your friends and enemies are.When you’re early and seeking product/market fit, you are pivoting and wiggling a bit. As you adjust, so does your competitive set. This spooks some less experienced investors.In my world, “competitor” means you’re going after the same wallet and the same users. But I’ve heard the “well I already have a women’s investment”, that kind of thing.Many angels don’t announce investments. So when you pitch you lack a full picture of who they’re sleeping with…and you are educating them.

    1. JLM

      The competition is always for the customer and his money. It may be targeted toward a specific product but the one finite resource out there is the disposable income of a customer.

      1. Mark Essel

        And so all of our competitors are taxes and over priced commodities like fuel and power. Let’s throw in over priced real estate and education as well.If we can only reduce the cost of living for the average American to zero, we can free up so much purchasing power 😉

        1. JLM

          The increasing price on gasoline is the greatest TAX issue in America today. It is pervasive and it will kill us.The lack of a coherent energy policy for lo the last 40 years is insane.

          1. Mark Essel

            If we can’t change energy policy we lose everything else we work for. You know there will be a straw that breaks a camels back, when gas prices move above solar/wind/coal whatever else we use there will be a big shift.We’re all power junkies and we just need to get our fix, at the cheapest cost now.

          2. JLM

            We have tons of room until we get to the cost effective threshold that makes solar/wind work. Coal is already there and has been there forever.The big wild card is nuclear power — the lowest cost energy available.Small package nuclear plants which can literally be buried and replaced once every 20 years may be the long term solution.

          3. Mark Essel

            Yes cheap nuclear power would be a wonderful boon.I didn’t mention I’m hastening our society to alternative energy by drivinga gas guzzling Nissan Xterra. I’m a sucker for Japanese cars every since myToyota Celica, what a great car that was. No maintenance beyond a minimallevel for years and it was rock solid reliable.

    2. JLM

      I think you have to be incredibly careful with whom you sleep when pitching deals. You owe it to yourself to run the traps first to see with whom everybody has been visiting BEFORE you whip out the slides.

      1. Tereza


  13. Nate Kidwell

    Besides Sales and Marketing, there are the actual Creators of the product. For these guys, competition is a pain for one reason: It makes every idea seem derivative.”A lot of guys are doing this” always hurts to hear. “Someone else had the same idea” always stings a bit.Yes that competition might make the product stronger in the end. And it may make the market larger.But as the Creators of the product, you still want to break something, at least a little bit :).

  14. ShanaC

    Ok, how do you leverage competition?

    1. Online MBA tutoring

      Differentiate. Competition allows/forces you to differentiate yourself. Its the best way to survive in a competitive market.

  15. JLM

    One of the most strategic decisions a business will ever make — whether a mature business or a start up — is its competitive positioning.The very, very, very best position to be in is one of NO COMPETITION.While NO COMPETITION is very rare, it is out there.A business should seek to be the #1 or #2 competitor in its industry or product space. To be less than #2 is to be pushing a rock up hill when the market leaders are on level ground. Not to say it can’t be done but it is much more difficult.You have to know your competition better than you know your own company. Because you will fashion your company to overcome the competition. If you cannot overcome them, then buy them.

    1. William Mougayar

      Agreed 100%. The #1 then plays defensive, which is a lot easier than offense. #2 and #3 will keep attacking #1 at greater costs. Once in a while new competition appears in an uncontested area, and if the market winds move with them, they can become the new leaders. Apple’s iPhone is a classical example of becoming a leader in a segment where RIM used to be.

      1. JLM

        What was that book you recommended on this subject?

        1. William Mougayar

          Marketing Warfare, by Ries & Trout. You could read it in one sitting.

      2. JLM

        There is so much to learn from Apple as it relates to marketing that it is scary.

    2. JamesHRH

      Right out of Trout & Ries. Bang on.Also a good ‘crappy investor filter’ (i.e., someone who asks about your lack of direct competition when you are discussing the creation of a new category of business.)

    3. JamesHRH

      Right out of Trout & Ries.Also a good ‘crappy investor filter’ (i.e., someone who asks about your lack of direct competition when you are discussing the creation of a new category of business.)

  16. ErikSchwartz

    I so don’t have time to get into all this today.Competition is great when you’re winning and less good the further back you are.It can be really useful internally as a management tool for motivating the troops.Competitors getting funded or acquired can be useful in price negotiations when raising money or exiting (especially when you’re better).They’re also great for market research, especially of you’re more nimble than they are.

  17. Denim Smith

    There is also significant competition for talent and winning the perpetual talent war is often the best weapon.

  18. Tom Evslin

    One of the best things that ever happened to “my” company, ITXC, was our competitor iBasis. Just as you said, having another company in the field made it much easier to establish a market for an entirely new concept (in 1998), using the Internet for the middle of international phone-to-phone calls. In fact, the major telcos who were our wholesale customers would have been less likely to buy from us had there not been an alternate provider.We both helped educate investors for our almost simultaneous IPOs.Just as you said, sales hated them; they did take business from us and vice versa. We kept each other from getting the high margins we could’ve achieved if our only competition had been traditional carriers with their higher cost basis. We certainly kept each other from getting lazy or complacent.Their CEO and founder @ofergneezy and I shared a favorite joke. Two men in a tent hear a grizzly approaching. One starts to put on his running shoes. “You can’t outrun a bear,” the other says. “I only have to outrun you!” is the answer we lived by.My worst business mistake was merging with a traditional telco rather than iBasis. More on that story at….

    1. JLM

      I actually ran into a bear when hiking in the Smokies a year ago. That joke came into my mind but I was with my wife so I did not run. I think she might have been able to outrun me as she is quite fit and very scrappy.I yelled at the bear and apparently the bear had had the same training and Ranger orientation. So it worked out well.A bear up close is pretty damn huge.

  19. Adrian Meli

    Welcome to the world of capitalism-if there are excess profits to be had someone will try to compete them away. The internet 2.0 space is interesting to examine because in some ways there are very few barriers to entry but in in others there are enormous barries in the form of network effects. If you started a retail chain 30 years ago it would take decades to scale it but now we live in a world where billions can be made quickly. I was surprised by the post in that I would think most entrepneurs would expect competition and thrive on it. I had never thought about the differing view of sales folks so thought that was an intriguing insight. It will be fascinating to see how these new models plays out over the next decade because the returns on capital are so enormous that competition will undoubtedly always be nipping at these company’s heels..

  20. 1683wpf1225

    Fred, you nailed it again. People who say they “Love competition” are so caught up in the “vision thing,” as a former US President called it, they’re hallucinating–people with visions often are psychotics-:). The best thing about competition is when your company is in a new market no one ever has served with your product or service, a competitor can enlarge the market. I believe marketing theorists call that market development. Those of you familiar with Blue Ocean Strategy by two INSEAD professors, Kim & Mauborgne turn the Michael Porter stuff upside down, so it’s a worthwhile read at a time when we have too many same-old, same-old management books.

  21. Statspotting

    I recently read the story of how threatened two guys with lawsuits. competition can sometimes be scary!

  22. Tutor Sentih

    Need to note that often, the impact of competition is dependent on the economics of the business. If it is a high fixed cost business, competition is really lethal as price competition takes over (like in airlines) whereas if it is a high variable cost – it is often easier for multiple players to carve out roles

  23. LIAD

    The book Blue Ocean Strategy has a ton of info on how best to analyze and then outmaneuver the competition.Their strategy canvas tool is a great way to visualise the lay of the land and then concoct a unique and rich value proposition.Little more info and an example here –

    1. Mark Essel

      To boil it down for those that haven’t read the book, the method selects the features consumers/customers currently care about and ignores legacy value systems. Seems like a no brainer in hindsight but it requires really understanding the market, more than the market understands itself, and that’s where the hard work comes in.

      1. awaldstein

        ‘understanding the market more than the market understands itself’Intentional creation that is meant to take the behavior in the market a leap beyond itself–who beside Steve Jobs has done this in the last 10 years?I’m blanking on others.

        1. Mark Essel

          It’s easy to be blinded by such a bright example.Let’s look at a few “more mortal” examples of market driving founders andleaders:1) Jeff Bezo’s with Amazon from suggested purchasing behavior to huge cloudinfrastructure2) Tony Hsieh and Paul English for customer service driven companies thatdeliver what customers need with ground breaking corporate cultural and workmethodology (Zappos & Kayak)3) Github founders Tom Preston-Werner and Chris Wanstrath revealed hugelatent market value by putting a pretty front end on social network whichflows about and between git repositories4) Heroku founders for executing essential web platform simplicity with onebutton deploys, it’s style is mimicked by my favorite node hosting solutions(nodester and duostack)5) Daniel Ha for driving this distributed/centralized social web jiu jitsu6) Superfeedr ceo Julien Genestoux for recognizing the power of push feeddistribution and founding a business at it’s the web’s deltaand there are many more when you think about entrepreneurs who helpcustomers and their market better understand themselves and their needs.

          1. awaldstein

            Glad I asked Mark ;)I think there is a distinction though.On one side is a dogged belief in a vision that grows over time and by perseverance, luck and flexibility you just make it happen. On the other side is a reading of the market that is ready for a change (aka iPad).By your definition my friends at RealD (RLD) are also an example. They believed that the intersection of digital projectors, stereoscopic technology and the need for distinctions between home and theatre viewing would build the market case for 3D. 8 years later it did.I wonder what the distinction is between evolving a belief into a market winner and just reading the market right and building it right out of the gate. Most every startup starts with a strong belief that the market needs what they are inventing.Thanks for this Mark. I needed a brain teaser.

          2. Mark Essel

            I forgot to mention Joel Spolsky who has redefined how many businesses viewthe art of software development, and nurturing highly effective teams. Themarket of developers gets plenty of inspiration from Joel, and even returnsthe favor. It wasn’t long ago that Joel wasn’t too keen on git asdistributed version control tool as an old svn fan. But he was convinced,and it really changed how he looked at source code repositories and theirchange history.

  24. Scott Ballenger

    Seth Godin says that competition changes a buyer’s decision from “yes” or “no” to “this” or “that” – a good thing.

  25. paramendra

    C for capitalism, C for competition.

    1. Dave Pinsen

      How insightful.

  26. Jacob Slevin

    Great read! It’s interesting, bc our competitors in the b2b architecture + design media space (at least those that control any meaningful transactions) are mostly print/legacy businesses whereas we’re “the fresh, hip web” alternative. That being the case, the bulk of their marketing efforts tout the value of their brand, and nearly nothing more, probably bc they’re afraid it will accidentally educate their clients on our behalf, and therefore send business elsewhere. The end result is both good and bad: good bc they continue to sell the wrong story leaving that high-ground to us, but bad bc it forces our sales team to sell a story “buyers” are less familiar with and therefore less prepared to accept.I’ll be paying very close attention to any of these competitors beginning to market themselves more so in a light that likewise promotes our own products for sale. Although we “instinctively” review this already, I’ll make sure it’s officially threaded into our tactical plan.Fundraising and exit plans are fascinating also, but in my experience, there’s typically more money available to capitalize existing and proven business models rather than new business models without success stories. For this reason, I think that provided an entrepreneur is in fact developing the “best” solution in his/her market, having competition will be a helpful ally. And as you say, competition is inevitable long term so a good business challenge to become familiar with in the early days.

  27. Tom Labus

    Sales teams don’t want to hear about competition, slogans, and especially marketing unless they can be talked into doing a lead generation campaign.Sales wants leads, preferably the Glengarry Gen Ross Leads!!!

  28. MartinEdic

    The worst is when your competition is lame. In the last B-B software company I worked for we were market leaders in a tightly focused market. Our competition was light years behind us and not catching up. Their product was cheaper but it actually turned people off from trying us because they lumped us together.I like the Marketers vs. Sales insight. It is so true. You could also argue that salespeople live for today, while marketers are planting seeds for future crops.

  29. Brooke Aker

    I built a whole business around technology that helps companies analyze their competition. The one thing every company forgets is that competitors will always do something you least expect. In other words don’t assume they will always do what you did – if they did you could outsmart them every time and wouldn’t be a worthy opponent.

  30. NoodleShare

    “Very few companies will operate in a market for long without competition. Imitation is the greatest form of flattery.”That is exactly what I think about competition. If there are others in the market, it must mean the product or service at least has some merit.Competition also lights a fire under my butt. When I find out about a new competitor, it gets me motivated even more.

    1. Stephen

      @fredwilson:disqus was this what you were thinking? I wanted you to expand on that thought about “Very few companies will operate in a market for long without competition.” But I like you take NoodleShare.

  31. Kevin Drost

    In college I worked in a bar, whose owner used to say that the greatest thing that could happen to his business was that another bar would open directly across the street. Not quite a tech startup, but shows the aplicability of building a market.

  32. kumarbshah

    One of the favorite lines I read in favor about competition (and which you covered in your post above) was that “Presence of competition validates that there is a market”

    1. JLM

      1MM ants can’t all be wrong

    2. Guest

      I loved that line too Kumar.RE:”Presence of competition validates that there is a market”It is though the existence of competition can actually give an entrepreneur a sense of peace that someone else sees it too and that they are not a lone pioneer. Which can be good because as a newspaper quote I had hanging in my office from Mr. Ewing Kauffman said : “Industries form on the dead bodies of pioneers.” Maybe having some competition means that it might be your competition that dies along the way. 🙂

  33. Scott Barnett

    I just read this article a few days ago about how Starbuck’s actually helps mom and pop coffee shops – perhaps a rising tide raises all boats type of analogy –…I just wrote a blog post that covers this a little bit – one of the VC’s I’ve heard speak a few times always talks about “what aisle, what shelf”. Regardless of what you’re selling, people expect to be able to place you alongside something else. And while I agree with JLM that you should always strive to be #1 or #2, when you’re just starting out, you are neither.

    1. JLM

      Sometimes the ability to be #1 or #2 has to be couched in geographical terms. You may have to pick a geographical submarket that allows you to be the cock of the walk on that walk.Or to be positioned as the dark side of the mirror of the seeming market leader.My college age daughter is all about “no corporate coffee”.

      1. Guest

        KUDOS to your college age daughter :-)P.S. Sorry Mr. Howard Schultz

      2. Scott Barnett

        It can be more than just geographical – and that’s the beauty of starting something up – is how you are going to disrupt the status quo, or create a new segment, or define a sub-segment of an existing segment, etc.It’s great that your daughter is against corporate coffee – and there are plenty of people (sadly, like me) who really enjoy a cup of Starbuck’s coffee – my point wasn’t to comment on Starbuck’s greatness (or lack thereof) but rather that I would think the conventional wisdom would be that a Starbuck’s coming to your neighborhood would kill the mom and pop coffee shop, but that doesn’t appear to be the case.To Fred’s point, that competition can be good, can help you focus, and sometimes may have the opposite effect than you expect.

        1. JLM

          While The Perfect Daughter is well — perfect — my point was only that sometimes, like fast food, the market is created by NOT being the seeming leader but to be “the” alternative to the seeming leader — the dark side of the mirror.So we agree totally.

    2. Dave Pinsen

      Starbucks is probably atypical in at least a couple of respects:1) To quote a letter writer to the FT a few years ago, Starbucks raised “the possibility if not the reality of excellent coffee”, i.e., it raised the bar for coffee and opened a market for even better coffee served by local coffee shops with which Starbucks can’t compete at the high end.2) Starbucks doesn’t (and probably can’t) compete on price. Wal-Mart can use its inventory management and economies of scale to undercut your prices if you owned a similar retail store, but Starbucks can’t do the same to your coffee shop. And if you offer truly excellent coffee, you get away with charging more than Starbucks.

  34. Nav Dewan

    The best entrepreneurs are the ones who think life is boring without a competitor. It gives you a chance to improvise and can result in many new ideas.

  35. Guest

    Great post and tons of excellent comments too. I have a bit different take on one thing though.”Imitation is the greatest form of flattery.”I think this is a true statement in terms of personal life (e.g. me modeling myself after someone because I respect their honesty, piety, communicativeness, etc.) and I think this quote was originally used in this context. But in business let’s face it … competition is good, competition is healthy and competition can cause improvements and efficiencies but having someone knock off your business model, product, etc. is not flattering if we are honest about it.I am playing the semantics game a bit here I admit.To me the highest form of flattery is not imitation in business. To me, when I refer a business’ product/service to colleagues, friends and loved ones that is the highest form of flattery I can give a business.

  36. bmartyna

    If we didn’t have any competitors, it would be my solemn fiduciary responsibility to invent them.

  37. Ryanmatthewb

    Competitors also help rationalize your value proposition and customer expectations; without competition there is no relative performance that allows you to say no to customer demands. The most extreme ( and often illegal) examples of this are price fixing schemes or cartels, but even in cutthroat markets competition allows you to reach a point past which you will not go to win a deal.

  38. Ryanmatthewb

    Also I’ve seen a trend in B2B markets in that they require competition. Often times when a dominant player emerges there is an opportunity for one of a crop of tier 2 players to get sucked into second place rapidly by the vacuum force of the market’s “need” for a logical alternative to a dominant leader. If you are one of those tier 2 providers you can greatly benefit from focusing your strategy around making it a horse race as often as possible.

  39. BuyGiftsItems

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  40. Rob

    I’ve been waiting for this topic to come around on MBA Mondays! Would love to see a series on this talking about competitive advantage, positive sum competition, etc.

  41. cparso1

    Great article. I recently had a similar post about direct and indirect competition before you enter the market vs once you are in the market. “Imitation is the greatest form of flattery” hits the nail on the head. If your competition isn’t doing it before you, they will certainly try to copy it once you start doing it.http://www.smallbizbigdream

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  46. Shannon Myers

    I like and value competition. I think it keeps you sharp. I also think some competition when you are a startup and the competition is weak or not addressing an issue properly it puts you in the spot to immediately gain customers, users…

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  49. Billy Kirsch

    Great post Fred. It’s good to be reminded that competition is both good and bad. As a small business owner, competition gets me riled up, but I also learn a lot from seeing what others in my niche are doing. It has helped me understand how to differentiate myself. 

  50. taigeair

    I like competition and often times develop a congenial relationship with them. However, some times the competition plays dirty – what do you think about that?

  51. ShanaC

    It sounds like your last company may need to do slightly more marketing depending on the costs involved….if you can not hurt turn around time to install, while also reaching more nonprofits, you could kill the incumbent

  52. Mark Essel

    “But I love to kick ass, especially when the odds suck.”We’ll probably never understand all the details of what motivates us, it just happens. Keep on kicking ass Mr. Crystle, it’s what fires you up and it’s inspirational to those around you.

  53. JLM

    Need the tax losses?

  54. JLM

    This has been true of the fast food business for decades.Mickey, Jack and the Colonel have never been happier than when they are across the corner from each other.

  55. Carl Rahn Griffith

    Good point, lol – when the consumers choice is all crap, the competitors know they all stand a fair chance to grab a pro-rata slice of the business passing-by.A Cartel by any other name, I guess…?

  56. phollows

    Hi Gina:Fred has his list set to a daily digest; that’s why the schedule is the way it is. If you and others want to lobby for different timing during the day or more immediacy, I suggest comments here are the way to go. We at FeedBlitz can certainly accomodate that if Fred chooses to do so and the community wants it. :)Best,Phil HollowsFounder, FeedBlitzAuthor: List Building for Bloggers