We may get 1-2 inches of snow today, which means the city of Nashville is practically shut down. As a life-long Midwesterner, I still find the South’s reaction to snow hilarious. Nevertheless, I will not be leaving the house today.
Stay safe and warm.
Topic of the Week: Competition and Problem Solving
I have a mechanically inclined family. They can build or create just about anything.
Need a car? They can build you one. Want custom cabinetry? No problem. Trying to turn a pontoon boat into a pirate ship for a parade? They got you covered and will toss in a functioning water cannon. I can’t make that last part up.
Unfortunately, I did not inherit these mechanical abilities. In fact, if you ever see me with a power tool, run quickly in the opposite direction.
While I didn’t inherit their physical abilities, I did learn something very important from growing up with these kinds of people. I learned their approach to problem-solving.
They taught me that there is no one way to build something. In fact, you never set out to build something. You set out to solve a problem, and there are many ways to solve the same problem.
Today, I thought I would share with you the way I use this “problem-solving lens” to analyze a competitive landscape.
I start with making sure I have a good understanding of the status quo or the way a problem is addressed today.
Many folks underestimate status quo as a competitive threat, which is a mistake. It’s never easy to change the way people do things. Change requires an incentive or catalyst.
If you sell a $300 grill cover to protect from rain/snow, can you convince my family to buy it if a $10 tarp does the same thing? Probably not.
Now, if that grill cover is only $25 and easier to remove/put back on than the tarp, then you may have a compelling value proposition and a new customer.
The next step is understanding who else is solving the same problem, similarly. These are the direct competitors.
For example, let’s say I need to hang a shelf on a wall. I’m probably going to buy a drill, drill a hole into the wall, insert screws, then affix the shelf to the screws.
Every company that sells consumer drills and screws will be in direct competition for my business when I go to buy a drill to solve this problem.
The direct competitive landscape is usually easy to identify. The challenge is understanding how each company is differentiated in the eyes of customers. (A topic for another day.)
My family is innovative. They didn’t always take a conventional approach to building things. Instead, they would assess the underlying problem, explore all ways to solve that problem, then choose the best option.
From the shelf example above, I wasn’t buying a drill. I was buying a way to attach my shelf to the wall. Staying true to my upbringing, before buying a drill and going the conventional route, I explored my other options. How else could I attach this shelf to the wall?
Ultimately, my 21-year old self landed on a creative solution that was cheaper, safer and easier to install.
If any of you do home improvement projects, I’m sure you’re laughing right now. You already know my velcro solution was a failure. It didn’t work and I learned a valuable lesson in home improvement projects.
However, what if there was an adhesive substance/material that was cheaper than buying a drill, fastened securely, and eliminated the need to drill holes all together? This would be a viable disruptive competitor to the drill and screw method.
Thinking through the solutions or regulatory forces that could create major disruption to a business is one of the most interesting and nuanced aspects of analyzing a competitive landscape.
There is one final category of competition that is often overlooked. Budget competition. Your customers don’t have just one problem. They have many problems, all competing for attention and dollars.
While they may value your solution, you may be number 57 on a list of priorities behind more pressing problems.
From a market standpoint, we’ve experienced years of economic upturn and growing consumer/business confidence. What happens if that confidence changes and budgets shrink? Where does your solution fall on the priority scale?
This is something I find myself spending more and more time analyzing as I evaluate investment opportunities lately.
A problem solving lens can help you address the following four questions to better understand a competitive landscape
1) What are my customers doing today to solve this problem?
2) Who is doing something similar to me in the market?
3) What new solutions could put me out of business?
4) Where do I stand on the priority list for my customers?
Have a great weekend everyone.