I just got back from a trip to New York. While I was there, I met with a promising entrepreneur who has a great startup that has been pretty successful so far. He is in the middle of expanding his business nationwide. We came upon the topic of competition and how to deal with it. I realized that many people have some misconceptions about competition.
My advice was “don’t be afraid of competiton.” I learned this lesson when I was running ExchangeHut and talked about it at last year’s Entrepreneurial Deli event in Madison. While we were running ExchangeHut’s trading platform for college students, our biggest fear was that Facebook would launch a marketplace that would crush our competitive advantage. When we heard that Facebook was launching its marketplace, we changed big parts of our strategy to react to the new competition that had yet to launch.
Big mistake. When marketplace first launched, it was fairly useless and was not a competitor to our business. We had changed some of our bigger plans because we were afraid of competition and did not expand as quickly as we had planned because of it. Our competition did not hurt us. My point is that you never know if your competition will actually be successful. If you have a great idea, don’t immediately change your plans if you hear about competition. Execute on your ideas and let the chips fall where they may. If your idea is good and you execute well, you will be successful.
Another point on competition: Don’t be afraid to get in contact with your competition. This isn’t t say that you should tell your competitors (or the world) every last detail of your plans to conquer the world, but you should be on good terms with the other people and companies in your space. We found that it paid off to get to know the other startups that were in our market. We talked to just about everyone in our market.
We even ended up being able to work out some great deals with competition because we were on good terms with them and they knew we existed. There really is no downside to being on good terms with the others in your market. You never know when a great opportunity will present itself to you or one of your competitors that will be beneficial to both of you. Plus, if you plan to start another company, these contacts will be valuable later. If we had been afraid of competition and not talked to them, we would have missed out. Moral of the story: don’t be afraid of competition, get to know them, but don’t tell them everything!
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The infamous ‘yin-yang’ symbol teaches us that no matter what you’re talking about, everything is relative. In other words, you cannot know what ‘light’ is until you experience ‘dark.’ You cannot know ‘good’ until you’ve experienced ‘evil.’
The same is true for companies. Why does Coca-Cola have 90% market share? Because people have tasted the competition–Pepsi–and concluded that Coke is just better. If there was no such thing as Pepsi, Coke would not do as well because people would not have a comparison by which to judge it.
The same is true with startups. Some will gravitate toward the top, some will fail (quickly). But not to be overlooked is the incredibly important role of the failures…for they are the ones that hoisted the successes up to the top by giving people a comparison by which they can weed out the “good” from the “bad.”
Sorry for rambling, but my point is this: You are right, do not fear competition, embrace it. For one day it may be your competition that hoists your company to the top once people see how much better yours is than theirs. Don’t fear competition, but rather, cradle it, embrace it, and then like Arnold in Eraser…destroy it.