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Trying to build a strategic direction without a competitive analysis is like walking barefoot through a cow pasture on a moonless night. You have no idea where you’re going, how far you’ve gone, whether you are about to run into something, fall into something, or step into…something.
A competitive analysis is not meant to determine whether your product is priced effectively! It’s a determination of where your competition is best able to compete and how it is actually performing. Believe it or not, your analysis may show that your competitor is using a flawed strategy—which helps you build your winning strategy.
Here are five key questions to help guide you through the process of building a simple—but telling—competitive analysis:
1. Who are your competitors?
Make a list; build the spreadsheet. Any company that overlaps your sales area geographically with similar products and services (or in short, the companies your clients may choose to work with rather than you), is a competitor.
2. Are they growing organically (day-to-day sales) or by acquisition?
This one is important. If your competitor is acquiring everyone in sight, are you prepared to one day face a single competitor that represents the rest of the market? If the competitor is growing organically, are they differentiating themselves as the product expert that leads the market with innovation, new ideas, and solutions to customer needs? Or, are they a follower? If so, who are they following? Are you the leader, follower, or acquirer?
3. What kind of financial shape are they in?
Are your competitors small, and can weather a downturn in the market, a new government regulation, a change in technology? Are they large, and can they drive the market in ways you cannot?
This is sort of like playing Texas Hold ‘Em. The player with the most chips can drive the betting, forcing the others out of the game. So, are your competitors trying to force you out of the game? Should you be forcing them out of the game?
4. What do you know about their personnel?
What territories does their sales staff cover? When salespeople leave, the relationships they had in the market are wide open for the taking. Job openings, especially repeated openings at the executive level, point to weaknesses. If the CFO's office seems more like a revolving door, look deeper into their financial statements. It may tell a story.
Executives who are mismatched for their roles often indicate weakness. Is their head of marketing and sales from administration? Does the head of banking operations come from hotel management? Has the new manager ever managed? Has the new leader ever led? Backgrounds are easily found on social networks. Do some digging!
Sometimes promotions point to newfound weakness. Manufacturing learned this lesson a long time ago. Promoting someone from the production line doesn’t mean he or she has business management, leadership, motivation, and/or coaching skills. Look for opportunity when your competition takes their best-performing people and places them in a management role. It may mean weakness at both levels!
5. How are you gathering information for your analysis?
If you are basing it on your loudest/most opinionated/most successful salesperson, one industry periodical, or a recent presentation you heard at a conference, your analysis will be flawed. Look at the empty spots on the spreadsheet you’re building on your competition. This is the source of your questions. For answers, look for repeated results and messages from numerous sources. Only then should you trust your data enough to rely on it.
Building a competitive analysis will give you a much better idea of what your strategic direction should look like. So, go ahead, take that walk through the pasture—but do it in the daylight!
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