Invest where competitors aren't

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Hey there 👋 - it's Brian.

In 2021, I helped a $40B+ tech company launch in a new market (let's call them "SaaSCo").

SaaSCo worried they wouldn't have a competitive advantage. But they saw an opportunity they didn't want to miss. So we helped SaaSCo figure out where to invest to give them an advantage in the new market.

In today's issue, we'll walk you through what happened and help you invest in your business to win your market.

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Steps you can take to build your competitive advantage

A common mistake I see businesses make is to build a product that isn't clearly positioned as the best solution in the market. If you don't have a competitive advantage, your business growth will slow as your company gets bigger. Why? Customers can't quickly tell what makes you more valuable than other solutions.

Without an advantage:• It's harder to attract customers• Customers are quicker to leave you• Customers pressure you to lower your prices

We knew that for SaaSCo's product launch to be successful, we needed to invest in areas that gave them a clear competitive edge.

So here's how we did it:

Invest where your competitors are not

To create a competitive advantage, you need to invest in places your competitors aren't. In other words, you focus your money, time, and resources to solve customer pains in a different way.

So first, let's figure out who your competitors are:A competitor is any alternative solution to the customer's problem (including their broken way of doing it today).

Here's a previous article on how to come up with your full competitor set (so you don't get blind-sided by one you don't see coming). I made you this simple template to list out your competitors by category.

Now, let's figure out how each competitor is different.

Competitors focus in different markets. Examples:• Customer types (examples: income levels, age ranges)• Geographies (examples: countries, regions, states)• Offerings (examples: services, products)• Channels (examples: social media, email)

Competitors have advantages in the different markets:

1) Customer-facing advantages (examples):• Service: Faster installs, better guarantee, better replacement• Distribution: Better product placement, wider partnership• Marketing: More promotions, larger sales team

2) Behind the scenes advantages (examples):• Operations: Lower downtime, faster response rate• Inputs: Bigger databases, better insights• Talent: Better training

I made you this simple template so you don't have to start from scratch. To keep the template simple, combine the focus areas and advantages into one column on the left. Here's an example from the startup I built last year:

How you chose where to invest to give your business an advantage

We ran this analysis for SaaSCo and helped them make the choices on where to invest.

Here are the choices we made for each market and some tips for you to do the same.

Market choice: Customer segments

Through customer interviews, we chose to focus on large enterprises in two specific industries since they were most receptive to the SaaSCo brand name and most in need of the solution we were building.

How to win: We chose this segment because we already had strong relationships from SaaSCo's hardware business. We decided to focus on converting their hardware customers to our new software product.

Here's a thread to walk you through step-by-step how to choose which customers to focus on:

Market choice: Channels

SaaSCo had a large distribution network from their hardware products. These partners had a great experience with SaaSCo. They had full teams devoted just to distributing their products and were happy to take on another solution.

How to win: "Winning" in distribution channels meant having favorable terms and devoted teams prioritizing the product. We were happy the terms and prioritization distribution partners had for SaaSCo's products. We chose to not invest further in distribution channels.

Use the distribution channels that you have an advantage with.

Examples:• Social media (advantages: an engaged audience)• 3rd Party distributors (advantages: favorable terms, broader network)• Non-traditional channels* (advantages: exclusive partnerships)

*Note on non-traditional channels:There's no playbook here so I'll give you a real example. I worked with a bank that got an exclusive partnership to use a convenience store as a bank branch. It gave them an advantage in geographies that other competitors couldn't reach.

Ask: "who has distribution in the geography you want your products in and could benefit from having your products in their store?"

Market choice: Products & Services

SaaSCo chose to expand their offerings from hardware to software.

How to win: SaaSCo will win by providing the software that their hardware customers will need.

They had a captive audience in tech hardware so they had an advantage where if they provide software for that hardware, it's hard for others to compete.

Learn your customer pains (know it better than anyone) and provide solutions others can't match. Here's a previous article on how to deeply understand customer pain.

Invest where your competitors aren't

The stronger your competitive advantage, the more likely your business is to grow quickly and be profitable.

That's a wrap!

If you have any questions, reply to this email and I'm happy to guide you.

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See you next Thursday 👋

Brian

Clickworthy Resources

• Article: How Netflix created their competitive advantage• Article: How to make your strategy docs• Book: How to interview your customers so they don't mislead you

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