Product Strategy - How to deal with competition
5 weapons to utilize against your competition
In today’s tech world, competition is everywhere. You will probably have to spend some significant time thinking and coming up with a product or service that is absolutely unique, lacking any competition.
But there are always winners and losers in this game. The question remains - how do successful companies tackle competition?
This article will talk about those key strategies you can adopt to sustain your competitive advantage.
When your product or service is facing competition, you have 5 choices at your disposal. These choices are not mutually exclusive, by the way. An entity can mix and match different tactics to develop its own plan to handle the competition.
Copy
Acquire
Cede
Minimize
Regulate
1. Copy
A very straightforward response to competition is to copy your competition's product or features. Yes, you heard it right. There are instances when companies have been successful just by copying a feature from their competition.
Let’s take the example of Facebook. Facebook copied the stories feature from snap stories. Stories were copied into Instagram pretty much feature by feature, exactly how it was designed in Snap, and it worked.
But, there are failure stories too.
Google tried to copy facebook’s core social network with its own network called Google plus. It offered many similar features such as - profiles, photos, news feed, like button, share, etc. Google also tried to differentiate itself by adding some novel features like Circles (e.g., it allowed users to segment their network to work, friends, family, etc.).
But, the product failed miserably. Google plus lacked incentives for users to leave Facebook and build new networks with Google plus. There was not enough value for users to switch.
One key lesson we can learn from this is that, when you already have an established value for users, copying something adds a delta on top of it. For Facebook, the stories feature sat on top of the already established network that Instagram had developed, and users adopted the feature.
But for Google, they were expecting users to switch from an already established network just by offering the same features, which was not enough for users to switch from Facebook.
2. Acquire
Acquiring a competitive threat is a well-known tactic. Unlike copying a feature, the acquisition enables companies to acquire a product, talents, and customers. But this can be a costly affair and involves many complexities. Let’s see some examples -
Waze posed a threat to Google Map, and Google acquired it.
Facebook understood how Instagram and Whatsapp could be a potential threat for them to hold their competitive advantage in social media territory. Facebook acquired both of them.
For these examples, the acquired product still works independently from the original entity. However, neither Google nor Facebook has to worry about losing their competitive advantage to Waze and Instagram or Whatsapp respectively. They have not only acquired the product but also acquired all the customers of their competition. Now they can plan to merge these products or continue to run them independently. At the end of the day, Google and Facebook still hold their competitive advantage and eventually have built stronger entry barriers in their territory.
The acquisition strategy, at times, has failed as well. The classic example of this is Microsoft acquired Skype for $8.5B in 2011, the integration could not make Microsoft the reigning champ in the workplace productivity and video conferencing market. Even though they had a huge lead in development time and the perfect product suite (Office 365) to plug into, they could not win the market. Zoom emerged as an independent winner in the video conferencing space, while slack took the workplace collaboration market. Microsoft fought back with the Teams and regained the market shares back. But initially, they lost the advantage despite the acquisition.
The same goes for Google’s acquisition of Motorola or Microsft’s acquisition of Nokia.
3. Cede
A third tactic is recognizing the competitive threat and making a conscious decision to cede that territory to the competitor and switch focus to other areas. This happens when a company realizes that there is too little gain in competing with an entity with a stronghold in a particular territory.
Let’s consider Google again. Google tried to re-enter into social networking with Google Plus, ultimately ceded to Facebook and switch their focus on other areas - Cloud, Ads, Search, etc.
In a similar move, Atlassian tried to enter into the workplace collaboration and communication space with Hipchat but eventually ceded to Slack.
By the way, here is how Hipchat looked like.
However, Atlassian played this well. They sold HipChat to Slack and invested in Slack - signaling their intent to cede this territory but hopefully gain some monetary benefit from an equity stake.
4. Minimize
Another way is to compete tangentially with a competitor to minimize its competitive advantage instead of taking them head-on.
A good example of this strategy is Google Photos: it’s a product built around Google Plus and later was integrated into it. Even though Google Plus could not hold its ground against Facebook. Google kept Google Photos alive to pose a potential threat for photo-oriented apps like Facebook, Snap, Instagram, etc. Google is strategically minimizing the long term advantage that Facebook can build up as the default photo album.
Obviously, this may not prevent Facebook's success, but, at least, Google Photos likely puts a dent in the overall number of photos uploaded to Facebook and may effectively siphon off some users.
5. Regulate
Finally, the fifth one is about throwing the "regulatory book" at your competitors. Ultimately, this means that a company uses its influence and lobby with a powerful entity to push for regulations for its benefits.
A great example of this would be Intuit’s TurboTax aggressively lobbying the US government to prevent easier ways for Americans to file taxes online free and easy - like it's possible to do in many other countries.
Conclusion
There you go. 5 solid tactics to use as weapons against your competition. But, this is easier said than done. We need to remember that these are just strategies and not the success formula. There are examples of both success and failure for each of these strategies.
Sincerely,
Arkapravo
PS. Your feedback will help us get better. Click here to opt-in for a short survey. It won’t take more than 30 secs.🙏
To receive more such articles in your email, consider subscribing. 👇
Click here to learn more about the Product Hub Newsletter.