The Right Way to do a Competitor Analysis for a New Product Category
A guide for startup founders to do an objective & value based competitor analysis
Almost in all startup pitch decks, you’ll definitely find at least one slide on competitor analysis. While this analysis is critical for all startups, but many of them, even mature ones, make a fundamental mistake while doing it.
The Traditional Competitor Analysis
Competitor analysis is usually a table with the first column listing all the product features. The next would be the startup’s product with a series of ticks indicating that all of those features are available in the it. And the next few columns would be competitors’ products, with ticks & crosses, or blanks. This basically indicates that the startup’s product is superior.
The comepitor analysis would look something like this:
While this approach can work well for existing product categories, there are two major limitations when it is applied to new product categories. First, it only lists the startup’s product features, but doesn’t indicate if those features & functionalities are the ones that will solve customers’ problems. Many founders assume that it will do so, but in reality, they might not.
Second limitation is that it only allows products to be compared with other similar products, but not with other alternates or substitutes that can provide the same value to customers. For example a startup that has a hardware technology to monitor the health of lakes, using this approach, cannot be compared with a startup that addresses the same problem through analysing satellite images of lakes. From a feature perspective, these two products will be completely different, but are definitely competitors.
To overcome these limitations, products have to be benchmarked from a “customer value” standpoint. This would put objectivity to the competitor analysis. One of the best way to do this is through the “jobs-to-be-done” theory.
The jobs-to-be-done theory says that whenever someone uses a product, they are trying to get a particular job done for them. For example:
- We use uber to get the job of “commuting from point A to B” done;
- A warehouse that wants to “fulfill customer orders in the shortest time possible” might use an inventory management software to get that job done;
- A sales organisation would use a sales automation tool to get the job of “closing more orders” done.
To summarise, jobs-to-be-done (JTBD) is a set of jobs that a set of people, i.e. customers or users, wants to get done in order to solve a problem. Also, note that there can be more than one job that customers wants done to solve a particular problem.
Observe that jobs-to-be-done does not indicate any product or solution, it only indicates what jobs the customers wants solved. In the sales automation example above, the sales organisation can as well choose to get the job done manually or use any other alternative. Refer this link to know more on jobs-to-be-done.
The first step in doing a “Customer Value” or “Jobs-to-be-Done” based competitor analysis is to identify the JTBD your chosen target customer.
JTBD Based Competitor Analysis
Once you’ve identified the JTBD for your product, the next step is to simply replace the first column of the competitor analysis table with the list of JTBD.
This might not look like a significant improvement to the traditional competitor analysis, but in fact, it shifts the entire perspective of how you look at your product. There are several upsides to following this approach:
1. Benchmark your product with alternates or substitutes
This approach will not just help you benchmark your product with competitors but will also help in comparing it with alternative solutions or substitutes available. For instance, if your product is an AI-based process optimisation software for manufacturing companies, you can compare it with a consultant providing consultation on process optimisation.
This offers a whole different perspective from where you can look at your product from. While traditional competitor analysis would be blind to such alternatives or substitutes.
2. Improve your product
Since you are listing down all the JTBD for your customer, it will clearly show what your product is missing, i.e. what jobs does it not perform for your customers yet. For example, your product might only perform 3 of the 4 JTBD for your customer, indicating that you still need to develop your product to include the remaining JTBD.
3. Showcase your value proposition
This approach can help compare your product with the current product/solution your customer is employing to solve the problem. Through this, you can show your product’s superior value proposition to what they are currently using.
4. Extending your product scope
You can also extend this framework to include the jobs that your customers would do immediately before & after using your product. By doing this, you will know if your competitors’ products are doing those jobs for your customers already. This also gives you additional scope to improve your product now or in the future.
In the sales organisation example above, the company might want to “ensure timely collection of payments” from customers post closing orders. This might be a potential area that the sales automation tool can address in future.
The JTBD based competitor analysis would look something like this:
Access the template here.
As buyers, people intuitively evaluate all possible ways to address a problem. But as sellers we somehow switch to a siloed thinking and consider only the product that we have in hand. This can put serious limitations in being competitive.
The jobs-to-be-done based competitor analysis can help you look beyond your product and see what customers really value and if competitors are offering. The tool also points you in the direction where you can improve your product and position it better to customers. Whereas traditional features based competitor analysis is blind to most of these aspects. As Tony Ulwick puts it “competitors aren’t companies that make products like yours, they are any solution being used to get the job done.”