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8 Mistakes to Avoid for Your Startup to Outwit the Competition

Why entrepreneurs get their competitive strategy so wrong.


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Amir Emadi

3 years ago | 5 min read

Going into 2020, major entertainment companies like Disney and Warner Brothers have been laying out billions of dollars to compete with Netflix’s movie streaming business. Even Apple has gotten in the game, and it alone has dropped a billion into new video content.

Startups, however, don’t have billions of dollars to spend creating new content and stealing market share. Yet, I see too many entrepreneurs pursuing competitive strategies they can’t afford.

For example, they spend money on ads before doing market research and without an aim to learn about the customer.

The problem starts with the way early entrepreneurs analyze the competitive landscape. For an established industry, you can leverage the competitive landscape to learn a lot about partners, pricing models, and customer segments. But in a startup environment, you have to take different angles due to the new nature of the business or solution.

Why do early stage entrepreneurs get the competition so wrong so easily?

Below is a list of mistakes I’ve seen entrepreneurs make — and that I’ve made — with some advice on how to gain a competitive edge.

NO COMPETITION

We’ll start with the mistakes or challenges that stem from a thought process many first-time entrepreneurs have. That is, they believe they have no competition.

1 — Ego

If people needed a term to describe entrepreneurs, it would be “passionate.” There’s no doubt that an entrepreneur’s passion drives her to work long hours for weeks at a time even when it seems the world is working against her.

However, passion can easily turn into an ego, which is one reason entrepreneurs say “we’re the only ones doing this.”

Having a big ego doesn’t allow you to acknowledge the difficult situations that competition will bring you. Imagine you go to market without knowing the existence of other players until your potential customers tell you about them.

It’s a bit of a shock from which you weren’t psychologically, operationally, or financially prepared to recover.

2 — Denial

Turning a blind eye to competition inhibits you from facing the facts of real competitive problems. There are ways to conduct proper competitive analysis and they all require critical thinking. More importantly, you have to be open minded to see potential competitive threats.

It’ll be easy for you to miss the barriers to entry or potential threats if you look at your startup as the only company providing a solution for a problem.

3 — Indifference

If you don’t take the above consequences seriously, you’ll send a bad message to your entire organization. They’ll believe you’re incompetent, in denial, or dishonest. A natural response from entrepreneurs who have been misguided and become fatigued is to brush off the views of others.

This might be a bad form of managing interpersonal relationships, but it’s an even worse form of managing a company.

DIRECT COMPETITION

4 — Rigidity

When your focus is too rigid, it’s susceptible to snap at many points of failure. So there’s a balance to meet when closely correlating characteristics between companies.

Some entrepreneurs build a list of characteristics to include product features and sometimes pricing, nothing else. Why is this a problem? Features can be added and antiquated. And prices can change, especially as the market becomes saturated with more options for the customer.

I’m not saying “don’t focus.” Quite the contrary. I’m saying, “be so focused that you’re nimble to outside threats.”

5 — Blurriness

Other problems arise for entrepreneurs who only consider direct competition. By doing so, they overlook their current weaknesses while blurring their vision to potential threats.

There’s a problem with defining your startup’s “current weaknesses” while your vision is blurred. You don’t see market barriers such as regulation, traditional methods, or nothing at all — sometimes the most annoying competition.

When building out your competitive landscape map (the quintessential checks and “x” marks on a table), think about how your competitors create revenue streams, deliver service to customers, brand themselves, and manage regulations and other barriers.

INDIRECT COMPETITION

6 — Misdirection

The most glaring issue I’ve seen is when an entrepreneur allows the indirect competition to distract her. She’ll look at a company that uses a different approach to help customers, and think, “oh we should do what they’re doing if it works and it entices investors!”

That’s an overly simplistic and a bit facetious way of paraphrasing, but the thought process still exists. I recently spoke with an entrepreneur who, at the beginning of her pitch, said her startup’s competitive advantage was in her intellectual property. But she doesn’t have a patent.

Her unique value to the customer is in her expertise on skin care, but she had been focused on building out the technology behind her app rather than enhancing the customer’s experience.

7 — Avoidance

In this context, I’m talking about avoiding the customer, not the competition. I’ve seen entrepreneurs so hung up on the idea of competition that they don’t conjure a new way to hear from their customers.

Let’s look at the beauty care company again. The entrepreneur has identified a problem whereby so-called “beauty experts” provide bad advice to women.

She even showed me dozens of Facebook interactions as evidence that her competition sucks. Ironically, the entrepreneur hadn’t thought to use those Facebook comments from dissatisfied women as a basis to build her startup’s competitive advantage. Whether intended or not, she avoided them.

8 — Myopia

The dictionary defines myopia as the lack of foresight. That’s precisely what I mean in the context of entrepreneurs not seeing future indirect threats (as opposed to current ones).

When a market is built out, a customer problem solved, or a new road paved by a new solution, then the passage of time brings with it new competitors. Sometimes the threats aren’t commercial; they’re regulatory like the way the cryptocurrency and cannabis industries have seen it.

Sometimes the entrepreneur herself creates a competitive blocker. By introducing a complex solution, she forces the customer through a steep learning curve (having to learn something new can prevent a purchase).

Conclusion

Of course, this list of 8 may seem negating or skeptical. My hope is to motivate you to keep an eye out for unnecessary mistakes.

As we think about creating more competitive advantage for our startups, we develop sophisticated outlooks. We realize the adverse effects of an underdeveloped competitive outlook on the performance of our startups.

You can run your startup with a highly efficient business model while delivering value to your customers. In fact, the two go hand-in-hand. Just be sure to fine-tune your self-awareness and recognize that having a more connected strategy allows you to create a unique advantage.

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Amir Emadi


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