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I was sitting with the founders of a company we’ve funded the other day talking about their competition. I love this product and I use it every day. It doesn’t yet have widespread adoption, but it as extremely actively used by the early adopters.
This company has several competitors — long time incumbents with somewhat stale, but useful products, and several new competitors, including well-funded and noisy ones. I use several of these products regularly in different situations and have encouraged the founders to use them also.
During our conversation, we started off by talking about pricing and go-to-market strategies. As part of this, we were talking through a strategy to change the current game being played in the market, both from a product and pricing perspective. We had clarity on the product side (we have several fundamental architectural differences that enable a powerfully different approach at scale) but thrashed for a while on the pricing perspective.
I realized I wasn’t very clear on the pricing strategies of the competitors so we went through them on-line. While this was sort of useful, our knowledge of their products, how they work, and what the current limitations of them are was more enlightening. Ultimately, the product differentiation drove the pricing differentiation discussion, which resulted in our hypothesis about how to change the game which we are now testing.
If we hadn’t all be active users of these competitors products, we would have had a stupid conversation. While we have limited visibility into the competitors’ product roadmaps, we know how hard it will be for them to change several dimensions of their products. Sure, we should assume they can and will do this, but as we enter the market in a serious way, I think we can carve out a unique and very significant position for ourselves by leading with the product differentiation and supporting it with a pricing strategy that undermines theirs.
In the absence of the product information we have from our experience using their products, we wouldn’t have been able to tie these two constructs together, and our resulting approach would be weak.
My general approach to competition is to “obsess about their products while completely ignoring the company.” If you can identify competitors, use their products continually, if only to have that knowledge when the moment comes that you have the conversation about how you are going to change the game.
This story originally appeared on Brad Feld. Copyright 2014
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