I was employee #3!

Think about this – it was like I was the first person hired by Larry Page and Sergei Brin to start Google.  Or the first person hired by Jobs and Wozniak at Apple. Or like being in Microsoft before it was even this big:

I was employee #3!  Obviously, this was during the first tech bubble.

I had been hired (#3!) to sell the awesome new piece of software that the founder had written, and we were all going to get rich.  That, at least, was the plan.  The first point where I knew this might not work occurred very early, when we had this discussion:

Me: Ok, who is our competition?

Founder: No one.

Me: No one? There must be some other database management software out there.

Founder: Oh, there’s database management software, but none of it does what ours does.

Me: Who’s close – I need to map out the market.

Founder: No one – we don’t have any competition.

This, of course, was false.

The Problems with No Competition

Whenever I hear someone say that they don’t have any competition, it sets off big warning signs in my head.  In our case, Microsoft’s SQL Server did a whole lot of what our software did, for a lot of money, and PHP did the rest for free.  Our competitive position was not strong.

There are several problems with believing that your competition is “no one”:

• It shows you’re focusing on your features, not the problem that you’re solving. My founder thought we had no competition because we had a set of features that no one else had.  But the problem that we were trying to solve was common.  When you’re sending an innovation out into the world, focusing just on the features, or just on the technology, will kill you.  You have to focus on the job that your customer needs to get done.
• No competition makes you lazy.  Our user interface was terrible.  But it didn’t matter because we didn’t have any competitors!  Right.  On the one side we had the very slick enterprise-level SQL Server, and on the other the hard-to-use-but-still-fairly elegant PHP.  We needed to match one or the other.  But because we had “no competitors,” there was no urgency to fix the UI – the need to do so wasn’t even recognised.  This was bad.
• It’s really hard to sell something with no competitors. If you get your business model innovation right, you will be in a unique space.  This is good – and something that you probably need to do to support your great new idea.  But you still need to have analogies.  Why does everyone sell their new thing by comparing it something else?  “It’s like Pinterest but for cats” is useful because the analogy helps us start to picture what the new thing looks like.

If They’re Buying Something From You, They’re Not Buying Something Else

Even if you’re coming to the market with the most unique thing ever, people are still making a choice when they decide to buy it.  No one has unlimited money, so they are making tradeoffs.  Rita McGrath makes this point very well in a post discussing why industry analysis is out of date.  To make the point, she shows this graphic from the Wall Street Journal showing how cell phones are eating into household budgets:

And here is what she says about how to think about competition:

To consider competition like this, you need to think more broadly about what I call “oblique” competitors. These are competitors who may not be in your industry, may not be targeting the same problems you target, and may not even intend to compete with you at all. To understand them, you have to redefine what you are competing for. In this case, it’s share of family budget. To do a competitive analysis in this situation, you’d need to get into the heads of potential customers and try to understand the tradeoffs they are making and why. Until you get in the habit of doing that, the risk of being collateral damage of someone else’s successful strategy is all too real.

So just as your customer isn’t “everyone,” your competition isn’t “no one.”  If you’re employee #3 and you want to get rich, or if you’re employee #4,582 and you just want to do interesting and rewarding work, you’ll be better off if you think about your competition more broadly.

Any time you’re trying to get a new idea to spread, you have to break people’s connections to old ideas.   Since innovation always requires a change in behaviour, you always have competition – even if it’s just the old way of doing things.

Your competition is never “no one.”