Startups, here´s why you should ignore competition
By: Christian Häfner
Tags: Strategy, Entrepreneurship, Startup

The person with a business idea also has a reservation at most times:

“How can I protect my business idea, so that nobody is copying it?”

A statement which has come to my attention a hundred times and more over the last months and years, but nevertheless is not really comprehensible to me.

Here is why…

Particularly in the time of startup and crowd funding many entrepreneurs and initiators ask themselves about the privacy of their own business idea. Quickly lawyers and business administrators appear around the corner with declarations of confidentiality, patents, registered design and utility models or commercial protection rights. It is recommended to sign any agreements by writing — wrongly in my opinion and possibly also detrimental to the development of projects, as I have learned over the last few years.

Many own the idea but only you can bring it to fruition

The initial business idea is always just the tip of the iceberg. Before it seriously ripens in your head it grows in your unconsciousness. An idea is also always the beginning of a journey and never complete right from now on.

But why do we regularly feel chased from those who could copy my own idea? Does nobody else have this idea which is fluttering around my head at the moment?

Simply presume that at least 1000 other people had your idea previously but you are the one who brings it to realization. Than you have still won at the end, haven’t you?

Seriously, if you are the only one than keep the following in mind:

“If your idea is really that simple and easy to copy, than eventually somebody will do just that. Make your business unique instead of keeping it a secret”.

I believe that the idea and the ingenious mind flashes should be discussed with other people from early stages onwards. It helps to validate and to develop the idea further. Competition should simply be ignored and an orientation alongside those basically avoided.

Why do I say so?

Competition is never asleep, that is clear. But please understand that if your idea is really so simply copied than you have not thought it through to the end. As soon as you are in an attractive market, competition is bound to follow suit.

Why is early communication so important?

1. Feedback Sometimes one cannot see the forest due to all the trees. In relation to your idea that means — you are really so convinced by your own idea that you do not sufficiently illuminate it from all sides. Can the idea be realized? What if, when…? Who is your target market? Is anybody really going to buy the product? Are you addressing real problems? Questions over questions which one tends to forget in the heat of the battle. That is human but can have fatal consequences. From an utter illusionary business plan, to the complete product that no one buys, everything is possible.

Are you communicating with friends or associates and are you allowing them to participate? You are automatically minimizing risks. Even better is not to talk to friends but with people who can give a real feedback. Why? Because they look at your idea from the outside and are much more objectively since they are not emotionally tied into it and do not tend to sweet-talk themselves into it either.

Here you will come to understand very fast if you are going home with a pre-order or a few question marks.

2. Learn to pitch One of the highest disciplines in the early stages of an idea founding is the perfect pitch. Maybe you have all nooks and crannies of your idea prepared but you cannot deliver it with one to three sentences to the point. Unfortunate, since that is exactly what the pitch is about… the first explanation, later on at the web-site, in the pitch deck for potential investors and at last but not least, in the relationship with your customers. Through the early communication of my idea, I have come to understand the essence of it. I have taken out this part in accordance and formulate through that my pitch of one sentence.

3. Development and maturity Many cooks do not always spoil the broth. Let yourself be inspired by the feedback and bring your idea through that to maturity.

The reality is turning up differently most of the times. A team creates more complex, better ideas and projects than a single person. This stems from the diversity of the ways in which humans think. Everybody thinks differently, has made his own experiences and can make use of those. That’s why startup weekends work so well.

And if every string attached snaps and the business idea does not withstand any validation, than stick to the words of Albert Einstein:

“If at first an idea is not absurd, there is no hope for it.”

But the competition…!?!

Now that we know why it is important to discuss a business idea with others instead of protecting it, let’s have a look at the aspect of competition. One ground rule can be applied in 99% of all cases:

“Where there is no competition, there is no market.”

The possibility that there is an undiscovered market for a business idea does exist but it is limited. Therefore try to form and formulate your idea as good as possible, so that you can clearly identify your market.

If others are already playing on a smaller scale in that particular market it is a very good point to enter. The market has been recognized by others too.

Foray:

Anybody interested but who has not studied business management, can look at Michael E. Porter’s Five Forces Analysis. Essentially this is the delimitation from competition through cost leadership, differentiation, or focus. Not every variation applies to every business, e.g. one who wants to undercut Amazon with cost leadership will soon discover limits.

Competition is great, saturation difficult

Should your market already have been discovered by competition and at worst already be saturated, than do not make the error and orientate yourself to much on it. Try to find a niche market instead.

Why you should ignore competition:

If you follow a competitor, you will only run after him!

From my own experience I can say, that it is okay to enter a market which does have competition. It is perfectly right to orientate myself, to briefly look left and right. But it is NOT OKAY to try and to copy the competition.

There is one mistake which most business startups walk into when thinking of competitive differentiation: they limit themselves to the differentiation of some features or a concrete product only. But your unique selling proposition (USP) has to be visible from many more different corners and angles. Be different, be unique, and be special with what you do and how you are doing it.

My experience at FastBill

Over the last years I have often enough been stumbling over comparative tables which have contrasted competitors with FastBill. The end result always looked the same: A table, on top some names, in the middle functionalities and at the bottom the line with the prices. Guess what: the table was nearly always the same. Everyone had ticked nearly all the boxes and at the end it was the price difference which decided about victory or defeat. Just as little as these tables are not helping anyone, this type of competition evaluation (only on the basis of price and function) does not help the design of the overall experience. If this would be the basis to enter a market, I would have not been allowed to either start up FastBill or this particular blog. Even before FastBill receipt writing software existed and blogs were written around the topic of startups as well. Whoever hears the sentence “that has been around for a while” has to think about alternative differentiation and how to distinguish oneself and define these aspects. Sometimes these are not to be found on the surface, but show up in the detail. Don’t be deterred but create it differently and to a higher standard!

How to distinguish yourself from competition with the same product

How does it work to differentiate oneself from competition? A general rule of the thumb is — just as in many cases — that it is difficult, if not impossible. Potential points for entry in spite of it all:

Create your business as your own, which means — you should try and undertake everything possible to add a personal or other detail to it and therefore let it be unique. Your customers are not only buying a product, but also a feeling or an experience. “Popcorn in cinema is great but at home on the couch it’s boring.” Same product, different experience.

At the end the mix of brand, product and service will be decisive. Take care that your unique selling point is the first thing your customers are thinking off (the brand) and do not disappoint once you have won them (product and service).

You offer exactly the same product as your competitor? Try to offer something different. Different headline, different pictures, different choice of words, different location. Just because you are wearing the same shoes, does not mean you have to walk the same way.

Success stories — that’s how it can be

The following success stories of well known companies show how their differentiation has stirred attention and generated revenue:

Amazon — Focusing on the simplification of the checkout process and the acceleration of the delivery phase had been unique at the time (and they still are to a certain degree today). Amazon has become worldwide Nr. 1 partly for these specific features.

Zalando — Developing from garage trading to a consumer giant in five years. Nobody would have thought that a business with free returns would ever function. At the beginning Zalando wrote red numbers only but in the last quarter the break-even-point was reached and that with a sales volume of nearly 2 Billion Euros in the last year.

Airbnb — Who would have dreamed of quickly renting ones flat over the internet to strangers in September 2007? With this community-marketplace for holiday flats a revolution unfolded at the time. Nobody believed in it but with the established trust of the Airbnb community this turns out to be a profitable company since seven years now.

Briefly spoken

In the rarest cases it is of advantage to protect ones business idea or to keep it hidden in the dark. Preferably choose communication with your environment and validate your idea. In this way you can improve on the idea and enlighten it from every angle. And once you have decided that your idea turns into reality don’t make the error and run after your competitors. Rather use your time to take care of the special features for your business, formulate them and organize things differently. Only in that way will you draw attention.

Picture (cc) by Mary Crandall