Ryan's Rules #58: Always overestimate your competition

 Every Friday morning at 8am we had an ongoing project implementation call with a client in Germany. It was an extended trial of our SaaS offering but we were on the path to conversion into production use. Each week, small niggles would be raised. We’d commit to them in our roadmap or else fix them or show the client how to resolve the problem on the call. Things were going great. This was one of a number of concurrent clients who actively trialling the product. We had a lot of early traction. The purpose built solution was very different to what everyone else was selling and was built with feedback from expert users. We had a spreadsheet built with every competitor in the space. "I think we're actually ahead," I said, scrolling through it. We were untouchable. That is, until the Friday morning when the client project manager joined the Zoom meeting alone and with a smile said “It’s not you, it’s us.”

They weren’t the only prospect that we lost out to either. Eight months later, two of our "behind" competitors were eating our market share like it was their breakfast. Their tech wasn’t better. In fact, it was a rehash of what had already been on the market for years at that point. Their sales guys weren’t secretly more advanced. When we said yes and meant it, they said yes but it was really a maybe. We had become complacent. We'd stopped updating the spreadsheet as soon as it told us what we wanted to hear.

This is the trap that "always overestimate your competition" is built to catch.

The Comfort Problem

Most people think competitor analysis is a one-off research exercise. Build a great looking chart, briefing or slide deck. Gather data, try to get their price books, figure out what people don’t like, draw conclusions, update, move on. This is all well and good, but the real failing in this exercise isn't a lack of information. It's what you do with the information. If you decide you're winning, you relax. Urgency drops. Meetings about "what's next" turn into meetings about "what we've already done." Or much worse, as I experienced on the receiving end from a vendor recently, you start to treat your users with disdain. You know, the ones that pay your bills. “Our solution is very complex, you must be overwhelmed.” I swore, loudly, after this call finished.

Overestimating your competition isn't about a full distortion of reality (even a small distortion can do the trick). It's a disciplined effort that keeps you in a state of alertness, even when the data seems to say you can relax. Andy Grove summed up in his famous line that only the paranoid survive. The legendary founder and CEO of Intel built an entire management philosophy around this idea. He even published a book! This was not drama though. He had watched companies with technical superiority lose time and time again because they stopped feeling threatened.

Complacency brings comfort, but it creates blind spots.

I write these articles based on a one-liner, usually one I write when I catch a fleeting thought and happen to have a notebook or my notes app nearby. There’s a scene in the TV show Game of Thrones where Littlefinger and Tywin Lannister are having a private meeting. Littlefinger, attempting to impress Lord Tywin quotes “It is my belief that a moment of chaos affords opportunities lost soon after.” Tywin responds, “You say that as if you were the first man to think it.” Just like Lord Baelish, I rarely have original thoughts. This is not a new idea. Military strategists have used a version of it for centuries: assume the enemy is better prepared than your scouts report, because the cost of being wrong about that is catastrophic, while the cost of overpreparing is just extra effort.

Sun Tzu's writing on warfare talks to a similar premise: know your enemy as well as you know yourself, and never assume you already do. Translate that into business terms, and it becomes a simple operating principle. The companies you've dismissed as "too small," "too slow to gain advantage" or even “too big” are often the ones fixing the exact weaknesses you stopped paying attention to while you languish in your comfort zone.

Build It Into Your Operating Strategy

So, underestimating your competition is complacent behaviour. It can lead to surprises. What then is the opposite of complacency? Anxiety?! False urgency will do more damage than good in the long run. Remember, more haste does not necessarily mean more speed. Overestimating your competition doesn’t have to be about anxiety. Not if you make it part of your process. Revisit your competitor assessment frequently, not just before a round. If you are only updating your competitor analysis when investors are likely to ask for it you’re not using it correctly. By then it's already stale. By then, you’ve already lost.

Here are four steps to build into your routine that will work without turning you or your team into a bag of nerves. If your market map bred complacency, use these to keep it fresh:

1. Adversarial review. Pick one person, ideally not you, to argue the case for why a specific competitor could beat you in the next two quarters. Force them to be specific: better unit economics, faster shipping cycles, a hiring advantage. Vagueness will not help here, specifics will.
2. Start tracking the competitors you've dismissed previously but keep hearing about. The startup that ate Blockbuster was a mail-order DVD service. Now that company is a streaming giant and a movie studio all in one. Nothing like where it started. Your most dangerous competitor probably doesn’t show up on your radar unless you start really looking.
3. Separate confidence in your product from confidence in your position. You can believe deeply in what you've built while still believing someone else might be building it better, faster, or cheaper. Your product can be better than theirs and you can still lose. Your competitors could be excellent at selling snake oil. Look for every one of their advantages!
4. Ask "what would have to be true" instead of "are they actually a threat." Change how you look at your competitors into a scenario-planning exercise. This will keep your team thinking on its toes instead of reassuring itself. What if your best salesperson walked out of your business and into theirs?

It’s Not Really About Your Competition At All

This isn’t really about your competitors, is it? You don’t know what goes on within their four walls. You can only guess most of the time. Or else you’ve got teeny tiny cameras in their boardroom… Once you’ve identified where you are feeling comfortable and what you need to do to live in discomfort this is really actually a tool for managing your psychology. The actual capability of the company down the street is pretty much irrelevant to the impact this habit will have on you and your business. The continued belief that others in your market are formidable will keep you sharp. It’ll keep you shipping incredible new products and it will keep you asking hard questions about your own business instead of idly admiring it in all its glory.

In other words, you could be dead right that a competitor is weak but you can still benefit from acting as if they're strong. The behaviours produced by your threat assessment exercises are the important part. Treating competitive research as a permanent posture will keep you honest no matter what the data actually says.

This sounds messed up, but bear with me: the goal was never to have the most accurate analysis. Accuracy isn't really the point. The competitive analysis becomes like a Gantt chart. It’s a lie that you get everyone to believe. What you are actually seeking is the drive that services a specific outcome: staying paranoid enough to not only survive but to improve too.

Don't Let the Spreadsheet Lie to You

We never did win back that client who killed us with a lovely smile. At least, not before I left that company anyway. Their team told us more than once they'd have loved to switch, but a multi-year contract had them locked in. That stung a little, but it was fair. If we'd won that contract instead, nobody, and I mean nobody, would have made headway with that client.

Reasons to worry became our default setting instead of reasons to relax, and while it wasn't the last deal we failed to close, our success rate climbed dramatically after that. The product is still on the market today, still evolving, and the small team behind it is still knocking it out of the park. No secret technical sauce, no magic dust. Just a team that never let the comfort get the better of them.

So here's my parting shot to you: when's the last time you looked at your competition and felt scared? If your spreadsheets are comforting you but your year end totals are telling a different story, that might be the most useful feeling you could have all year.