And in the first place, don’t fear your competitors. You have better, more important things to do.
One of the benefits of having served as self-proclaimed Chief Big Ass of the fan company I founded–and being Founding Contrarian of an investment company–is that I’m frequently asked for business advice on things like funding and operations. But there’s one subject in particular that seems to consistently be on everyone’s mind: how to deal with the competition, the monster lurking beneath every entrepreneur’s bed.
I’ve often said that everything you need to know about business can be found in Aesop’s Fables, and, sure enough, Aesop focused several of his tales on competing forces–as in “The North Wind and the Sun,” which describes a contest to determine the more powerful of the two, and ultimately teaches that gentleness is more persuasive than brute force.
Perhaps the best-known of his tales, though, is “The Hare and the Tortoise,” in which slow and steady–say it with me–wins the race. Still, there’s another aspect of that tale that’s equally significant for businesses, especially startups. Recall that when the Hare looks back and doesn’t see the Tortoise, he decides to take a nap, and in doing so, creates the opportunity for the Tortoise to cross the finish line first.
It all reminds me of the many founders who spend too little time concentrating on running their own race, and too much time reacting to what their competition might be doing. Competitors are good in that they make you better. But that doesn’t mean you have to distort your own company’s fundamentals to deal with them.
Shouldering Your Worst Fears
Back when I was getting my fan company going, I worried about the competition all the time; the hours between 10 p.m. and 4 a.m. were particularly fraught. But once Big Ass Fans got rolling, I knew that dwelling on what the pack behind us was or wasn’t doing was not a constructive way to spend my time. Our focus needed to stay on building our brand by improving our products and providing the best service possible.
Some startup founders have a tough time doing that. They can’t seem to stop worrying about what everyone else is doing–or not doing–even when things are going their way. Their focus on the competition paralyzes them, like a deer in the headlights in the middle of a highway.
At Unorthodox Ventures, we see this problem a lot. Many founders we talk to spend an unhealthy amount of time and energy looking over their shoulder, afraid someone might be gaining on them, or changing course because of what they perceive the competition is doing. We’ve watched as companies signed one-sided distribution deals just to squeeze out potential competitors. Let the competitor make that bad decision. And we’ve watched as others have raced to market and made entirely preventable mistakes.
“Don’t worry about the competition,” I tell them. “Ten and 2, 10 and 2,” I say, like an old driving instructor who’s spent too many years riding shotgun. “Keep your hands firmly on the wheel and your eyes on the road in front of you.” Still, they have a hard time staying focused. They can’t take their eyes off the rearview mirror. They’re fixated on the competition because they think they’ll lose out if they don’t, when in fact the opposite is true: They’ll lose out because they do.
Imagining the Worst
I remember being at a speaking engagement once with the co-founder of a widely popular eyewear brand. This company seemed to have everything going for it, having successfully disrupted a staid industry and gained a legion of young and loyal customers. So imagine my surprise at hearing this guy say that what he worried about most was “four guys sitting on a college campus thinking up some drastic way to disrupt our business.” Really? I thought. Sure, disrupters such as Michael Dell and Mark Zuckerberg famously launched businesses while they were college students. But losing sleep over such a remote prospect is on the order of worrying about being hit by an asteroid.
At our investment firm, we’ve seen the fear of competition do strange things to people, from imagining someone’s biting at their heels when nobody’s there to making bad decisions based on misperceptions of their own product’s value versus that of others.
One company we advised became convinced that a potential competitor had developed a better health and wellness product. For a while, it was all they talked about; they went so far as to proactively cut prices. In reality, they didn’t need to worry, because the product that consumed them for so long died in gestation.
Likewise, a founder recently came to us with an innovation designed to improve the outcome of a common surgery. The founder noted that 20 percent of the surgery’s complications were the result of the problem this innovation specifically addressed and corrected. It was an absolute game- changer. Not only would it reduce the surgical failure rate, but it could also significantly shorten overall operating times.
This all sounded great. But when he told us what he planned to charge for his device, we were shocked. “Why so cheap?” we asked. Here was someone who’d identified a real problem and had managed to find a real solution–the dream of every true entrepreneur. But, under his plan, his margins were going to be next to nothing. Why? Because he’d priced it to compete with another product on the market.
Nothing good ever comes from making decisions solely with competitors in mind; instead, decide on the basis of what’s right for your business.
“But that one doesn’t solve the problem,” we pointed out–vigorously. “How in the hell is that your competition? You have a better product,” we said. “You absolutely should charge more. Consider the future costs of product development, marketing, and sales,” we pleaded. “You need money for those things.” But he was too focused on his perceived competition–and pricing his product “competitively”–to see where we were coming from.
He wouldn’t relent. So we had no option but to back off, as shredding our capital on bad market positioning is not exactly in our playbook. Often, the most innovative thinkers can be their own worst enemies when it comes to building a company. Either they don’t recognize what they’ve got or they’re unwilling to charge for it–they just want to save the world. Well, having money helps when you’re trying to save a planet.
You Have to Be Grounded to Fly
Here’s another thing: If you’re worried about your competition, you’re not just wasting time–you’re actually losing ground. How many times have we seen companies alienate customers by trying to be something they’re not? Instagram took a beating of late for its efforts to become more like TikTok. Barnes & Noble suffered for years because of its pathological Amazon-envy.
But possibly the saddest victim of competition anxiety I’ve ever encountered was a fellow who owned a single hardware store in downtown Indianapolis. He and I crossed paths at a televised business event years ago. This poor guy defined his competition as Lowe’s and Home Depot, and was fixated on matching their prices. He was so concerned that he trekked weekly to record the prices charged by these billion-dollar hardware meccas of mediocrity for everything from a pound of tenpenny nails to a 100-watt light bulb, with the goal of assuring his prices beat those of the “competition.” All the effort wasted on this miserable avocation likely didn’t leave him much room to build his own brand.
I told him to cut that shit out and focus on his strengths–like his easily accessible downtown location and individualized service–and to offer customers special tools or services that no big-box store could match. Put the energy you’re wasting on worrying to far better use by differentiating your business. Look ahead, not behind you, I urged him. I wish he had listened, but, unfortunately, his store closed a few years later. The world needs more local hardware stores run by people who know how to fix things. It most definitely could have used his.
The advice I gave that day in Indianapolis is the same I give every entrepreneur: Concentrate on your strengths and distinguish yourself by providing quality products and, most important, exemplary service. Much like Aesop’s Tortoise, founders need to stay focused on the horizon and keep moving forward. If you do, then you’ll have a much greater chance of getting your business where you want it to be: out ahead, with the sky your only limit.