How to do competition analysis

Purpose

Competition analysis serves as a critical foundation for product strategy. A thorough competition analysis helps us understand the market dynamics, identify unexplored opportunities, and make strategic decisions about where to compete and how to differentiate.

This deeper understanding allows us to identify not just feature gaps, but strategic opportunities that others might have missed.

Desktop Research: Beyond Feature Comparison

Desktop research forms the foundation of competition analysis, but it needs to go far beyond simple feature comparison to reveal strategic insights.

Understanding Market Positioning

Start by examining how competitors present themselves to the market. This includes analysing their:

• Websites
• Marketing materials
• social media presence
• Public communications.

Pay attention to:

• Their messaging hierarchy - what benefits and features do they emphasize first? This often reveals what they believe customers value most. For instance, when Slack first launched, they emphasized reducing email and improving team communication, while competitors were focusing on project management features.
• The language they use - specific word choices often reveal how they think about the problem space. When Notion talks about "all-in-one workspace," while Evernote emphasizes "note-taking," it reveals fundamentally different perspectives on the problem they're solving.
• Their visual identity and design choices - these often reflect who they believe their core users are. Compare the playful design of Mailchimp with the corporate aesthetic of Enterprise email marketing tools.

Financial and Business Model Analysis

For public companies, financial statements provide crucial insights. Even for private companies, you can often piece together valuable information about their business model:

• Study their pricing strategy - not just the prices, but the metrics they charge on and the differentiation between tiers. Stripe's decision to charge per transaction rather than a monthly fee reveals their understanding of how developers think about payment processing.
• Examine their go-to-market strategy - do they sell through partnerships? Direct to consumers? Through enterprise sales teams? These choices reveal their understanding of customer acquisition costs and lifetime value.
• Look for partnership announcements and integration strategies - these often reveal their perspective on the broader ecosystem and how they believe value is created for customers.

Product Archaeology

Think like an archaeologist examining artifacts. Every feature, design choice, and product decision tells a story about their understanding of user needs and technical constraints:

• Study their product's evolution through web archives - what features have they added or removed over time? This reveals their learning journey and what hasn't worked.
• Examine their API documentation and technical blogs - these often reveal their architectural decisions and technical priorities.
• Look for pattern breaks - places where they deviate from common patterns or their own conventions often reveal interesting insights about specific user needs or technical constraints.

Primary Research: Getting Ground Truth

While desktop research provides the foundation, primary research reveals the ground truth about how products are actually used and perceived in the market.

User Interviews and Observation

Conduct interviews with users of competitor products, but focus on understanding their experience rather than just gathering feature requests:

• Ask about their journey - what led them to choose this product? What alternatives did they consider? Understanding the selection process reveals important insights about how users evaluate solutions.
• b- where do they struggle? What workarounds have they developed? These pain points often reveal opportunities that competitors haven't addressed.
• Explore their broader workflow - how does the product fit into their larger work process? This often reveals integration opportunities and ecosystem plays that competitors might have missed.

Sales and Customer Service Intelligence

Engage with competitors' sales and support processes to understand how they position themselves and handle customer needs:

• Go through their sales process - what questions do they ask? What objections do they anticipate? This reveals their understanding of customer decision-making.
• Examine their support documentation - what issues come up frequently? What workarounds do they recommend? These often reveal product limitations and opportunities.
• Study their customer success materials - how do they define and measure success? This reveals their understanding of customer value.

Market Dynamics Analysis

Understanding market dynamics requires synthesizing multiple sources of information:

• Talk to industry analysts and experts - what trends do they see? What challenges do they believe are underserved?
• Study job postings and team structures - what skills are competitors hiring for? This reveals their technical priorities and future directions.
• Examine their ecosystem - who are they partnering with? What integrations are they prioritizing? This reveals their perspective on value creation.

Strategic Analysis: Finding White Space

The real value of competition analysis comes from synthesizing this information to identify strategic opportunities.

Value Proposition Mapping

Create a comprehensive map of how different competitors create and deliver value:

• Identify explicit value propositions - what benefits do they promise to deliver? How do they measure and demonstrate this value?
• Uncover implicit value propositions - what unstated benefits do users receive? What secondary problems do they solve?
• Map value delivery mechanisms - how do different features and capabilities combine to deliver value? What supporting services or integrations are required?

Capability Analysis

Understanding competitors' capabilities helps identify areas where you might have strategic advantage:

• Technical capabilities - what unique technical assets or expertise do they have?
• Distribution capabilities - what channels and relationships can they leverage?
• Brand capabilities - what unique trust or credibility do they have with specific user segments?

White Space Identification

Finding white space requires synthesizing multiple dimensions of analysis:

• User segment analysis - are there underserved user segments that competitors have overlooked?
• Use case analysis - are there specific use cases that aren't well served by current solutions?
• Value chain analysis - are there opportunities to create value in new ways by rethinking how value is created and delivered?

Synthesis and Strategic Decision Making

The ultimate goal of competition analysis is to inform strategic decisions about where to compete and how to win.

Opportunity Evaluation

Evaluate potential opportunities through multiple lenses:

• Size of opportunity - how many users experience this problem? How valuable would a solution be?
• Defensibility - what unique advantages could you bring to this opportunity? How sustainable would these advantages be?
• Time to value - how quickly could you deliver meaningful value? What intermediate steps might be required?

Strategic Positioning

Use your competition analysis to inform your strategic positioning:

• Identify gaps in competitor positions - where are there opportunities to stake out unique territory?
• Evaluate potential positions - which positions align with your capabilities and vision?
• Test positioning hypotheses - how do potential users respond to different positioning options?

Conclusion

Competition analysis is a crucial tool for product strategy, but its value comes from going beyond feature comparison to understand the deeper dynamics of the market. By combining thorough desktop research with primary research and strategic analysis, you can uncover opportunities that others have missed and make informed decisions about where to compete and how to win.

Remember that competition analysis isn't a one-time exercise. Markets evolve, new competitors emerge, and user needs change. Regular updates to your competition analysis help ensure your strategy remains relevant and effective.