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In 1876, an inventor named Elisha Gray filed a patent for a “telephone” with the U.S. Patent Office. His was the 39th application received on February 14. He was stunned to learn that Alexander Graham Bell had filed a patent for a “telephone” on that very same day. However, Bell’s application was the fifth of the day and went on to be awarded the patent.
Alexander Graham Bell
The inventor of a new product or creator of a startup business needs to be keenly aware of what is going on in the marketplace. The threat of competitors is a reality that demands constant vigilance. The new venture must continually monitor both itself and the environment, asking tough questions such as:
Who else is doing this in a different way?
What could be considered to be a competitor?
When will potential competition arise?
Where might the competition come from?
Why will or won’t competitors emerge?
And so on…
Here’s a universal truth: There is always a competitor.
Even if they’re not in the market now, someone else is probably thinking about it. And even if no one else is thinking about it, there are indirect competitors to consider.
Three Productive Ways To Consider The Competition:
 Barriers to Entry.
Every product or business faces barriers to enter the market. Whether it’s financial, or technological, or ethical, or who-knows-what, there are roadblocks and hurdles that must be overcome to succeed.
Take into account how the need your new idea will fill in the future is being satisfied currently. Your competition may not be doing exactly what you are doing, yet competing for the same audience and fulfilling the same consumer need.
 A Reason For Differentiation.
Differentiation creates barriers to competitors and imitators. Branding plays a huge role in this area. Without differentiating features or marketing, a company can find itself in the unprofitable position of shrinking margins that are a part of being in a commodity market.
The winners of these kinds of battles are generally the most efficient producers with the deepest pockets.
 A Worthy Opponent.
Competitors are a major source of information and ideas, too. Remember, sometimes it takes two competing products to create a market and generate public interest. Additionally, their existence will motivate you to improve and keep you from getting lazy.
How do you get into the market?
Start with a complete audit of the market:
Who are your direct competitors?
Who are your indirect competitors?
What is the current solution being offered?
What is the result of taking no action?
Understand how your product, service or company measures up.
Recognize and acknowledge your competitive advantages and disadvantages.
Much of this information can be found in the press, annual reports to shareholders, analysts’ reports, and filings with the Securities and Exchange Commission (SEC). You can often find press releases and other key facts on company websites. Conferences, trade shows, distributors, retailers, and customers are also excellent sources of information.
Maintain an ongoing familiarity with your competitors’ products by buying them and studying them thoroughly.
After the information has been assembled, use it to show how your offerings are different in a concise and compelling way. A chart of features and benefits is an effective device to communicate these differences, especially in presentations.
To add credibility to your presentation, provide all of the backup research in an appendix on competitors. This will demonstrate your understanding of the competition. Once this analysis, has been completed, a realistic assessment of the barriers to your entry can be made and a practical plan to overcome them can be devised.
Five Constructive Ways To Examine The Marketplace:
 Reconnaissance of Your Rivals.
How many competitors do you have?
How much do they overlap?
How successful are they?
What are the growth rates and profit margins?
 Potential for Poachers.
Is innovation creating new opportunities?
How easily is it for new contenders to enter?
Are there high capital investment costs?
Are there cost advantages to existing companies?
 Steel Against Substitutes.
What is your indirect competition?
What are alternative solutions or products in the market?
Does brand loyalty play a role in the market?
Is price-sensitivity a factor in the market?
 Protect Your Pricing.
How much pricing power do you have over your customers?
How concentrated is the market?
Will you be dependent upon just a few large customers?
What is the buying capacity of the audience?
 Vanquish Vendors.
How much pricing power do they have over you?
Are there alternative suppliers you can use?
How high is the cost of switching?
Are they also supplying your competitors?
There’s No Shame In Being Small.
In many situations, the alternatives are not another product customers can purchase to satisfy their need but an established habit that is ingrained in the target audience. In that case, your product or solution must be sufficiently better than the current way of doing things to overcome old routines or customer apathy.
Competing large companies are opportunities in disguise. Incumbents may have a hold on the market now, but complacency often allows creative and nimble small companies to exploit overlooked prospects. Always question deep-rooted assumptions. Just because something is done a certain way doesn’t mean that’s the best way. Be willing to be different. Speed, agility, flexibility, and willingness to adapt are huge assets.
Big companies focus on big sales accounts that can impact their bottom lines. Those neglected smaller customers offer startups and small, low-overhead companies plenty of openings. Once inside, it’s possible to “fly under the radar” while earning a healthy profit.