Conducting competitive analysis for your startup


Competitive analysis is something you’ll need to do at every stage of your business, in research and planning stages as well as continuously through the lifespan of your business.
You’ve validated your idea and gotten up close and personal with the market. Now what? Time to conduct competitive analysis and get to know who and what you’re up against. 

In this guide, we’ll discuss:
  • How to identify your competition
  • Determining the ways your business is better
  • Identifying your differentiators
  • Visualizing where you sit in comparison with the competition 

Competitive analysis is something you’ll need to do at every stage of your business, in research and planning stages as well as continuously through the lifespan of your business. It’s like a constant game of keeping up and keeping your eyes and ears open, and that can feel overwhelming. 

Here’s how to get started.

Identify your competitors

Think of your competitors in one of two categories: direct competitors and indirect competitors. 

Your direct competitors are typically who you would think of when asked about your competitors. For a project management tool, it’s another project management tool. For a search engine, it’s Google. For McDonald’s, it’s Wendy’s. 

But, if you’re watching your direct competitors, one risk is that you’ll end up subconsciously imitating them. 

Indirect competitors are a bit more nuanced but just as important to consider. Think of them not necessarily through the lens of what the product is, but instead in terms of what else is competing as the solution to whatever problem your customer is trying to solve.

There are many successful businesses founded by people who have no prior experience in the field—they’ve got the advantage of a beginner's mind, which can help them see things in new ways that are touted as innovative. In hindsight, these businesses are really just simple solutions that came from a fresh lens, often from closeness to problems (indirect) vs closeness to solutions (direct). They often become market leaders, one of the most well-known examples being Sara Blakely, who started a shapewear company (Spanx) because she needed shapewear to wear under white pants, but sold fax machines before that. 

Examples of indirect competitors:
  • A project management tool’s indirect competitor could be physical notebooks, or a calendar app. Problem: how to organize tasks. 
  • A search engine’s indirect competitor could be social media. Problem: how to find information about a company.
  • McDonald’s’ indirect competitor could be a coffee shop or even a home coffee machine. Problem: I need my coffee!
  • For Spanx, it was pantyhose that Sara had to cut the feet off of. 

As you can see, indirect competitors depend highly on the customer and the very specific problem that they need to solve, at the very specific time that they are looking to solve it. If the customer isn’t going to McDonald’s for coffee, the indirect competitors would look very different. So, it’s important to map out all customer segments to find all your indirect competitors. 

One very cool thing about indirect competitors, and in some cases direct competitors too, is that you don’t always have to think of them as your competitors. Instead, they can become partners, allies, and supporters of your business. This is especially true and important for emerging markets where, as they say, “a rising tide raises all ships,” and in cases where customers are looking for more than a single solution. If we’re sticking with calling them competitors, then just think of it as a race where there’s more than one winner. 

In every case, though, it’s really important to understand how you’re differentiated.

How are you better?

One of the clearest paths to starting a successful business is to simply outdo your competition by doing it better, faster, or more conveniently. These are ways to think about and understand your value in a way that can be easily quantified. Think of Apple and how they outdo themselves each time they launch a product (2x faster, 30 percent more battery life, etc.).

Do you improve on your competitors in any of the following ways?
  • Price
  • Speed
  • Size
  • Volume
  • Etc.

How are you different?

If doing it better is about quantifying benefits, doing it differently is about qualitative benefits. Using the same example of Apple, this is their minimalist look, their Apple TV+ content mix, even something as intangible as “brand legacy” or their positioning within the creative community.  

These things aren’t necessarily and quantifiably better, but they are often measurably more resonant to specific people and their wants and needs.

Are you different from your competitors in any of the following ways?
  • Channels and platforms 
  • Marketing
  • Voice and tone
  • Visual look
  • Etc.

Increasingly, this is a way companies are choosing to “disrupt” the market, but it’s worth noting that often, they’ll also be better in quantitative ways above too. As an example, look at the slew of DTC (direct-to-consumer) eCommerce companies that completely rethought business models, but along the way and because of this, were able to offer fairer prices and more convenience for the customer. 

Visualize it

Now it’s time to visualize where you sit in comparison to your competitors. This is sometimes called a Perceptual Map or a Value Proposition Map and can help you spot opportunities and gaps. It’s a helpful exercise whether or not you’ve decided on an idea. 

  1. Take two of the most important factors/attributes from your customer’s point of view. (For example, if they don’t care about branding, then don’t use that. But challenge your ideas about what you think they care about: do they not care about branding or is that actually what’s missing in the market right now?)
  2. One will be your X-axis and the other will be your Y-axis. 
  3. Plot all your competitors based on where they fit on these axes. 

(Feel free to try multiple versions if you’re not sure which factors/attributes are most important.)

You should be able to see how strong your business idea is (is it sitting on its own vs in a cluster next to many others?) or, if you haven’t narrowed in on your idea yet, then start to look at the white space to determine where the gaps in the market are. These are your opportunities. 
Eventually, you should aim to do a comprehensive analysis based on all factors/attributes you’ve identified, but early on, it’s important that you’re able to do a simple X vs Y axis version based on two only. Why? It helps you get clear on your positioning, which needs to be simple in order to be resonant.

Your checklist to understanding your competition as a startup:
  • Identify your direct and indirect competitors
  • Outline the ways in which your offering is better than the competition
  • Determine how your startup is better
  • Visualize the competition—and where you sit within it—with a value prop map
Have any ideas or suggestions to improve this article?