Breaking into new markets? Goodnest founder James MacAvoy highlights how working with, rather than against, the competition delivers benefits for your business and for your customers.
Being an entrepreneur is always an interesting journey. Over the course of a few decades, one of the most notable realisations is that working with, rather than against, the competition delivers greater benefits not only for your respective organisations, but your customers too.
Collaboration between market operators is an essential component in developing markets, particularly when the products or services being offered are new to consumers. After all, while a brand new service might have the prospect of unlimited growth, if your customers don’t yet know they need it, they aren’t exactly going to queue up to buy it.
Getting back to 'co-opetition'. In the founding and running of several ventures, I’ve seen some interesting results which have come from paying excessive attention to the competition rather than sharpening the focus where it should be, on the customer.
One of the first initiatives in which I was involved was a DVD rental company, started with my brother out of a bedroom. Like Netflix in its early days, we delivered movies using the postal system, improving convenience for customers.
Soon, we had competition.
The interesting thing in those days was that our business and the competitors started to spend a lot of time trying to figure out what the other was up to. It got crazy: we’d spy on one another, they sent in a staff member disguised as a courier driver to observe our operation, our website wouldn’t change except if the other’s did. We spent unnecessary time and energy trying to get one up over the other, rather than looking at how we could get a competitive edge by doing what was better for our customers.
"We thought success would come at the expense and, preferably, failure of the competition. We were wrong."
On the one hand, we were competing on one-upmanship. On the other, we were trying to take customers away from one another, rather than focusing on growing the number of customers who would want to rent a DVD through the post. We thought success would come at the expense and, preferably, failure of the competition.
We were wrong.
We were scrapping over a small pie rather than working to create a much bigger one (Netflix’s pie today is global).
This isn’t a situation limited to small startups. I’ve worked at Xero; when Xero entered the US market, it had the market incumbent Intuit to go up against. Most folk noted that Intuit had four million customers, and asked how was Xero going to take away 10 percent or more from the established business?
Rod Drury astutely pointed out that there are over 20 million small businesses in the US, most of which are using paper and Excel for their accounting. That’s the real, and bigger pie.
Moreover, when you’re focused on the activities of competitors to the exclusion of all else, you’re likely to only do something new after the other guys have given it a go (and if it seems to work). That’s not innovation, that’s following. You’ll always be, at best, second.
Probably the greatest lesson from my exploits in starting new businesses and pioneering new industries is that your competition aren’t the bad guys. Your competition are there because they, too, see the market opportunity. When that opportunity is brand new – like the early days of Treat Me and Grab One – your customers don’t know what you’re providing. Marketing, advertising, press, social media, promotions all become necessary to tell the market what you have on offer.
Those things don’t come cheap. So working with competitors on a ‘co-opetition’ basis helps expand the market for all the organisations working in that industry. As the saying goes, a rising tide lifts all boats.
Most importantly, this approach takes the focus away from trying to chip away at the other guy’s business and puts it right back where it should be: figuring out how you can create better value, lower prices, or greater convenience for those people who matter – the customer.