We’ve spoken about competitors before and that is an article you really should read. This venture into the area of competitors looks at things a little differently. We are going to explore 3 key competitors based on the position they occupy in your customer or expected customers lives. The current solution or incumbent represents the product or solution people are using to currently solve the problem you intend to solve if you are looking at entering a market. The substitute is the alternative way of solving the problem this applies to those already operating as well as those entering a new market. Finally, the threat is an alternative which perhaps lacks one or two small things to become a viable competitor. Let’s delve a little deeper into these ideas.

The incumbent (current solution)

While in most cases we will look at this from the perspective of a new entrant into a market it should be noted that it also applies to an existing that wishes to grow its market share through the acquisition of customers that are already using another solution. In this case, you are coming from an underdog position and this will inform how you view the competitor and what to glean from them. Firstly the incumbent is doing something right to be the choice of customers. It’s a common mistake to focus on what the incumbent is doing wrong and attempt to usurp them based on righting these wrongs. Remember it is highly likely that customers choose the incumbent despite their flaws and there may be little or no value in fixing these.

It is paramount to learn what the incumbent is getting right. Consider that whatever the incumbent is doing right has come to be established with the customer or in the market at large as being the bare acceptable minimum. To challenge the incumbent you need to at least get what they get right correct and then provide additional value.

The substitute

The substitute is best referred to as the external substitute. Let us use the example of a soft drink manufacturer to make the point. Soft drink brands will look at other soft drink brands as competitors. This makes sense. However, water is a substitute for a soft drink. While soft drink customers will look across soft drinks as options they will also consider water. See things makes things very tricky because water unlike softy drinks will not play in the same price range, it is often much cheaper. If we throw into the mix fruit juice, milkshakes, energy drinks and others there are many substitutes out there.

Now because of the number of substitutes that could be out there, it is very difficult to study them, all the same, we would an incumbent. That is also not necessary because we do not compete with them entirely. Rather our soft drink market competes with the water or fruit juice market. What we can learn here is what pushes customers to completely jump from our market to another market altogether. There may be an opportunity there. We may as well acquaint ourselves with the reasons water customers would jump to the soft drink market.

The threat

If you think the substitute is a headache wait until you meet the threat. Threats are a bit harder to explain because they really are not ever-present like incumbents or substitutes. Instead, threats are solutions that are one or two factors away from being competitors. If we call back to our soft drink example a threat is something like a hot beverage. Hot beverages such as tea, coffee and hot chocolate do not normally compete with soft drinks. However, in the right (for them) weather conditions they become threats. What separates threats from substitutes is that threats are usually acted on by an external force to become competition whereas substitutes are motivated by internal forces and therefore ever-present.

The soft-drink example I used doesn’t illustrate this well but there are things we can learn from threats. Threats can tell us where to look next to improve our products. Tel One could’ve looked to mobile phones to learn especially when mobile operator Econet introduced the ridiculously popular prepaid service. The one thing that held mobile telephony back was the cost of the devices (external factor because Mobile Network Operators do not control phone prices though they can slightly influence them). Then prices dropped and it was open gates.

This is not meant to replace the previous work we have done on competitors but rather add a layer to it. There is a lot we can learn from all 3 competitor types listed here.