On Competition

Microsoft's recent launch of Bing, their new and revised search engine, has generated a lot of buzz in the press and blogosphere about whether this is a "Google killer." It got me to thinking about competition, and how companies can benefit most from having a strong competitor in the marketplace. I've managed to distill my thoughts to the following five bullet points. I'd love to hear what others think as well -- feel free to voice your opinion in the comments section below.

1. Strong competitors should force companies to look ahead, not backwards.

When a competitor comes out with a worthy competitive product or service, often the knee-jerk reaction is to take a look at what the competitor offers, and either trivialize or copy what "the other company" came out with. It is often all too easy to react defensively ("That feature won't work, our users don't want it.") or flippantly ("We can add that feature in very easily.") when faced with a new competitive product in the market, but the smart competitor reacts by analyzing what the competition has come out with, seeing what features or attributes it can absorb and offer to its customers/users, and spend time figuring out how to innovate new and even better features. Our competitors should help us dictate what our future looks like, not what we can write off or copy in a me-too fashion.

2. The best way to compete with another company is to not be a competitor.

If you are competing against no one, it's a lot easier to be successful. This is one of the first rules of competition: define yourself and offer products and services that meet customer and user needs that aren't currently being met. Twitter is successful because they realized there was a latent need to communicate in a fundamentally different way than what was currently enabled, and was able to really run with it. One of the reasons Google was successful in becoming a popular search engine was because at the time Google was created, most thought search innovation was done. Search had become a commodity, and anyone who spent resources in trying to improve search that was "good enough" was wasting their time. With this breathing space, Google was able to gain a foothold and eventually go on to be the most popular search engine on the Internet.

3. When facing a single strong competitor, rally the troops towards a model that trivializes the competitor.

When there is a single strong competitor in the market, it is often difficult for other companies to be successful, even when they are not in the same business. Take Microsoft for example: with their strength in PC operating systems, not only were they able to own that market for many years, they were able to pivot off this strength to also win in office productivity applications. They are only now starting to realize that their strength on the desktop PC is actually a disadvantage as the world moves to a cloud model. With cloud computing and applications, the underlying operating system doesn't matter. Newspapers are starting to see this as well -- their value in providing great information has been virtualized, and people can get that same information in multiple places, including the Web, TV, radio, etc.

4. Underdogs are only successful when they take big risks.

If you are an underdog in a particular industry, particularly one with one or more strong competitors, the only real way you will likely make progress in taking marketshare is by doing something big and bold. Incremental improvements or changes will not get you there -- your strong competitors have the resources to incorporate those small changes easily, leaving you an also-ran in the competition. By taking big risks that the bigger, entrenched players can't realistically take, you position yourself in a place to succeed where your competitors cannot. Google did this with Gmail -- with nothing to lose, they offered email accounts with a thousand times the amount of storage space as existing free email providers were offering. This proved to be very successful, and redefined the space.

5. Competition is often not a zero-sum game.

Often companies have a mindset that competition is a zero-sum game. There is one and only one winner, and the rest are losers. There are many examples of mature businesses where this is not only not true, but the competitors in a particularly space work to make the relationship win-win. Cloud computing could prove to be an example of this. The more significant players that enter this market, the more credibility it gives the whole notion of "cloud computing" and the better everyone does.