337: How to Compete in a Hyper Competitive Space
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In today’s episode of The Startup Chat, Steli and Hiten talk about how to deal with a hyper-competitive market if you’re in one.
Today’s startup world is super competitive. It is not uncommon for there to be hundreds, if not thousands of competitors in the market you operate. So how do you differentiate your brand from the rest and get the attention of those you want to do business with?
Tune in to this week’s episode to hear Steli and Hiten thoughts about how competitive the market is, what you can do to differentiate and much more.
Time Stamped Show Notes:
00:22 About today’s topic.
01:25 Why this topic was chosen.
02:00 Why all markets are going to be hyper-competitive in future.
03:39 Steli’s two cents on the issue.
05:40 Why it’s important to stand for something.
06:21 The reason why Close.io became successful in the CRM space.
07:49 One way to differentiate in a hyper-competitive market.
09:40 A second way to approach differentiation in a super competitive market.
11:26 One last tip from Steli.
12:19 Why competition is a good thing.
3 Key Points:
- There’s always a niche that’s underserved or overlooked.
- In today’s world, it’s probably going to be hard to compete on features.
- We built a product that was very differentiated for a customer that was very undervalued and we marketed it in a very different voice.
Steli Efti: Hey everybody, this is Steli Efti.
Hiten Shah: And this is Hiten Shah, and I’m going to talk about something today with Steli on this web chat that is near and dear to his heart. I think that’s why he wanted to talk about it, so Steli you’re going to have to take the lead on this, but basically the topic is how to deal with hyper-competitive market if you’re in one and Steli’s company, Close.io, happens to be in one of the most hyper-competitive, or competitive I guess, hyper-competitive software markets out there, CRM. So they build a CRM solution, a Customer Relationship Management Service, I guess. Dude, sucks to be you.
Steli Efti: I would agree with you if I wasn’t me. I would think the same thing. You know, I always tell people, if somebody would have told me, I don’t know, six years ago, that I would be running, or seven years ago, that I would be running a CRM business, I would have punched them in the face. Nothing inside of me was like, “Yes! CRM-“
Hiten Shah: Let’s do that.
Steli Efti: ” … That’s what I want to do. Let’s go into that market.” Nothing really inside of me wanted that. So the reason why I wanted to talk to you about this is that I’ve given a few talks on this subject because people have been asking me to speak about it and I’ve increasingly noticed this notion of people describing the space they’re in, or founders describing the space they’re in as, “The most competitive space,” or, “One of the most competitive spaces.” Or, “Hyper-competitive.” I’m starting to think that this is going to be new reality where it doesn’t fucking matter what you do, it’s going to be a hyper-competitive space eventually. Because of the way the world works, because of the way … Especially in software, where a single developer, somewhere in a random location around the world can compete with a venture tech start up in the Valley with tens of millions in venture funding and so there’s this explosion of software products in many, many categories and people feel overwhelmed by that. Yeah, I have a personal story, because I launched a company in an insanely competitive space but I also feel like this is a trend. I don’t know if you agree with me but it feels to me like a trend. I look at this company that does this once a year, the Marketing Tech Space report or something, I just know or remember there’s like a graphic of all the little logos. They have this grid of categorizing all the different SaaS products in all the different marketing tech space categories and it’s like, that fucking chart every year is doubling for the last three years that I’ve been looking at it. I think last year, it went from 4,000 to almost 8,000 and I’m like, “Is it going to go from 8,000 to 16,000 SaaS apps in the marketing tech space?” So I think this is an interesting subject. I’ll throw in my first two cents and then I’m dying to hear your views on how to compete successfully today in the hyper-competitive spaces. For me, it really goes back to a very simple rule which is you need to find a customer that you understand better than most other companies in the space, that you care about more than most other competitors in your space, and that you can service in some kind of a better way, a more valuable way. So it’s all about a, understanding the customer that you want to cater to, there’s always a niche that’s underserved, or a niche that’s misunderstood, or a niche that’s overlooked that offers an opportunity. Then it’s looking at yourself and understanding that in today’s world, it’s probably going to be hard to compete on features, which is something that you were able to be competitive with at some point in the past. You had some special feature that took your competition maybe a year to copy, to one and a half years to copy, where today it might just take them two weeks and they have it then also. So features are not going to be the way to compete. Design, UI/UX is something that today more so than ever, it feels like it’s easier to do really excellent in the way that companies design products in UI/UX rules and best practices and innovations are being adopted really, really quickly. So just purely competing on a product that has lots of features, or that looks a little nicer than other products, that’s becoming harder and harder to do. So it becomes more important to be very introspective and ask yourself who are we as a company? What do we stand for? What do we stand against and how can we build this business and this product and the way we communicate with the world in a way that creates a very distinct brand? Which then means that your reputation … It’s the way people feel about you, your company, your product, versus just the way they think about it. I think that most companies and most teams, they don’t feel comfortable standing for and against many things. They don’t feel comfortable having a very strong distinct voice. They’d rather be very kind of middle of the road and if you build a middle of the road brand that’s hard to differentiate and now you’re in a hyper-competitive space where whatever feature you’re building, your competitor has a week later, then this becomes I feel, like a very hard battle to win and to even fight and that’s why I think a lot of companies are struggling. A company tells me they’re struggling because it’s such a hyper-competitive space, it’s not a good reason to me. So circling all that back to us, to just give a very concrete example, the reason why we became very successful in this space was that we had built a very different product than all the competition for a very specific customer. Even within that customer, we hyper-focused on a stakeholder that everybody else was ignoring, or didn’t value as much, so we built a product that was very differentiated for a user and customer that was very undervalued and we marketed it very differently, with a very different voice. We decided to mainly market the product through content marketing, through teaching and we decided that we would put my ugly face out there, screaming at people all day long so people could really humanize the brand and feel a certain way about us. Those two things, having a strong brand, strong marketing and strong voice and point of view and building a product for a under-valued stakeholder and under-valued customer in a very differentiated way, those two things were the things I believe in hindsight allowed us to really succeed and gain traction and become a big business in a market that was so over-saturated with solutions already.
Hiten Shah: Your face isn’t ugly but you can say that.
Steli Efti: I can say that.
Hiten Shah: Yes. Oh man, I think you guys really found a differentiated opportunity and you found it early. So I think there’s two approaches and they converge at some point in a hyper-competitive market. The first approach … And you can start either way. So one approach is you find an opportunity and you build something that’s re-segmenting the market. So basically creating a new norm in the market. I think you guys did that but you didn’t have a full featured CRM at the time. Then now, you are evolving into what I would call a much more full-featured CRM, that’s what you’ve been doing for the last few years. So one way to start if you find something, differentiate it, so that it’s easier to build than building the whole thing first and copying everybody, which is what I call parity. So in a competitive market, your product needs parity. Parity means basically, it does all the things people expect of a CRM. Now if you have one innovative as fuck feature and you figure out how to front-load a lot of research, or a lot of intuition or whatever, you get lucky, I don’t know, there’s many ways to go about that and you figure out the opportunity, I think for you guys, you were in the market. You guys were in the market, being sales people, running a massive sales team for many different companies and you learned a ton about what is required and you found an opportunity to build something. That’s the way I look at it. What you built is what’s differentiated in the market for a very long time. Even three months is a long time, but six months, a year, maybe even longer, differentiated in the sense that people thought of you when they thought of wanting that. That was what helped a lot. Now, there’s two things that are happening for you guys. One, you’re doubling down on that thing and creating the next generation of it, that’s what I see in the new feature launch you’re going to do soon, which I’m sure we’ll talk about in future. Then, you’re … Also have built a much more full-featured CRM in the process. So that’s how you approached it. A second way to approach it, which I would say is more like Zoom, which is the web conferencing service is that they created a web conferencing, like a whatever … A web conferencing software that was really, really good and had parity with the products in the market, meaning it had all the features that other products had but in a bunch of areas, it was just 20, 30% better, maybe more. One of the areas was they had a free plan and it was very generous, but it was very smart about how you can only do 45 minute calls with that free plan. Webinars and all that stuff, they’re one hour long at least, at least. So wow, that was so brilliant, right? Then they had a limited number of participants you could have and all these things that made it so I would use it, but if I really wanted to use it, I would have to pay, but I could keep using it for free and be relatively happy with some constraints. So that created this urgency and this need to upgrade at many different points of using the product. So that was a brilliant innovation, I would say in that market, of giving the product for free, making it easy for someone to try that product in a competitive market. So to me, those are two ways. One is you build all those features first and you basically are like Zoom, and you figure out things you need to do a little bit better, or a lot better, whether it’s for the business model, the strategy, or the product itself. Or two, you innovate and you start with innovation. Then you realize eventually you have to get to a place where that innovation, you’re constantly improving but at the same time, you’re also building out the full-featured version, like everybody else has. So that’s my take on how you do it-
Steli Efti: I love it.
Hiten Shah: … And how you compete.
Steli Efti: I love it. I couldn’t agree more. Let’s end the episode with this last tip from me, because everything you said is absolutely right and brilliant. The last thing I’ll say on top of it, this addresses a certain type of person that’s thinking about, or complaining about, the competition. If you complain about the competition and if you blame the competition for your lack of traction and success, then you deserve that lack of success. Nobody gives a shit. It doesn’t matter, you don’t deserve a seat at the table, it’s not a birthright, you don’t deserve to have access to these customers and serve them. You need to earn that right and there’s lot of competitors that do similar things than you, then that’s not a reason to complain, or if one of your competitors copies something novel, unique or valuable that you had discovered and innovated on, then you can sit there and cry but nobody cares. Competition should be, and is, a good thing and you should focus on your customers and finding ways to drive value for them and to earn their business. Sitting around and blaming that you are just in too much of a competitive space to be succeeding, that’s not doing anybody good and that’s not going to help your company, it’s not going to help your customers. So the last thing on this is, if you feel the heat from competition increasingly, if you feel there’s more and more competitors entering the space, if you feel like the big incumbents are copying you, or taking over certain things from you, if you feel the heat, that’s a good thing so step up your game, become a better competitor and create more value versus seeing that as a reason to whine and to attribute your lack of traction and success in any way to anybody else because that’s not really going to help anything. So yeah, become a better competitor, I think that that’s something we all need to become, is just better and better competitors to earn our right to have customers and have thriving businesses.
Hiten Shah: Couldn’t agree more.
Steli Efti: All right, that’s it from us for this episode, we’ll hear you very soon.
Hiten Shah: Later.