The next step after preparing your value proposition is a competitive analysis. Checking and evaluating your competition as well as identifying their strengths and weaknesses is something you should do before you start your business and the development process, and then keep it up to date. This will provide insights that will drive future profit levels.
Competitor analysis in the development of IT products - main goals
We start with questions related to:
- Whether there is a demand in the market for the product or service you want to offer.
- Whether there are similar offers already.
The next steps to take when working on a competitive analysis are:
1) Identifying your competitors
These are the companies that provide the same product or service (direct competition), as well as companies from other industries alternatively satisfying a given need (indirect competition)
2) Determine how many direct competitors there are
The higher the number of competitors, the lower the chances of success
3) Analyze the competitors' products and services (including prices)
You need to look at the products and services of your competitors, try their services, analyze the strengths and consider their similarity to your own solution
4) Analyze the competitive market
Define the market areas in which the competition operates and verifying their overlap with the planned business
We also do the analysis in order to learn:
- what can be done differently and improved,
- how to reach our target group,
- if the market is not already saturated
- if there is a niche on the market
- from failures and mistakes made by competitors
On the other hand, if you are already operating in the market, analysis of competition will allow you to increase efficiency and introduce changes needed to operate more effectively, based on a cool assessment of the market and situation, without ideas saturated with emotions.
How does one conduct a competitive analysis?
Designate categories for analysis
The most important of these include:
- The offer - products and services (names, descriptions, functionalities, customer feedback, price)
- The target group - customers, consumers and users, including their number, characteristics, needs
- Strengths and weaknesses - in relation to the company and each of its products and services, including competitive advantages (unique features of the products and services offered)
- Technology and introduced functionalities
- Business initiatives undertaken
- Marketing reach (e.g., number of followers on Instagram, Facebook, etc.)
Write down all of your thoughts and ideas
The longer it takes to work on the the analysis, the less details you will remember.
Don't use shortcuts
Prepare your notes so that you can show this document to others at any time. You can't do everything by yourself. You never know when someone will have to replace you or when you will be sharing competitive intelligence with the sales team, for example.
Read between the lines
Generally, no one is going to give the findings to your competitors on a silver platter. Most elements of the analysis are your own conclusions based on the observation of actions and insight into content posted by competitors.
Remember about links
By keeping links to relevant material, you will save a lot of time when updating your analysis because you will be able to quickly find the information in your file.
Time is needed
Competitor analysis requires effort. Do not be in a hurry because a cursory overview of the market does not give as much value as a thorough understanding of the competition.
Think through the barriers to entry
Barriers to entry, as the name implies, are problems that can effectively block the development or even the operation of your product. Examples of barriers are as follows:
- High capital requirements - AI, NLP, Augmented Reality, biotech, etc.
- Economies of scale - larger and experienced companies produce the product at a lower price or faster than startups,
- Brand loyalty - consumers may believe that a competitor's current product is unique and irreplaceable,
- Transition costs - costs associated with switching from one product to another,
- Access to distribution channels - existing companies have, for example, exclusive rights to work with your potential partners
- Ownership factors - patents or copyrights that will not allow you to manufacture the product,
- Regulatory - whether licenses, permissions, or approvals are required, without which you cannot enter the market
Update your information regularly
Your competitors aren't standing still and may just be implementing new features in your app. So even if you have your own clear vision of product development, it's still a good idea to stay up to date.
Competitor analysis gives you tremendous knowledge and advantage. However, analyzing your competitors does not mean copying their actions. This is the worst thing you can do, because it shows lack of vision, own ideas and poor condition of the company. Observe and learn from mistakes, drawing lessons for better development of your own product.