A tool to understand who you are really competing against
As a product manager, it’s important to understand that your product will be competing with others when it hits the market. It’s easy to forget the competition when you’re developing your ideas and committed to a vision. Having a decent grasp of what others in your space are up to will help you not to be caught off guard. It can give you the inspiration you need to improve your product, how not to do things, and even help you to develop some understanding of why people are choosing them over you or vice versa (wahoo!).
When thinking about the competition, there’s usually some obvious direct competitors. Adidas vs. Nike. Mercedes vs. BMW, etc.
But sometimes the competition isn’t played out as a simple choice between two brands or which toothpaste to pick off the shelf. Sometimes your competitors aren’t even in the same “industry” as you. Google competes in multiple industries with its Google Maps product, and Apple competes with banks and FinTech companies with Apple Pay. BMW and Toyota will be watching over their shoulders as Google explores launching their first cars. Apple has been exploring this space as well, although it’s still not clear how they want to approach it.
Finding out who else your target customers are going to go to (if not you) and who they might be choosing to help them solve their problems is key to building a successful product.
One useful tool that you can use to extend your view of the competitive landscape is the diagram opposite. It looks a bit like a target on a firing range. And right at the center of your sights, is the direct competition. We call it the Levels of Competition.
The rest of the diagram is designed to take into account factors outside of your direct competition and can stimulate thinking about the less obvious needs of the customer. By splitting the competition into four levels, it’s also useful in identifying other competitive threats that aren’t immediately obvious.
At the center, it asks you to look at direct competitors (i.e. the same product form) all the way to things that are competing for budget or “share of wallet”.
In the example here, you can see that the most direct competition for the PS4 is the Xbox One. The two take the same product form and each is a popular and well-recognized gaming brand.
More widely in the product category level, we can see that other gaming devices exist, including the iPad and Nintendo handhelds.
At the generic level, there is all manner of entertainment devices. Smart TVs, Google Chromecast, Amazon Fire Stick all compete if the job-to-be-done is to ‘be entertained’.
Around these outer two levels of the circle is where things get a little less defined and become more subjective. You might not consider a smart TV to be the competition for an Xbox, but Microsoft might. Furthest from the center of the circle is the budget competition or share-of-wallet level. This is where you would categorize anything that would compete against your product for your customer’s money. Again, you might not consider a packaged holiday to be competing with a home improvement budget, but your customer might.
And because the customer is the one who has the choice, and who pays, they’re the people you have to win over. How do you get them in your sights? The levels of competition might be one way to help.
You may be pleased (or displeased) to hear that there is no set method for doing this. However, we would advise the following.
This is a thinking tool. It can be applied in many contexts and at many different scales and may be applied to an individual product as well as to the whole organization. Depending on the application, some of these scales may be more interesting to explore than others.
Download the template for the Levels of Competition here:
MARK KRISHAN GRAY
I create content and develop courses for Value, Flow, Quality. I’m interested in people, products, and how we can design experiences that have an impact. The rest of my time I’m a Product Management consultant working with clients for Emergn.