6 Competitive Analysis

Define competition from the customer’s view

Competitive analysis is the systematic study of businesses and other options that compete to solve a target customer’s problem. Its purpose is not merely to make a list of companies; it is to understand what customers can choose today, how those choices create value, and where a venture might establish a credible position. The findings should help the venture decide whom to serve and why those customers might choose it.

Identify customer alternatives

Ask what a target customer would use, do, or choose instead. Competition includes more than companies selling similar products: a venture may face meaningful alternatives even when no other company sells the same product.

Direct competitors

Direct competitors offer a similar solution to a similar customer group. Compare them with attention to the specific customers and needs they serve.

Indirect competitors and substitutes

Indirect competitors and substitutes solve the same underlying problem in a different way. For example, videoconferencing can substitute for business travel. Customers compare alternatives according to the value they receive and the effort or cost of switching.

The status quo

The status quo is also a competitor from the customer’s point of view. Customers may keep using an existing tool, do the task manually, or decide not to act.

Compare alternatives consistently

Choose a relevant customer segment and compare a manageable set of direct competitors, substitutes, and the status quo using the same criteria. A consistent comparison makes it easier to see differences and identify unmet needs.

Choose comparison criteria

Consider these dimensions when investigating each option:

• Target customer and use case: Whom does the option serve, and what need does it address?

• Offering and performance: What does it provide, and what does it do especially well or poorly?

• Price and total effort: What does the customer pay in money, time, or inconvenience?

• Access and experience: Where and how can customers find, buy, and use it?

• Strengths and weaknesses: Why do customers choose it, and what frustrations or unmet needs remain?

• Market context: How crowded is the segment, and what barriers, buyer power, or substitute threats matter?

Use evidence carefully

Use reliable, comparable evidence where possible, such as product information, pricing, customer reviews, interviews, and market or industry data. Distinguish observed facts from estimates and assumptions. Competitor research can include products or services, market segments, strengths and weaknesses, indirect competitors, barriers to market entry, and how important the target market is to rivals.

Assess industry pressures

Porter’s Five Forces offers a broader view of pressures shaping competition and profitability. It examines rivalry among existing competitors, the threat of new entrants, the threat of substitutes, and the bargaining power of buyers and suppliers. This industry-level view complements, but does not replace, a close comparison of customer-facing alternatives.

Choose a focused position

Positioning is the place a venture aims to occupy in the minds of a particular customer group relative to alternatives. A useful position makes clear who the offering is for, what need it serves, and why it is a relevant choice. Strategic positioning involves choosing what value to create and how to create it differently from rivals.

Find valued differentiation

Differentiation is a meaningful difference that customers value, not simply a feature competitors lack. It might come from better service, convenience, quality, specialization, reliability, price, or a distinctive experience.

For example, nearby bicycle-repair shops might focus on sales while local riders need fast repairs. If customers value quick turnaround, specializing in same-day repairs could provide a clearer position than claiming to serve “all cyclists.” Comparing rival strengths with customer needs can reveal such gaps.

Connect value to capability

A claimed difference is useful as an advantage only if the venture can deliver it and customers care enough to choose it. A strong position connects a specific customer need, a relevant benefit, and the capabilities or choices that let the venture provide that benefit. Trying to be the best choice for everyone can make the position harder for customers to understand and harder for a small venture to deliver consistently.

Turn findings into decisions

Turn the comparison into concrete decisions:

1. Customer and alternatives: Identify the target customer and what they use now.

2. Competitive pattern: Describe what existing options do well and where customers encounter an unmet need.

3. Chosen position: Decide which customer need to prioritize and what benefit to offer.

4. Proof and capability: Identify evidence that customers value the benefit and what the venture must do well to deliver it.

5. Risks to monitor: Consider whether rivals could copy the difference, a substitute could improve, or market conditions could change.

Keep the analysis current

Treat competitive analysis as a working tool rather than a one-time report. Revisit it as customer preferences, competitor offerings, technology, and industry conditions change. Comparing customer groups, offerings, prices, experiences, strengths, and weaknesses can reveal underserved needs and help a venture choose a focused position, a valued difference, and the capabilities needed to deliver it.