Monday, 11 July 2016

7 straight-forward steps to master competitor analysis

A robust competitor analysis is an essential component of any strategy analysis. With the wealth of easily accessible information available on the Internet, it has never been easier to compile a successful competitor analysis.

However, without a plan, that wealth of information can seem like a firehouse, flooding you information and making it difficult to see the forest for the trees. And because competitors are continually changing and evolving, competitor analysis must be an ongoing programme, rather than a once-off exercise.

This article outlines a simple plan to help focus and sustain your competitor analysis effort.

1. Identify your competitors 

This may seem almost too obvious to mention, but depending on your industry, it can be quite difficult to identify exactly who your competitors are. In fast moving industries, it is easy to be caught unawares by the entry and sudden growth of a competitor before you were even fully aware of their presence. In industries with rapidly changing consumer preferences may be particularly susceptible to substitution, for example when competition for a local restaurant might come only from other restaurants, but also from a local grocery store stocking ready meals. Knowing your local market well may no longer be enough as the Internet can make it easier for competitors to come at you from almost anywhere in the world.

One way to identify competitors is to talk to people. Your staff / colleagues may have worked at your competitors or know people who do. Your customers and suppliers may also do business with your competitors or may have been marketed or pitched to by them. The conversations can be in the form of formal research, or just casual conversation.

Trade bodies, shows and publications, where available are another source of valuable intel.

2. Segment your competitors

Once you've identified your competitors (and possible substitutes) you may find you end up with quite a long list. If your list is too long, and you try to analyse them all, you may find that you are unable to do justice to any of them.

The solution is to segment them. There are two different ways you can approach this. If your competitors can be divided into different groups which behave similarly, then you can simply monitor one or two competitors within each group and extrapolate your analysis to the group at large. (There is clearly an inherent risk here, so it is important to confirm your groupings from time to time.)

You can also divide your competitors into high, medium and low groups depending on how much of a competitive threat the represent. You would then do a more thorough analysis of the first group, and a more cursory analysis of the third group. Part of your analysis of all three groups should be, will, of course, be to confirm that they are still in the right group, and to move them if necessary. Avoid the temptation to put all of them in the high group as that rather defeats the purpose - try and force yourself towards 1:2:3 splits.

3. Know what's important to your customers

Once you know who your competitors are, what are you actually looking for. Studying any competitor without a clear plan of what you're are looking for is inefficient: it could take much longer than needed and you could still miss something important.

The trick is to focus on what's important to your customers - more specifically, what criteria do they use when choosing between you and your competitors. This could be based around price, convenience, product or service features, image, reliability, etc. Once you've identified these competitive factors, you need to be particularly alert to any changes your competitors make or signals of future changes they give off so that you can plan your strategy accordingly.

One way to find out what your industries competitive factors are is, of course, to just ask your customers. Remember to ask not just people who are already your customers, but also people who you would like as customers but don't do business with you yet (prospects and targets). Remember, though, that customers don't always know what they want, so it is important to sense check what they tell you against your own trend analysis (see How to do a PEST analysis).

4. Tap in

Once you have your plan in place, you're ready to start gathering data. Staff, customers, suppliers trade bodies, shows and publications are again all invaluable sources of information. Competitive intelligence gathering is a never ending activity.

There are many information services that you can tap into also. Some of these can be quite pricey. However, simple Google Alerts are often as much as you need.

To set up a Google Alert, simple Google the name of your competitor, click on "News" at the top of the search results, scroll to the bottom of the list of resulting news stories and click on "Create alert". Remember to check the options to ensure you're getting exactly what you want. Et voila, you have competitive intelligence in your inbox on a regular basis. You should have at least one Google Alert for each of your competitors. 

5. Visualise

Once you're collecting high quality and relevant competitor intelligence its helpful to find a way to summarise and visualise the results.

The Strategy Canvas provides a neat way of mapping your own business relative to your competitors according to competitive factors you've identified (see How to draw a Strategy Canvas).

It does require you to score each competitor on each competitive factor. The actual numbers of the scores are not important, they're just a way of comparing one competitor against another (or against your own business). So you have to use your best judgement. Particularly if you're working in a team environment, forcing yourself to score each competitor against each competitive factor is a great way to focus debate and avoid a pointless talking shop.

6. Tool Up

You can, of course, complete the entire exercise on the back of a paper napkin (or using MS Word, Powerpoint or Excel). However, if you've invested all this time an effort in competitor analysis, it makes sense to use a more appropriate tool to help you manage it.

StratNavApp is an online tool designed to help you collect and process your competitor analysis, including drawing a Strategy Canvas (it includes many other tools as well, covering the entire strategy development and execution cycle, but we'll leave those for another day).

It's a collaborative environment as well, so you can work with your team. All of your insight and discussion is captured in one place so you'll never have to scour through old documents and emails to put it all back together again. There is also a handy 'bookmarklet' tool which allows you to pull any information from anywhere on the internet into your analysis with a single click of a button.

Go ahead and give it a try!

7. Act

Of course, no amount of competitor analysis will make any difference unless you act on it!

There are a number of ways of using competitive analysis in your strategy: you can mimic (fastest follower), differentiate, under-cut, exclude (using exclusivity agreements or patent protection), collaborate with (subject to anti-trust / competition laws) or out-maneuver your competitors in a variety of ways. You can also build competitor analysis into game theory analysis to understand how competitors may respond to significant strategic moves you're planning before deciding how best to proceed.


Competitor analysis can seem like a daunting task. Fortunately, there are now many sources of readily available information, as well as tools, such as StratNavApp, to help you do it. The most important success criterion is to approach it is a planned and structured manner.

If you need any help getting your competitor analysis programme up and running, please contact me to discuss how I can help.

See also:

photo credit: ISST London via photopin (license)