One of the key challenges startups face is how to position their offerings in the marketplace against incumbent vendors. And what do many startups neglect to do when briefing industry analysts? Show a slide about the competitive landscape!
Presumably, executives have shown that slide to investors. For one thing, it’s important to show who you are selling to if you are trying to raise funding. VC’s want to see if you are selling to a large enough market to justify their investment, and to see how defensible your position is.
That’s why Steve Blank offered up the Petal Diagram as a way to show investors that there are multiple markets that a startup can sell to. Tom Tunguz, VC at Redpoint, recently wrote a counterpoint view that the Petal Diagram falls short in showing how a startup differentiates itself in a market. He suggests that the traditional matrix still works best for showing differentiation in established markets, while a pyramid diagram is effective for showing entry into a new market segment. In either case, a competition slide is essential for showing how the startup is going to win market share.
And yet, in my 17 plus years as an analyst, few start-ups ever included this slide when briefing me- I’d estimate fewer than 5% of companies in that time. Perhaps they were hoping that an unfocused sales strategy would go unnoticed, or that somebody would see that they were going straight up against a multi-billion dollar incumbent with little more a lower cost alternative.
Actually, I’m as interested as the investor in drawing a detailed picture of the competitive landscape. When I advise your potential customers and investors on who has an interesting, differentiated product and has a viable strategy for selling that product (or service), that advice comes out of knowing what the competitors are or are not doing.
In terms of a practical example, in the CDN market, there are several market segments that a company could compete in – media delivery, web performance (including dynamic site acceleration and mobile acceleration) and security. Even within security, one can argue there are multiple products, each with a different but slightly overlapping set of competitors. A petal diagram could be used to highlight a particular strength of yours. Or, as Tunguz suggests, a pyramid diagram could be used to show that your company is addressing the SMB market, rather than the hard-to-crack Fortune 500 space dominated by Akamai and a small handful of competitors.
Just make sure to show up to a briefing with a deck that has a competitive landscape slide, even if it’s just a tried and true matrix.