Competition

You have to have an international reference of competition. You have to have the

highest [standards]. Carlos Slim Helu, Mexican business magnate, investor, philanthropist, and world’s wealthiest person

     Assessing industry condition and industry status provides a starting point for understanding competition. To outperform the competition, the learning curve, complementary assets, and reputation effects are key factors for entrepreneurs to understand. This is the competition element of the Opportunity Analysis Canvas.

Retrieved from: The Opportunity Analysis Canvas - Edition 2.0

How does the learning curve influence your success?

     When we define a learning curve, we’re exploring the rate of learning over time. How long does it take to get good at something?

     For a simple game, such as the Angry Birds app, it’s probably an hour or two. Once you understand the basic principles of the game, you can build reasonable proficiency.

     There are other things that take longer. To be a world-class tennis player, it takes about 15 years. Since you reach your physical peak by your early 20s, you need to start playing by 5 years old. It takes a long time to be world class.

      Learning curves are influenced by what you know today, your commitment, and your resources for learning.

     When we ask who would have a learning curve advantage, it’s typically the large companies. A large company that’s been there and done it, and has learned from their mistakes, has grown from trial and error, and has built expertise, is certainly going to have an advantage over the new entrant and the entrepreneur who hasn’t had those experiences.

     There’s a lot that can be learned from companies and customers. I will caution you from trying to do the same thing as a large company, because they probably have learned how to do it, and how to do it well.

How do the Fortune 500 and IPO market improve our understanding of learning curves?

     Fortune magazine publishes the Fortune 500 list annually, which is the 500 largest revenue generating companies. If we look at those companies in 1955, we see that of the Fortune 500 in that year, roughly half of them were still on the list 25 years later. They remained competitive, and they remained among the largest 500 companies, for 25 years.

     Of the 1965 companies, approximately half were still on the list 22 years later.

     In 1975, half of them were still on the list approximately 16 years later.

     In 1995, when we look at a more current edition, roughly 12 years passed, with half of them still on the list.

     This downward trend from 25 years to 22 to 16 to 12 evidences that maintaining your competitiveness long-term is a challenge, even for the largest companies in the world. While a few large companies have sustained – Exxon Mobil, General Electric, General Motors, etc. – the overwhelming majority of these companies have declined.

     For entrepreneurs, this is an encouraging sign. Today’s largest companies are susceptible to new, innovative startups. They may be replaced with new industries and new markets and new technologies.

     We can also examine the initial public offering (IPO) history of companies in the U.S. How long does it take to grow to be a $100 million or $200 million revenue generating company, and IPO? In the late 1990s, during the dot-com boom, it was only four or five years. By the early 2000s, the speed of IPOs declined dramatically, and they’re still relatively conservative today versus historic numbers. We see peaks of 14 and 15 years from company creation to IPO in 2007 and 2008. More recently, we see an average of 10 years for these companies. It takes time to build expertise and success, even as a fast-paced, tech company.

How is learning changing from its traditional model?

     We also see evolving models for climbing the learning curve. What we call traditional learning is largely bundled in a one-size-fits-all model. There are traditional assessments and exams on a set schedule administered to all students within a class.

     New stages of learning models are coming to market.

     Stage one is online and blended learning (with face-to-face and online elements). A traditional financial model that is tuition-based still exists.

     Stage two involves a level of unbundling, with a semi-customized curriculum. Courses may be separated into mini-courses offered at lower costs, in an online or blended format.

     Stages three, four, and five continue to gravitate towards free-range learning that’s transformed into unbundled that’s more value focused, that’s more applied, with differentiated business models.

     Coursera and the MOOCs are certainly moving through this path at a fast rate by partnering with universities. We see learning based on competence building. As you’re climbing the learning curve, there are abundant resources provided by universities, companies, governments, and organizations that can give you insights into understanding markets and industries.

     In summary, embrace learning to climb the learning curve. Keep in mind that the learning curve is to your advantage when you’re exploring new industries, new markets, or new technologies. Focus on being different, developing innovate products and services, and incorporating customer feedback to climb the learning curve quickly.

What complementary assets influence your success?

     Complementary assets, our second topic within competition, are the capabilities and/or infrastructure that support commercialization, beyond the assets associated with the product or service itself.

     Complementary assets can be tangible or intangible.

     

     It can be money. It can be equipment. It can be real estate.

     The intangible assets include your knowledge and relationships, and your intellectual property – patents, trademarks, copyrights, and trade secrets. Entrepreneurs can develop an advantage if they have significant intangible assets – if they have the knowledge, the relationships, and the intellectual property. These are more difficult to replicate than the tangible assets.

     How do you build your complementary assets? If you need to fulfill orders generated from your online retail site, you may buy or rent a warehouse. You may hire staff. You may manage all of your operations. Alternatively, you may partner with Amazon for inventory management and order fulfillment; without you having to build that system yourself. Or you may hire or collaborate with other partners to build your complimentary assets.

     Complementary assets may increase demand, improve your commercialization, and increase the benefit or the utility of what it is you’re bringing to the market.

     In the consumer electronics market, there are a variety of complementary assets in place.

     Sony’s inclusion of Blu-ray DVD playing capabilities in their PlayStation increased the utility of their gaming console, providing significant product differentiation from the competing Microsoft Xbox.

     Netflix’s partnerships with Sony, Microsoft, and Nintendo enabled streaming of Netflix movies and television though these gaming consoles. While the video content itself did not change, the ease of access and improved viewing experience (versus a computer) was the result of complimentary assets in action.

     Complementary assets themselves can be a source of new venture opportunities. For example, the forecast for the accessories market for Apple in 2015 is $11 billion.

     In summary, when we think about where and how we want to compete, avoid situations where the company with the most money is going to win. Instead, think about opportunities where complementary assets, and specifically, the elements of knowledge, relationships, and intellectual property, can be developed by you as a startup.

How does the reputation of competitors influence your success?

     The reputation of competitors is important to understand. This will conclude our discussion of competition as part of the Opportunity Analysis Canvas.

    Reputation is the set of generally held beliefs or opinions. This matters because customers often prefer to buy either from companies from which they’ve had a transaction before, or companies that they have familiarity and insight on via friends, or family, or the branding of those companies.

     Today, there are an almost limitless number of online resources that shape and influence reputation. There are consumer review sites, free sites, paid sites, and professional review sites—a variety of resources that we want to be familiar with, and think about how to use, as we are doing our competitive analysis, as well as our own reputation management.

     For example, we’ll take a look at a company that is producing a line of educational toys called GoldieBlox. Their target customers are girls in kindergarten and elementary school. These educational toys focus on engineering, math, and science principles. They’ve gotten a lot of very positive press in the U.S. for encouraging STEM-based education of young women.

     We can look at Amazon on a product-by-product basis and understand what GoldieBlox is doing well, what they may be doing wrong, and the opinions of consumers. We can explore the product reviews and ratings to learn what people are saying about the product and about the company.

     With hundreds of reviews on Amazon, we can review the highly-satisfied customers providing four-star and five-star ratings. But if we’re considering entering the space, and how we can improve on it and deliver better value, it’s those one-star and two-star reviews that I’d be interested in reading. We need to understand where the gaps and vulnerabilities are for GoldieBlox. 

     We can also study professional reviews. Sites like CNET review consumer electronics. There are many professional product review sites that provide detailed analyses that may be complemented by video, pictures, and other analytics on what professionals think about products or services. 

    We also want to do passive research, by which I mean automated. You can subscribe to your competitors’ sites. You can subscribe and like their Facebook groups. You can set up Google Alerts. You can join your competitors via Twitter. You can use RSS feeds on certain sites, and see what’s going on in the space, and set keyword alerts on your competitors or on certain products and brands that they own. For a number of these tools, you can subscribe to a daily email that provides a summary of news and information on competitors and their products. 

     In summary, when we think about reputation, we need to examine our competitor’s vulnerabilities. Where is it that we can make an impact? Are there problems in the marketplace that we can help solve with our ventures? We also want to think about new industries and new markets that we can enter. Also think about managing your own reputation. What can we do to build and manage our reputation? We need to take an active role in setting up our own alerts to see what’s being said about us, and play an active role in shaping that conversation. 

Entrepreneur Spotlight on George Weinmann, Founder and CEO of Mega Maldives Airlines 

     With a degree in aerospace engineering and an early career with Boeing, George Weinmann’s aspirations for starting a new airline were bold and challenging. With a vision to start China’s first low-cost carrier, after securing millions of dollars from investors and moving to China, China curtailed foreign investment in aviation. He had to abandon the plan when it became clear that China would not approve a new airline. 

     Mega Maldives Airlines was soon conceived during George’s honeymoon to the Maldives. He met with Maldives officials to discuss possibilities for charter operations from China. Instead, they proposed that he establish his own airline in the Maldives. 

     “Over the next ten years, the Maldives can become the playground in the backyard of India and China, similar to the way the Caribbean is to the U.S.A. and Canada,” says George. By linking the increasingly affluent China with the Maldives, a tiny island nation, the right ingredients are in place, to include landing rights in an expanding market, an international network of contacts, and crucial government approvals.15 

     Mega Maldives flights began in 2011 with one Boeing 767 flying from Hong Kong to the Maldives. By 2013, Mega Maldives grew to 180 employees. They now hold stopover rights in China, allowing expansion to other destinations like Japan. 

    With attention to climbing the learning curve, building complementary assets, and establishing a strong reputation with customers, business partners, and governments through the region, Mega Maldives is poised for success.

Ideas in Action: Competition

• What is the learning curve in your industry and market of interest? 
• What complementary assets are most critical in your industry and market of interest?
• How does the reputation of competitors influence your success?