A Framework for Discussing Competition
Having made a gazillion pitches over the past 10 years, I wanted to share some thoughts on how to discuss competition in a way that can impress investors and more importantly, help frame strategy.
Early on in my pitching days, I often defaulted to Googling “best startup pitch decks.” Airbnb, Uber, Square among others would show up at the top of search results. I would reference (in retrospect, depend on) these pitch decks and force fit our narrative to theirs.
The pitch deck ends up checking all the boxes and answers the what, but fails to answer the why. This is especially true and magnified when talking about competition.
If you are like me, then your competitor slide would look like some variation of the following where competitive differences are highlighted through the juxtaposition of features and/or value proposition:
Every time I get to this slide, investors would immediately ask, “well, couldn’t your competitor just build the same feature and lower the price point?
I would often answer, “yea, but not a priority for our competitors so we have at least a year head start,” and end with some statement like, “a year in our space is like a lifetime.”
I would weaponize time as my defense which doesn’t provide convincing closure to the question.
What my answer lacked is the why. If there is a feature that only we currently have, why is that difference meaningful? If it is not a priority for competitors, why has it been a priority for us? Why is the feature part of our bigger strategy to win in the market?
The heart of the “competitor question”
Over time, I realized that a question about competitors is really a question about why you will win in this market. Admittedly your entire pitch can be boiled down to this key question, but the competitor slide gets to the heart of it and makes it comparative.
In other words, the competitor slide is an exercise in identifying the different ways to win the market, and a discussion of why you are betting on one over the others. Each competitor could potentially be mapped onto each of these paths. The competitor slide is about your strategy to win the market, and why you think it is better than other options.
And if that is what the “competitor question” is essentially about, the template I was working with could never address it fully. Appealing to a unique feature may help explain why I may get traction early on, but it was not enough to show why and how I would ultimately win the market.
With this realization, I began to think of ways to re-tweak the competitor slide. While I wouldn’t say it is the only method, I wanted to share my thinking process behind a framework that has helped me on multiple occasions, on multiple stages along our company’s growth trajectory.
The New Framework
As the years passed, I learned that the most effective way to talk about competition is just to highlight what each competitor is betting on and show how a particular KPI will evolve over time by making such a bet.
The bet is essentially the hypothesis underlying your overall strategy to win the market. But I use the term “bet” here to emphasize that no one can make these claims with 100% certainty. By definition, a bet is based on a future event. No one can predict the future, so there is no right or wrong answer.
In other words, you aren’t being evaluated on your ability to predict the future, but rather on how you think things through. Before making a bet, you probably formed some hypothesis and ran some experiment to give you the confidence to make the bet. By showing a hypothesis-driven logic to justify your bet, you are giving investors confidence in your process and decision making.
As an added bonus, because there is no right or wrong answer, you also can talk about your competitors rather gracefully.
The framework would look something like this:
- Compare the bet
- Justify the bet: a voice over on how you chose that bet (a/b tests, traction, etc.)
- Define a KPI that indicates the progress of your bet
Let’s use ecommerce platforms as an example. Under this framework, the competition slide would look as follows:
The Script
Here is a script of how I would pitch the slide.
1. Compare the bets
“We are betting that over time, customer loyalty will come from great customer service and everything we’ve done from policies to product to PR is consistent with this bet, whereas Competitor A and B are betting on assortment and price, respectively. Now, our view on assortment and price is as follows: sellers aren’t incentivized to be loyal to one platform and negative gross margin is not a sustainable business model.”
2. Justify the Bet
“We came to this direction after running several a/b tests, pulling each of those levers. We don’t have enough data points over time to say this is conclusive, but we got comfortable with how the cohorts evolved over time when we pulled the service lever. Across the board, cohorts showed stronger patterns: higher user retention, higher GMV, k-factor, etc. Admittedly, it is a slower strategy from a user acquisition perspective, but we think will have a j-curve like effect down the line.”
3. Define a KPI that indicates the progress of your bet
“As we mentioned, we are betting on customer loyalty. We plan on closely tracking the source of traffic. Specifically, is the % of users starting and ending their shopping experience on our platform increasing? Or is traffic still being driven by price comparison sites / search engines, etc.? How does this look for our competitors?”
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I often struggled with the competitor slide, but it was because I had misunderstood the question. The competitor slide wasn’t really about competitors. It was about us, and how we think. Reorganizing the slide as a bet-justification-KPI, not only assured the investors that we were logical and hypothesis-oriented, but also that we had the standard to evaluate whether our bet held out, and either hit the petal or revise accordingly.
Again, I don’t think there is a right or wrong approach, but just wanted to share one version that had worked for me in the past and hopefully, it’ll help you as well! If you have any questions, or have another approach that has worked for you I’d love to learn from you. Please like and share :)
