My least favorite slide in every startup’s pitch deck is the “competition” slide. It’s always some version of the same basic concept, and it’s always wrong. Worst of all, none of the entrepreneurs (and, sometimes, the investors themselves) don’t seem to realize why it’s so wrong. Are you making the same mistake in your slide deck?
For reasons beyond my understanding, entrepreneurs and investors seem to have unanimously agreed that a startup’s competition slide should use either a “magic quadrant” layout (courtesy of Gartner), or, if you’re “sophisticated,” Steve Blank’s petal diagram. But both of those ways of thinking about the competition are fundamentally flawed. Here’s why:
Why the Magic Quadrant is inherently flawed
The above image is an example of AirBnB’s “magic quadrant” competition slide. Every magic quadrant slide follows the same basic principles. The axes get labeled differently depending on the value propositions being offered to the startup’s end-users, and within each quadrant, the entrepreneur includes the logos of different companies that do some part of what the startup is claiming to do.
Naturally, no other competitor provides the identical value proposition to end-users as the startup because that would be impossible (just don’t tell Coke and Pepsi). And, of course, in the top, right corner of the image you’ll find the startup’s logo because they’re obviously the best at delivering on the value propositions they’re defining.
The problem with this way of visualizing competition should be obvious, but, for some reason, nobody seems to realize it. When the startup gets to define the two axes that represent the value by which we’re measuring all the competition, then the startup will always come out on top.
Imagine me creating an assessment metric for “best articles on Medium” and labeling the X-axis as Written by someone with first name “Aaron” and labeling the Y-axis as Written by someone with last name “Dinin.”
Since I’m the only Aaron Dinin in the world, I’ll always be the best! (And I’m just hoping this guy never decides to start publishing Medium articles.)
Why the Petal Diagram completely misses the point
At first glance, when compared with the flawed magic quadrant approach, Steve Blank’s “petal diagram” concept seems like a more thoughtful way of envisioning competitive landscapes. It appears to think about competitors more comprehensively. But, in reality, it’s even more selfish than self-defining the axes in the magic quadrant..
In spite of the magic quadrant’s core flaw, it gets one thing right: consumers care more about value than features. They make purchases because they’re trying to solve a problem in their lives, not because a certain product includes a specific kind of functionality. But the petal diagram goes in the opposite direction by asking entrepreneurs to focus on features. It tells them that features matter more than value propositions, and that’s never a good message to send entrepreneurs because it gets them focusing on what they can build rather than how they can help.
For instance, in reading the above example of a petal diagram for Slack, it tells us that Slack is a task manager, chat platform, real-time collaboration tool, online file sharing system, and unified communications platform. Sure, that certainly makes Slack seem robust. But have you ever heard someone around your office make the following complaint: “Ugg… I really wish we had a better task manager, chat platform, real-time collaboration tool, online file sharing system, and unified communications platform”?
Of course you haven’t! That’s not how people operate. We don’t wish for features. We wish for solutions to our problems.
If I’m wishing for a Slack-like tool, I’m going to say: “Ugg… I’m struggling to keep track of the conversations I’m having related to all the dozens of different projects I’m currently juggling. I wish it was easier.”
The only competition slide you’ll ever need
The reason magic quadrants and pedal diagrams struggle to describe a startup’s competition is because they begin from a flawed premise. They both assume that consumers use products for similar and easy-to-define sets of reasons. However, the consumer behavior is significantly more variable and nuanced.
For example, let’s consider note taking apps. A simple search for “notes” in the Apple App Store returns somewhere between 50 and 50-gagillion note taking apps. Results include everything from the built-in note taking app on the iPhone to robust softwares like Evernote and Microsoft OneNote.
Personally, I take dozens of notes daily. Which app do you think I use?
The correct answer: Gmail and Outlook. Did you guess either of those? I’m betting you didn’t.
Like most people, I have multiple email accounts. My personal email runs through Gmail, while my @Duke email runs through Outlook. When I take notes, I tend to open one of my email clients on my phone and fire off an email to my other email account.
If the note relates to personal things, I’ll send it from my work email account so it appears in my personal email account. If it’s a work-related note, I’ll send it from my personal email account so it appears in my work email.
Does this system for taking notes make any sense? Of course not. Is it efficient? Hell no. Does it make finding things easy? Almost never.
If my process for taking notes is so bad, why do I keep using it? I have no idea! No matter how often I’ve tried switching to other note taking apps, I always return to my “send myself emails” system because it feels comfortable and seems to work for me.
Once you’ve finished judging me for my poor organization skills, take a moment and think about how my usage of Gmail and Outlook would appear on a magic quadrant. Similarly, would a startup building a new note taking platform include Gmail or Outlook in their petal diagrams? Not that it matters. Even if a startup’s magic quadrant or petal diagram perfectly overlaps with my usage pattern, it still wouldn’t matter because they’re completely missing the point. The competition still wouldn’t be Gmail and/or Outlook. The real competition is — and always will be — the status quo.
Every entrepreneur who tries to expertly map their competition is making a fundamental mistake about why people use products. People don’t wake up in the mornings and think: “I want to buy a new product today.” They wake up and start triaging each problem as it arrives, one-by-one, until they go to bed. They say to themselves: “I have to go to the bathroom… what can I use to accomplish that?” Then they walk to their toilet. Next, they remind themselves that they need to wear clothes, so they walk to their closets. As they’re putting on their pants, they suddenly have a great idea for a new Medium article, and, if they’re like me, they hop over to their phones, pants still around their ankles, open a Gmail compose window, and fire off a quick summary of the article to another one of their email accounts.
It might be weird, but it’s real, and that’s what matters. So if you want to describe your biggest competitors in a pitch, here’s a simple PowerPoint slide that’s guaranteed to work no matter what.