Analyzing The Current Solution Set: What is Your Future Competition Getting Wrong (And Right)?
Competitive analysis overview for early-stage competitor research
First published on thinklikeacpo.com
If you’ve read my post on problem statements, you know that I believe there are 4 key pieces of information you should have identified before beginning ideation for a new product: target user groups, problem of interest, current solution(s), and value creation opportunities. Current solutions is normally the easiest piece of information to identify, but I would argue, among the hardest pieces to analyze correctly. This makes it a danger zone for entrepreneurs, who think simply knowing the names of the product(s) on the current solutions list is enough.
Even when entrepreneurs know to ask target users questions about the current solution space, opportunities for inspiration and improvement are still being left undiscovered. So, how do we do an early-stage competitor analysis that comprehensively identifies gaps in the current solution space? In this post, I will explain how to analyze the products in the current solution space to capture opportunities for end-to-end value creation. Let’s get started!
The blessing that is competition in your space
A quick, but important note before diving in. It’s easy to look at the current solutions list and get discouraged, but I truly believe having competition is a GREAT thing for entrepreneurs for a multitude of reasons. Here are the two that I like the most: One, existent competition in the space normally indicates that there is a real problem to solve. And the more the merrier. If the problem is big enough, there should be a few (or many) companies that are trying to solve it. Two, when other companies are attempting to solve our same problem, we can use their products as opportunities to learn the value currently available to users and what’s missing. So, I would encourage you here to have a little bit of “main character syndrome” (courageous optimism) and view this as a good thing. You can’t “win” if you’re the only one playing, right?
Why analyze the current solution space?
One of the key steps in developing a new product or service is analyzing your competition and the current solutions in your market. By doing this, you can establish a baseline for what people are currently using to address their needs and solve their problems, as well as identify any gaps or opportunities that may exist. This information is crucial for developing a product or service that can effectively compete and provide value to your target users. Additionally, analyzing the current solutions in your market can help you better understand what people are looking for, where there may be room for innovation, and how you can position your product to stand out from the competition.
Establish a baseline
Knowing what a target user uses to solve the problem today is valuable for three reasons. First, this knowledge allows you to gauge the current features / affordances that users consider essential v. “nice to have”. Second, the solution range will offer you an understanding on which implementation is considered average vs. best-in-class for each feature / affordance. Lastly, the current solution space will provide inspiration, both for what to and not to do.
Reverse engineer “first pass” of user needs
User needs are, in simple terms, what the user expects a product or service to “be” (affordable, fast, aesthetic, etc.). User needs will be covered extensively later on. But for now, think of this as certain “parameters” the user cares about in the current problem space. For example, if I’m building a coffee mug, some user needs may be cost / affordability, portability, temperature control, durability, etc.
In your competitor analysis, you’ll be able to gauge an initial list of user needs just from what is currently being marketed and sold to users. Although this won’t necessarily lead to a final, or priority ranked, list of user needs. It’s good to establish a basis for what current solutions all have in common (what users most likely consider table stakes) and what each solution’s competitive advantage is (what are current products “winning” with).
Know standards and averages v. best-in-class implementations
“Table stakes” features / affordances are the particular requirements considered essential to the target user when addressing needs and problems. All products will have some of these. An example is how all life preservers (things that keep people afloat in water) are expected to, well, float. Identifying these product standards can help you better understand what your future product will be expected to have. For example, if you’re developing a piece of software for managing large-scale data storage, then it’s likely the user needs are related to cost-effectiveness, data security, and speed of access. Once you know the table stakes, deducing the accompanying industry benchmarks for what is considered average v. best-in-class for cost, security, and speed will help you understand where your solution must sit to be competitive.
Let’s look at an example:
Say you are analyzing competitors in the electric vehicle space. In doing an initial user needs assessment, you hypothesize that users care most about cost- + fuel-efficiency.
To establish a baseline, you compare the prices and energy efficiencies of current offerings and get the following result:
Cost (USD)
Average: ~$64K
Best-in-class: ~$28K (2023 Nissan Leaf)
Energy-efficiency (MPGe)
Average: ~100
Best-in-class: 141 (2020 Tesla Model 3)
From here you have a good idea of what users are currently experiencing in the industry.
Inspiration for your future solution
I won’t dive into too much detail here, but knowing the solutions users currently have access to can provide an inspiration base when you move into ideation for your future product. By understanding what people are currently using and how they are using it, you can begin to identify opportunities where you could create a product that will meet users’ needs more effectively. For example, if I’m building a new piece of software for organizing files on the computer, I might look at the current solutions on the market and see that most software is focused on managing files in a hierarchical fashion. Based on this, I might decide to design my product with a different organizational structure, if I can validate a user benefit to doing so.
How to do a comprehensive competitive analysis
Competitive analyses are useful because they can help you understand the strengths and weaknesses of your competitors (read: the market you are hoping to enter), so you can plan your strategy accordingly. A thorough competitive analysis can also give you inside information about how the market is evolving, and enable you to strategically position yourself in a way that will give you an edge over your competitors.
To conduct a comprehensive competitive analysis, there are several steps:
1. (Discussed below) Identify all potential competitors for your product or service.
You may be competing with companies large and small, both online and offline. Look at a range of competitors in detail to understand their unique value proposition and where they fit into the overall landscape of competition.
2. (Discussed below) Analyze each competitor on various criteria that matter most to your target user group.
This can include criteria such as cost, quality, features and user reviews. Identify areas where your product could be stronger than your competitors and get a sense for market average or best-in-class.
3. (Will discuss elsewhere) Identify gaps in the market that could be filled by a new product or service.
Think about what your target customers are currently experiencing and brainstorm solutions that would meet their needs more effectively than current offerings in the marketplace.
4. (Will discuss elsewhere) Use this information to strategically position yourself in the marketplace.
This can help you to outperform your competitors over time. This might mean developing a unique value proposition for your products or services, improving customer support processes, targeting new segments of customers, increasing brand awareness, among many (many!) others.
Figure out the range of current solutions for the user
Ok, so at this point you (should) already know the problem of interest and who your target user group is. If you don’t, read these posts on user selection and problem identification, then meet me back here. Next, let’s chat through how to figure out the current solutions available to the user. This shouldn’t be too hard, but remember that you first want to think of all the possible ways to solve the problem. Even if you have a solution coming to mind, try your best to not limit the current solutions just to solutions that solve the problem in the same way.
Here’s an example:
Pretend we have already identified our target user group as young urban professionals living in apartments. The problem of interest is that these professionals may have to get new furniture each time they switch apartments (due to varying configurations and sizes), which can be as frequent as yearly.
The current solution space you would want to consider here includes:
a) modular furniture manufacturers
b) furniture leasing companies
c) second-hand furniture resale platforms
d) pre-furnished apartment buildings
Although these companies are not all using the same means to solve a problem, they are all effectively solving the problem and therefore, are all in the solution space.
Analyze each competitor
You should, at the very least, make a list of major players in the competition space and get familiar with their offerings (comparing feature analyses across products would be a plus here). I would also advise you to do deep dives on leading products (and failed products) to get a better understanding of what I have belabored above, the user needs, and see what types of products are currently “winning” in your space. Beyond that, you can use the analyses outlined below to add depth to your understanding of the space either now, in the problem space, or later, as you begin ideation and refining your list of user needs.
Competitive analysis types
The four analysis types detailed here are all company / product line / product deep dives, but can be compared / contrasted to assess where competitors are strong / weak. Beyond your initial information search, detailed above, the competitive analysis tools you choose to apply will depend on how myopic or expansive you want the scale of your deep dive to be.
For example, 3 of the four analyses below work well on the SKU (or single product) level, while the first analysis works best at a company wide + macroeconomic level. Product-level analyses focus on studying the product’s design, features, price and value prop. Portfolio-level analyses add in a layer of insights about purchasing channels, support, and distribution / logistics. On the other hand, company-wide analysis may include finances, strategic vision, funding sources, operational excellence, etc. And a macro analysis would look at overall economic trends (e.g., inflation, regulatory change, political events) that may effect a company’s future state.
1) Company / macro level: SWOT analysis
When to use: How can you compete against the companies in your space? What can you do better?
A SWOT analysis is a slightly more detailed tool that allows you to evaluate the strengths, weaknesses, opportunities, and threats of your competing products. In a SWOT, strengths and weaknesses are internal pros / cons. Potential strengths can be a strong design / functionality, distribution channels, or positive brand perception. Potential weaknesses may include low product quality, negative press, or poor customer support. Opportunities and threats are external factors such as market trends, emerging technologies, regulatory changes. Opportunities are the positive external factors that can be leveraged to the business’s benefit. Threats are the negative external factors that could either cause the business problems or lead to failure.
Questions to ask to generate a SWOT:
Strengths
-What are the key strengths / assets of the company? (resources, technologies, partnerships, etc.)
-What is the company’s key competitive advantage? (resilient supply chain, strong brand loyalty, robust sales channels, etc.)
-What products garner the highest user praise? What products are best sellers?
Weaknesses
-What are some potential weaknesses of the company? (limited differentiation, limited distribution channels, underdeveloped product pipeline, etc.)
–Where is the company performing below competition? (customer support, marketing strategy, brand recognition, etc.)
–Which products have failed? Why?
Opportunities
-What are the key trends, market shifts, or new technologies that may create new growth opportunities for the company?
–What new products or services can be developed, new markets can be entered, new assets can be acquired that are synergistic with the company’s capabilities and take advantage of these trends?
Threats
-What are some major threats that may create future market decline? (shifting user perseption, policy chance, etc.)
-What events / disruptions could lead to company losing market share?
-What events / disruptions could lead to company becoming obsolent?
2) SKU to product line level: Feature overview / analysis
When to use: What are the key differentiators of your product? What are its unique features and benefits to users?
A feature overview is a basic tool that allows you to quickly analyze the features of competing products. Often, this type of competitive analysis will be used at the SKU (or single-product) level. In a feature overview, you will simply list out the features of each product and comparing them side-by-side. You can then compare products to see how each stakes up in terms of “best-in-class” features.
For example, if I am building a feature analysis for the water bottles market, I may include features like material (e.g., plastic, glass, metal), size, and cap type (e.g., twist off, flip up) for the relevant competitors in the space. It’s helpful here to then make an assumption about what is considered “best-in-class”. There’s a few ways to determine this depending on which parameter you are solving for. As a startup, you will more than likely be solving for growth — so I would recommend deciding “best-in-class” by which brand is offering the best user experience. For something like a twist off v. flip up, this decision may be subjective. That’s okay, what we want to get out of this is really just a sampling of who is offering what in your space.
This type of analysis can be used to identify key product differentiators, as well as areas where you may need to improve your own product offering in order to compete in the market.
3) SKU level: Deep product design assessment
When to use: What is a competitor product nailing? Where does it fall short?
Read the full guide on Design for Excellence here.
A product design assessment (using Design for Excellence principles as a guide) is a useful deep dive tool on a single specific product. This is where you analyze a product through different design guidelines (e.g., Design for Cost, Design for Manufacturing, Design for Sustainability) to decide where there is room for improvement. The above guide walks through a few of the popular parameters and some techniques to use to analyze each. I would NOT recommend doing this exhaustively across your competitive set. This is a useful technique to get a holistic, deep view on one or two of the products that you are interesting for particular reasons. These reasons can include being the best-in class product, being the worst-in-class product, or being the current choice product of your target user group.
4) SKU to portfolio level: E2E user journey map
When to use: What are your competitor’s most effective acquisition and retention channels? How do their products compare in terms of user experience / usability?
Read the full guide on E2E Journey Mapping here.
An E2E user journey map is a visualization tool that helps you to analyze the customer’s experience across different stages of their engagement with a product or service. This can be helpful in finding gaps in the services adjacent to the actual use experience with a competitor’s product. A journey map lists key touch-points, points of friction, and associated feelings for users. The above guide goes into deep detail about how to analyze the entire end-to-end user journey, beginning with a purchasing decision and ending with product disposal.
Again, this is not an approach I would recommend you take with every competitor. Particularly, I would choose 1. the most popular product for your user group and 2. the best-in-class product in the premium level of your category (e.g. Tesla, if you’re a EV startup). This will give you an idea of what your user experiences now and what the best-in-category experience looks like. More on this later…
Wrapping it up…
Overall, conducting a competitor analysis can be an invaluable tool for understanding the current landscape of solutions in your market and identifying gaps or opportunities that may exist in your product space. Whether you are looking to improve on current products, or lead the market with a completely new solution, conducting a competitor analysis is an important step in understanding how to achieve success. Good luck!
