When it comes to building a startup and the entrepreneurial journey that accompanies it, competitive analysis is about the least exciting thing you'll ever do--but it's also the most important.
Spending years and millions of dollars of someone else's money without doing comprehensive market research beforehand automatically lowers your chances of success. The issue is that most entrepreneurs are super passionate about their product and want to hit the ground running. The last thing they want to do is spend a month researching to create a market landscape.
That is a huge mistake. Here are some reasons you are going to want to do that research before starting your entrepreneurial journey:
Investors are going to ask you about it
Don't forget for one second how important competitive analysis is for you--investors are going to ask you who your competitors are. Do it for them if nothing else.
The worst thing you can say to an investor is that you have no competitors. If you say that, there are only two options: either you didn't do sufficient research or you're right, and there is no one out there trying to solve the problem you're solving. In other words, there is no demand for your product. Both of these aren't situations you want to find yourself in.
It will help you decide on the next steps
One of the most crucial personality traits of a successful entrepreneur is flexibility or the ability to pivot when necessary. By creating a competitive landscape, you are able to make a more informed decision of whether to take a different direction or to continue moving forward with your current product.
There is nothing as powerful as a visual representation of your market. When you have that graphic in front of your eyes, there is no lying to yourself about your chances of standing out. The landscape speaks for itself.
You can establish your differentiators
By seeing what other players in your space are doing, you are now able to determine what your differentiating factor should be. What are others doing? Who is succeeding? Who is failing? Why? All these questions are crucial, and competitive analysis will help you answer them.
You'll learn from the mistakes of others
Building a startup requires a balance of so many things. For example, looking at your competitors in order to copy them or see how they're doing things is not recommended. Too many entrepreneurs assume the other CEO knows what they're doing when in reality, they're in the same boat as you.
On the other hand, not looking around you to see what lessons you can learn from others is crazy. It's that balance that needs to be struck.
By making a comprehensive market landscape, you can see who is doing what in your space and learn from others' mistakes. If you have an idea for a startup, that's great, but before you execute on your idea, take a breather for a month and do research to build that landscape of the field you're going to spend the next decade playing in.