A lot of us operate in relatively stable and existing in markets where we sell a product or service that our customers are happy with--which allows us to make money every day of the week. We also know who our primary, or "in-kind," competitors are. We understand our basis of competition relative to them, so we are comfortable in knowing where their lane is as opposed to ours. 

The real trouble, however, are the newer competitors who are different: The ones who are too expensive and not good enough. Hold on, you might be saying. Their product is no good and it costs too much? That sounds like someone easy to beat. The catch is that this is exactly the kind of competitor who will eventually knock you out of business.

Let me explain.

Whenever a new technology or service comes into the market, it's typically expensive to build and suffers from a lot of quality and feature issues. Consider the example of the self-driving car. When they first arrived on the scene, they were extremely expensive, and they could barely navigate safely around a parking lot. If you were in the traditional auto business, it would have been all too easy to write them off; they were nothing to worry about.

But over time, as the makers of those cars turned more development cycles on their products and continued to learn with every new model they introduced, the cars got safer and safer and smarter and smarter. People now travel in near self-driving cars all the time and they are safer than human drivers. As the cars proved themselves and people bought them, they also got cheaper to make, which actually made they more viable to deploy in the market.  Frankly, the only thing limiting full deployment of these safer vehicles is our own government, trying to protect us.

A similar example is when the first GPS navigation systems started showing up in cars. Because it was so expensive, costing thousands and thousands of dollars, it was only available as an option in high-end cars. Worse, it wasn't that great because the GPS maps weren't updated, so following their directions was sometimes a risky decision. We've all heard the story about the car driving into a lake because the map was wrong.  Today, you rarely see GPS in cars anymore because it's gotten so cheap and available because everyone now just uses their phone to navigate.  If you do see them, they are generally using the data from the phone to do the navigation.

But what do you think the people who made maps thought when GPS first came out? Too expensive and not safe enough to be a threat, right? Well, ask yourself when the last time you bought a map to see how that worked out.

Both of these examples show the simple elegance of two forces at work. The first force at work is the well understood learning curve. As the products get better and better as more and more cycles of them are churned out, each generation of product better than the previous one and the costs to making those dropped units dropped at the same time. The 10th self-driving car was cheaper than the first and the 1000th was cheaper than the 100th. In other words, the cars were getting both better and cheaper over time.

The second force that then comes into play is the dynamics of supply and demand. As the products got better and cheaper, demand increased - because we generally buy more of something as it gets cheaper -- which meant that more cars were built at a faster pace, which allowed the manufacturers to get better at a faster clip.

These two forces then begin to work in a wonderful virtuous cycle that forms an expoential curve and before you know it, the curve knees and these products have become both cheaper and better than anything else out there, including your company's offer. That's how you can get blindsided, and put out of business, by something that was too expensive and not good enough - until it isn't.

So, when you think about your competition, don't worry about the ones who look and operate just like you. These aren't the ones who should keep you awake at night. Rather, look at the ones who are not good enough and to expensive--these are the products that can truly take you and your business out.

You can find Jim at www.IncCEOProject.com