What I'd Tell My Team About Competition
A lot of people simply don’t understand the degree to which competition matters in B2B software, and what competing effectively feels like. Competition is simply the art of increasing your win-rate when you and a competitor vie for the same customer’s business, and this is what I would tell my team if I had to motivate them to compete hard and win:
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If our market has any value at all, we’re going to have competitors. Many of them will be formidable, because the thermodynamics of capitalism dictate that competition always eventually appears. If it didn’t, it would mean that we were doing something useless.
If our market is as large as we think it is, competitors will continue to spring up and get funded until there’s no longer positive expected value in trying to own it. VCs need to make money, and they will pay an endless train of Stanford dropouts to try to kick our ass. Our goal is to instead kick their asses so quickly, decisively, and publicly that people stop signing up to take shots at us.
You’re gonna read stuff written by rich people who tell you that competition doesn’t matter. They’re going to not-so-subtly imply that even thinking about the competition is some kind of weak behavior. These people are wrong, and they were typically late joiners at dominant consumer monopolies like Google. Assume that we are not Google. Once you’re at scale (i.e. not a tiny startup), competition matters and there is no shame in recognizing it; the fact that you have competitors who deserve respect doesn’t make you somehow lesser.
They will sagely make pronouncements like “Startups die from suicide not homicide,” but I will tell you now that I have seen startup homicide with my own eyes. They’ll write that competing is some kind of beta loser move, because they’re standing so high up on the shoulders of giants that they don’t even know how they got there. We aren’t standing on the shoulders of giants yet, we are the giants, and if we do our job well, then one day we can explain to some kids that we, too, needed to compete like maniacs years before.
Even if you don’t personally feel like conflict, it will still be brought to our door. We cannot unilaterally declare a stalemate and have competitors disappear. They are coming whether we like it or not, so we can live in only one of two worlds. In the first:
Win-rates lag
Sales lag because win-rates are down
There isn’t enough revenue coming in, so Finance will reforecast the business
The reforecast will require cuts, leading to a layoff
Morale will sink and resourcing will get tighter, necessitating strategy changes (hard but sometimes effective) or tougher execution (harder and never effective). Top performers will quit
Beset by these challenges, win-rates will fall even further
More layoffs will happen
We’ll shutdown or be forced into a fire sale of the business
The odds of us getting fired at Step 4, 6, or 7 are high. In contrast, there’s Scenario #2:
Win-rates increase
Sales swell as the win-rates rise
There’s too much revenue coming in, so Finance will reforecast the business upwards. If we want to, we can raise significant additional capital
All of that money will flow back into the business. We can grow headcount faster, or simply throw the dollars at fungible resources for durable growth (tokens, discretionary marketing spend, lavish perks that boost employee retention)
Morale will rise and high-upside projects that require higher risk tolerance or more resources can be put on the table. Your favorite teammates will make plans to stay here for years, because they see that they will propel their careers and likely get rich right here
Buoyed by this strength, win-rates will go up even more
The business will go public unless an amazing acquisition deal comes in first
Meanwhile, our competitors’ sales will lag, and they’ll go down the first scenario that we outlined above
The competition wants to force us into Scenario #1. They want us to go out of business. They want to put you at your kitchen table at 9pm explaining to your wife that you’re going to need to cancel that vacation or trade in the car for something cheaper. Perhaps they’re not envisioning that actual scene, but every day they wake up and take actions that can literally lead to that conversation. I don’t want that for my kids, and I don’t want it for yours.
To really move win-rates we need to be far better than competing offerings – half as expensive, 10x faster, 3x better results, etc. 10% improvements won’t cut it because it’s so annoying for our customers to change or do literally anything. Even finding their credit card and verifying their email for some $29/month PLG product is enough hassle that most won’t do it.
So we aren’t going to get higher win-rates with incremental feature improvements. It’s great that some 5% product improvement that you want to prioritize is a good idea, but it’s probably not going to move the needle and put us in a stronger market position unless it’s part of a story where we fix literally everything. So if you’re looking at a modestly good idea, you either need to build it really fast or not at all. We are looking for knockout blows rather than love taps.
This is going to take a long time. In B2B you win deals one at a time, so it’s house-to-house fighting. You’re hearing us talk about beating the competition right now; you’re going to hear about it for years. Software companies, particularly enterprise ones, are like bugs that can survive a nuclear blast and live off of discarded Kind bar wrappers and half-empty Mountain Dew cans for decades. We’re going to have to track down every last bug in the landfill.
But luckily, focus and hard work are the two easiest things to control. So if we actually focus and do the right things, we won’t be the ones that need to cancel Christmas.
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