In my opinion, one of the things that companies (both startups and more mature businesses) overlook when they are planning their market strategy is considering how competitors will react. And how the company will react to the competitor in return. Think of it as game theory in action.
Consciously or unconsciously, companies often assume that competitors will not change behaviors when someone new enters the market or shifts strategy. Let me tell you, that is a faulty assumption. To think that your competitors will not react in some fashion is either foolish or (worse) implies that you don’t matter enough for them to react to.
As you enter the market with your new product or service, your competition WILL notice. They WILL make adjustments. They WILL react in some fashion. It’s important to not ignore that fact and consider how they might react…and what move you would make next.
When thinking about your strategy, the key is to put yourself in your competitors’ shoes. What would you do if you were CEO of your competitor? What adjustments would you make? How would you fight back?
Go through 1-2 rounds of scenarios. What would happen if your competitors do this or that? And don’t assume all competitors are the same. We all know you cannot know exactly what your competitors will do. They each have their own motivations and business models.
Some things your competition might consider (and you should think about how you might react to them):
- Pricing changes: Will they lower their prices?
- Product/service changes: Will they add new features? Will they bundle products/services?
- Marketing campaigns: Will they target you in advertisements?
We all know your analysis won’t be exactly right. And I certainly don’t think you should spend inordinate amounts of time in analysis. But thinking through several possible reaction scenarios will serve to strengthen your own strategy and improve your thinking. And it will give your team the knowledge and confidence that they need to make decisions quickly when changes DO occur.
It’s important to out-maneuver and out-think your competition. One way to do this is to think your strategy through completely. Don’t stop at “here’s what we plan to do”. Continue through for a round or two of what-ifs and see if your confidence in your strategy is not strengthened.
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