Knowing Your Place: How to Visually Map Your Competition

Why You Need More Than a Gut Feel

Most small business owners think they know who their competition is. You probably do, if you’re on your game. But if you’re not sure, or you want to up your game in terms of how you think about your market and the players within it, here are two simple tools to help bring clarity to your competitive position.

We usually teach these as big company strategy tools, but you’ll find both of them are also useful to the entrepreneur. Crystal clear competitive awareness can’t be a bad thing. It will help you fine-tune your positioning in the industry, and take advantage of strategic gaps in the market.

The Competitive Matrix

A competitive matrix packs a lot of information into a small space. To do it right, you first need to understand how the game is played in your industry. Specifically, you need to identify the primary bases of competition. Most industries have between three and five non-negotiables —the things that you must excel at to dominate an industry. These are the dimensions we will use to size up the competition.

And that’s the next challenge. Identifying who your competitors are can also be tricky. Imagine that you’re a used car dealer, specializing in middle-market, high-quality cars. You sell a lot of two-year old Hondas, the odd Infiniti or Lexus, and quite a few Volkswagen Jettas. Not far away is a “competitor” that only sells luxury used cars. Nothing below a BMW. Do you really compete? Do we even need to be good at the same things? Probably not!

You should probably narrow the scope of your competitive analysis to your segment of the used car industry, and consider the luxury specialists as a substitute. It doesn’t mean we can’t learn from them or we shouldn’t study them, but we will confine the direct competitors to those who sell what we do.

Let’s say the key success factors for this industry are:

• Access to inventory: Since they don’t manufacture their product, they have to be good at sourcing it.
• Competitive Pricing: Margins are tight in this kind of business, so your profit will come from velocity, which means you need to be competitive on price.
• Customer Trust & Reputation: The used car industry has a lot of warts on it from a customer perspective. Any ability to establish a good reputation will be a durable differentiator.
• Digital Presence & Lead Generation: Nowadays, most used car buyers start online, so visibility and digital conversion are now paramount.
• Operational Excellence: In a low-margin business, you need to be good at all of the little things to be profitable (upselling, inventory management, reconditioning, delivery, regulatory compliance).

The first two of these can be somewhat difficult to ascertain, but the others are not. The competitive matrix like you see below. This version includes weighting for each of the factors.