Should You Pay Attention To Competitors? It Depends On Your Company’s Conflict.

I don’t remember much from high school literature classes, but one of the key frameworks I do remember is the different types of conflicts in storytelling. Now, the internet is confused over how many types of conflicts there are. Much like the 4P’s of Marketing are now 7, scholars are adding more types of conflict in storytelling over time. When I was taught this, however, there were three we focused on; whether the protagonist was fighting against:

  • nature
  • another person
  • themselves

Why am I talking about high school literature frameworks? Because every company has a conflict as well. The type of conflict a company is in will determine how you think about competition. I’ll describe these conflicts in more detail, how they apply to companies, and how to think about what to do in each situation.

Company Vs. Nature

Every founder I speak with can name dozens of competitors. That does not mean they are in conflict with another company. Take Grubhub, for example. When I joined, we had raised $1 million in venture capital, and had three competitors all about the same size, but with different strengths and strategies. But this was not a competition about who would become the leader in online ordering for food delivery. This was a competition against nature and to make food delivery more attractive to consumers, and if they were ordering delivery, competing against calling restaurants on the phone. At the time, 99% of people were not ordering food online.

Most startups are in a conflict against nature. There is a status quo in the market – or some other type of barrier to adoption like, say, a global pandemic (“too soon!” shouts my co-workers) that has to be overcome for any type of company in the space to be successful. Normally, startups engage in trench warfare to grind against the status quo over time. Online ordering for food delivery went from a very fringe thing to a completely normal thing that everyone does. Mike Evans, Grubhub co-founder, famously said, “we were an overnight success ten years in the making.” Occasionally, nature provides catalysts to growth as well. Just talk to any telemedicine startup, grocery delivery service, or remote work tool about what happened to them when the pandemic started. The technology already existed for all those companies, but consumers needed a forcing function to accelerate adoption.

If your main goal is to grow the category and make people want its value prop in general, obsessing over competition isn’t very helpful. This is how we felt at Grubhub. We didn’t care too much about competitors at all and focused on our customers. This prevented us from wasting precious time analyzing our competitors instead of our customers, which is what would really help us be successful. Eventually, Grubhub acquired those initial competitors or made them irrelevant. When we acquired those companies, we found they spent a lot of time thinking about us. Now, one can make the counter-argument that that is because we were winning. This is a very important point. If any competitor working to grow a category is being materially more successful than another, you may shift into another type of conflict.

Company Vs. Another Company

In many markets, companies fight vehemently against competitors. Companies are embroiled in a Red Queen effect, where each company is trying to out-innovate or outwork others in the market to gain market share. Think of Uber vs. Lyft as a recent example. Startups frequently think they are in this type of conflict when they are not. I have seen quite a few startups emphatically compete before they are even sure the category will be successful. In many of those cases, it would be better to cooperate and grow the category faster by being coordinated. Stripe and Shopify are an interesting example of this. The categories of ecommerce and online payments are growing so fast that instead of competing with each other, they have tightened their partnership to make sure the category continues to grow quickly. Uber and Lyft however tracked each other’s moves, and responded in kind to new product launches, pricing changes, and market launches. Both of these moves look correct in hindsight. Uber and Lyft’s market, while growing fast, would ultimately be capped by consumer transportation needs, and lean toward a winning take most model due to the strength of the local network effects involved in the model. While Uber and Lyft have been competitive, they ultimately saw value in presenting a unified position on local regulations and working together to ensure its services would remain available throughout cities worldwide. So company vs. company can change depending on the fight back to vs. nature.

Company Vs. Self

The third type of conflict within a company is one many founders and employees seem to forget: competing with themselves. In this type of conflict, the primary fear of the company is not that the market doesn’t unlock or that a competitor will take your opportunity; it’s that the opportunity isn’t realized because the company cannot execute on the strategic vision. This type of conflict can be dominant for many reasons:

  • Internal politics
  • Lack of focus
  • Execution issues e.g. technical and process debt

Investors frequently call this “execution risk.” A company in conflict with itself means the vision is definitely technically possible (hence, not technical risk), but the company struggles to build toward it either due to being unfocused, people internally competing vs. cooperating, or building is very difficult due to technical or process issues. These types of companies can be appealing to certain types of executives who think they can fix the underlying execution issues. The reason for this is that if these companies do everything right, they win. This is certainly true. But it is not easy. Evernote is a recent example. Technical debt slowed their progress to a crawl, so the new CEO spent two years rebuilding everything. During this time, growth was slow, and more competitive risk emerged with companies like Notion, Coda, and Roam Research. If the company is finished with its conflict with itself, it likely finds itself in conflict with other companies now.

It is tempting to say in this example that Evernote should have paid a lot of attention to these competitors early on, but I think that would have been a mistake. The entire issue with Evernote seemed to be that they spent too long building new things on top of a technology stack that became unbearable to maintain. Movements in the market have no impact on fixing that core problem.

The type of conflict you are facing affects a lot of how you build and what you focus on as a company. Spending some time to think through where the real conflict is can help focus the company on the right activities to win. This can affect how much you invest in marketing, the focus of the product roadmap, and even organizational structure. Tackling the appropriate conflict is where the real leverage is in growing a company.

Currently listening to my Vocal Tones playlist.

3 thoughts on “Should You Pay Attention To Competitors? It Depends On Your Company’s Conflict.

  1. Anusha

    Could you also share some tips on how we can identify the conflict we’re facing and what our strategy for it should be please?

  2. Casey Winters Post author

    I had a 2×2 in a draft of this related to that, but removed it because I thought it was too forceful. In general, you’re trying to understand what is preventing you from growing faster. I would ask the question:
    1) Is the space you’re playing in already big? Leans toward an understanding of the competitors in the space.
    2) Is the space you’re playing in growing? May be be better to focus on harnessing that growth vs. combatting another company that is also in the space.
    3) Is what is slowing you down a lack of strategy? Technical debt? Lack of process? Those all indicate internal conflict you should be focused on.
    4) Is what is slowing you down the market itself? That implies nature.

    Hope this helps.

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