One of the key responsibilities for Product Managers is to establish and maintain competitive advantage for their products in the marketplace. Good intelligence about the industry and the competition give Product Managers and the teams they work with the edge and expertise to strategize and act with purpose and clarity. The more Product Managers know about their industry and the competition, the greater credibility they have as leaders.
Know the Environment
The fundamental understanding of the playing field and the players involved enables Product Managers to better anticipate what a competitor might do, how regulations will affect the industry, and more significantly, how customers respond. You must understand who or what your competition is, what their current relationship to your target customer consists of, and how you can best position yourselves to force them out of our target market segment. This is what is meant by defining the battle. The fundamental rule of engagement is that any force can defeat any other force - if it can define the battle. Yes, more military references, sorry.
To avoid losing, do things right! Do not misunderstand your organizational strengths or weaknesses, or those of competitors. And never misinterpret what target customers really want or you are afraid to step up to the responsibility of making sure they get it.
Sources of Information
Effective Product Managers are knowledgeable, totally involved, and passionate about what they do. They are constantly seeking cues and clues from the markets which they operate. Ways to be “one step ahead of the competition” is through multiple intelligence methods, the following are a few:
Meet and talk with customers
Meet and talk with retailers
Review various media (magazines, web forums, competitor websites, etc.)
Talk regularly with field sales and service staff
Listen to customers and retailers via customer support and technical support groups
Look at competitor job openings and review annual reports and analyst reports
Analyze warranty expenses
Porter’s Five Forces Model
A simple but very effective tool for analyzing the competitive landscape is Porter’s Five Forces. It is a framework for industry analysis and business strategy development. It draws upon industrial organization (IO) economics to derive five forces that determine the competitive intensity and therefore attractiveness of a market. Attractiveness refers to the overall industry profitability. An "unattractive" industry is one in which the combination of these five forces acts to drive down overall profitability. A very unattractive industry would be one approaching "pure competition", in which available profits for all firms are driven to normal profit.
Porter's five forces include - three forces from 'horizontal' competition: threat of substitute products, the threat of established rivals, and the threat of new entrants; and two forces from 'vertical' competition: the bargaining power of suppliers and the bargaining power of customers.
One force that Porter added later to this model is “complements”. These are items that go-along with the product or service and are integral to success. For example, gas with motorcycles, memory chips with computers, and ink cartridges with printers.
The following is a visual representation of the Five Forces model.
SWOT and PEST
Two simple but effective additional tools are the SWOT analysis and PEST analysis. The SWOT is a four-sector evaluation of an environment based on internal (strengths and weaknesses) and external (opportunities and threats) factors that can give a high-level overview of a product or segment. Don’t just understand the competitors Strengths and Weaknesses, but find the Weakness of their Strength. This way you will be able to identify a “junction” (i.e., gap) that provides an opportunity to attack.
PEST is similar to SWOT but the four sectors are Political, Economic, Social, and Technological forces that affect the business.
By using these three simple but effective tools, one can document and analyze all the “forces” affecting the business to allow a strong direction for more objective and quantitative analysis.
One more tool you can use which is an extension of the Five Forces is the 5C model.
Finally, here are several questions to evaluate competitive actions in order to determine options for action:
What is the strategic position of your competitor?
What actions has your competitor taken?
What have you done?
What do you expect your competitors to do?
What will you do?
It is critical to carefully analyze your market to identify areas of opportunities as well as areas to avoid. Using these simple but powerful tools to analyze the market, will allow you to confidently plan and execute market-winning strategies. Using a systematic and disciplined process to analyze the business environment will allow you and your team to confidently challenge competitors and provide new and unexpected offerings for customers.