If you’ve ever been involved with a start-up, you know the paranoia you feel with respect to competition – especially if you’re trying to live up to your business plan’s claim of the “first mover advantage.” Multiply the anxiety if, heaven forbid, your competition is a large and well-established company.

Here and now, I’m going to challenge the idea that competition is more bad than good for innovators and start-ups – and while I’m at it, I think I’ll dispute the notion that a first mover advantage is necessarily a good thing.

For the nine months or so that I’ve been working on the commercial launch of Smartware, we have had our eyes on the horizon watching for one particular competitor to come barreling over us.  They are large and amazingly entrenched among our target audience, and they have been talking about the coming release of a software product that appears to compete directly with Smartware.

We have done what we can to prepare.  We’ve made every effort to differentiate ourselves as only the little guy in the marketplace can. But one never knows what will really happen when the day finally comes.

It finally happened….  The big gorilla – let’s call the Goliath - finally announced the arrival of their new, competing product. Interestingly enough, we found out a day earlier than the general public when a reporter called from a publication in which we would LOVE to be covered.

I took the call wondering to what I owed this good fortune. Turns out, he was calling because Goliath had claimed that their new product filled a completely unmet need in the marketplace.  This reporter found Smartware in the course of his research and decided to get our opinion on the matter.

Goliath is regarded in this marketplace almost like Microsoft at an open-source convention.  They are corporate profiteers – a necessary evil. Adhering to our strategy of positioning ourselves in stark contrast to Goliath, we proceeded with the interview. 

They had a marketing/product development spokesperson.  We played an actual industry expert/practitioner, and I simply filled in the gaps with business facts and figures when asked.

They refused to disclose their pricing, but indicated that their software would be a “significant investment.” We disclosed pricing and spoke of our commitment to the industry.

Our expert actually said – and was quoted in the article, “we’re not corporate folks, and we’re not technology folks. We ARE the people that we serve, and we understand their needs because we’ve been their ourselves.”

A couple of weeks have passed now since this dreaded announcement, and I can tell you that since that day, every aspect of our revenue generating activity has literally doubled.  Web traffic has doubled.  Inbound phone inquiries have doubled.  Direct mail response rates have doubled. Product demonstration bookings have doubled.  And yes, sales appear to have doubled (though it is a little early to declare that officially).

How can we explain this bizarre phenomenon?

Goliath validated the need and established the market for a product like theirs (and like ours). And as one of VERY few existing competitors, our stature in the marketplace was elevated dramatically simply by being placed alongside Goliath. We instantly became a player.

I’m not a big NASCAR fan, but having seen Days of Thunder a few times, I am familiar with a racing term called “drafting.”  Drafting is when one car follows closely behind another and enjoys less wind resistance (and therefore greater efficiency). The car that is drafting burns less fuel, and when the time is right, can sometimes slingshot ahead of the leader.

As I reflect on this, it occurs to me that in business - in certain circumstances, one competitor can draft another and enjoy considerable marketing efficiency.  I wonder what we would have had to spend in PR effort to get any coverage at all in the industry leading publication that wrote this story.

Even if we got coverage on our own, I wonder if it would have had anywhere near the impact that it has had were it not for Goliath.  They brought significance, validity, and the appearance of scale to our nascent enterprise. I think not.

At this moment, we are drafting Goliath.  And we are in fact moving faster than our little engine could propel us on its own.  The questions now are – how do we keep drafting? And how will we know when the time is right to try to slingshot ahead?

This entry was posted on Friday, January 26th, 2007 at 3:45 am and is filed under Real-Time Case Studies, Sales & Business Development, Marketing Economics & Metrics. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.