on the competition…part deux

Last week we heard from Brian Scudamore of 1-800-GOT-JUNK on how he views and reacts to the competition. This week I sat down with Alan Smith of Business Model Generation fame. If you have not read this book then get on it, it is a game changer. If you are not using the Business Model Canvas to evaluate your ideas then get on it, it has changed how I evaluate every new idea in each of my businesses. But enough about me, let’s get on with the interview.

1. Alan, how do you define competition?

Your company helps people do a job, and however they do it without you is your competition. Other companies offering a similar product or service are obvious competition. Less obvious competition is customers hacking something together themselves. Products from seemingly unrelated industries can be competition too. A classic example: fast-food milkshakes aren’t competing against other big-brand milkshakes, they’re competing against bananas, muffins, coffee, snickers, and anything else people use to keep busy on a commute and stay full until lunch. To really know your competition, you need to know what job you’re solving for customers.

2. What’s the difference between product innovation and business model innovation?

Product innovation focuses on product, and sometimes market. These are two parts of a business model, which has 9 parts. The same product with a different business model can succeed where another one fails. Your product and its price tag are not your business model.

3. How should people focus on their competition?

Don’t. Competition rarely kills companies. Many founders find their competitors easier to understand than customers, and stay stuck in a competitive mindset. This keeps them from truly understanding their customers needs. Focus on solving real customer jobs through a tough to replicate business model. You’ll gain customers who won’t go anywhere, and prevent the competition from copying your success.

4. When should the business model be changed?

A “strategy event” once a year will take you no-where. You should always have a few new ideas in the pipeline, and be testing the riskiest assumption of each one. A short cycled iterative process of small bets keeps your costs and risks low, and keeps you ahead of the curve.

Alan Smith is co-founder of Strategyzer, and the The Business Design Summit.
You can follow Alan on Twitter @thinksmith and learn more about the Business Model Canvas at www.strategyzer.com