competitive analysis!
the framework to look at the business landscape with a non-linear approach!
There are several ways to look at the competitive landscape.
However, in a digital world, the concept itself (for now) has become more fluid.
Indeed, when you look at companies like Amazon, Tesla, or perhaps Google, where would you start?
True, each of those companies has a leading market/industry (Tesla = electric cars, Amazon = e-commerce, Google = search), and yet when we have a closer look at what those companies do, we realize there is more to it.
Indeed, as those companies operate at the edge of business and technological innovation, oftentimes, they place bets on new markets and industries that, if proven to develop, can become whole new industries.
As explained yesterday:
The essence of non-linear competition: While Tesla is primarily known as a car company, it has broader implications for various industries. The development of electric vehicles (EVs) has the potential to create new markets and disrupt existing industries. Today, we don't yet have a name for an industry at the intersection of energy storage/generation - EVs - self-driving - robotics - and real-time insurance. Yet, in the future, we might take that for granted...
Linear vs. non-linear: The competition in the technology industry is not always linear. In the short term, competition may seem straightforward, but new industries can emerge and overtake established ones in the long term.
Tesla's Real-Time Insurance example: Tesla's entry into the insurance business shows how innovative players can enter seemingly unrelated industries. Traditional insurance companies might not consider Tesla as a competitor due to the linear perspective of short-term competition, yet Tesla's Service Business, including its insurance arm, generated over $6 billion in revenues in 2022. However, the exact revenue and margins of the insurance business are unknown, thus highlighting the challenge of understanding the true impact of disruptors until it's too late.
AWS and Amazon's Disruption example: Amazon's AWS (Amazon Web Services) became a significant disruptor in the cloud computing industry. It grew rapidly and became more profitable than Amazon's core business. Traditional industry executives, like former Microsoft CEO Steve Ballmer, underestimated the potential of AWS.
Hidden and Hard-to-Predict Businesses: Disruptive businesses are often hidden and hard to predict. Recognizing new players and changes in underlying incentive structures can help identify industry disruptions. Building moats in technology is challenging, and markets are prone to disruption every few decades.
Long-Term Industry Shifts: Industries that may seem unrelated can grow and become significant competitors. The discovery of new business niches can have a snowball effect, compounding their momentum and disrupting established industries.
Embracing Change: To stay competitive, embracing new technologies and industry shifts is essential. Paying attention to critical data points and adopting a non-linear analysis approach can help identify emerging trends and opportunities.
Understanding competition in the business tech world
In the VTDF framework, I broke down tech companies' business models into four main parts:
Value.
Technology.
Distribution
And Financial model.
Each part is essential to build a viable long-term tech business model.
Thus, we can leverage this same model to also analyze competition in the business tech world.
Breaking down the competition in the business tech world
When it comes to competition in the business tech world, we'll analyze it from a few perspectives:
Current Customer Overlap: Who are the key customers currently getting value and sustaining the business?
Current Technology Overlap: What is the key technological advantage that sustains the business's value proposition?
Current Distribution Overlap: What is the key distribution channel the company uses to enhance the technology that enhances the value proposition?
Current Financial Model Overlap: Is the company using equity/capital, debt/financing to grow,, or is it bootstrapping?
Once we have looked at the four components above, we can look at a fifth one, which is a way to break away from linear thinking, to move into non-linear/long-term thinking:
Future Technology Development: what technologies is the company developing that can help develop a whole new market?
Let's see each of those elements in detail with a key question to ask for each!
Current Customer Overlap
Who are the key customers currently getting value and sustaining the business?
Current Technology Overlap
What is the key technological advantage that sustains the business's value proposition?
Current Distribution Overlap
What is the key distribution channel the company is using to enhance the use of the technology that enhances the value proposition?
Current Financial Model Overlap
Is the company using equity/capital, debt/financing to grow, or is it bootstrapping?
Future Technology Development (Technological Betting)
What technologies is the company developing that can help develop a whole new market?
To Recap: In This Issue!
Current Customer Overlap: Identifying the key customers who are currently deriving value from and sustaining the business. Understanding the target market and customer base is crucial for assessing competition.
Current Technology Overlap: Analyzing the key technological advantage that sets the business apart and supports its unique value proposition. This involves evaluating the company's innovative solutions, patents, proprietary technologies, or unique approaches.
Current Distribution Overlap: Examining the primary distribution channel used by the company to leverage its technology and enhance the delivery of its value proposition. This could include online platforms, partnerships, direct sales, or other distribution networks.
Current Financial Model Overlap: Understanding how the company finances its growth and operations. This includes assessing whether the company relies on equity or capital funding, debt or financing options, or if it is self-sustaining through bootstrapping.
Future Technology Development (Technological Betting): Identifying the technologies the company is currently developing or investing in that have the potential to create entirely new markets. This forward-looking analysis focuses on the company's ability to innovate and expand into new areas.
Real World Case Studies
Apple
Current Customer Overlap: Apple's key customers are individuals and businesses seeking premium hardware and software solutions.
Current Technology Overlap: Apple's technological advantage lies in its ecosystem of devices, operating systems, and software applications.
Current Distribution Overlap: Apple utilizes a mix of retail stores, online sales, and partnerships with carriers to distribute its products.
Current Financial Model Overlap: Apple relies on a combination of product sales, services, and app store revenue to finance its growth.
Future Technology Development: Apple invests in AI, AR/VR, and semiconductor technologies that may shape future markets beyond consumer electronics.
Microsoft
Current Customer Overlap: Microsoft serves businesses, governments, and individuals with productivity software and cloud services.
Current Technology Overlap: Microsoft's technological advantage includes its Windows OS, Office 365, and Azure cloud platform.
Current Distribution Overlap: Microsoft distributes software and services through direct sales, partnerships, and cloud infrastructure.
Current Financial Model Overlap: Microsoft combines software licensing, cloud subscriptions, and enterprise solutions to fuel growth.
Future Technology Development: Microsoft invests in AI, cloud computing, and quantum computing technologies to shape future markets.
Salesforce
Current Customer Overlap: Salesforce targets businesses seeking cloud-based CRM and enterprise software solutions.
Current Technology Overlap: Salesforce's technological advantage lies in its cloud infrastructure and customer relationship management tools.
Current Distribution Overlap: Salesforce uses a subscription-based model and partnerships to distribute its services.
Current Financial Model Overlap: Salesforce generates revenue through subscription fees and add-on services.
Future Technology Development: Salesforce invests in AI-powered analytics and automation to innovate within the CRM industry.
Alibaba
Current Customer Overlap: Alibaba serves businesses and consumers with e-commerce, cloud computing, and digital payment solutions.
Current Technology Overlap: Alibaba's technological advantage includes its e-commerce platform, cloud services, and digital payment systems.
Current Distribution Overlap: Alibaba operates online marketplaces, cloud data centers, and digital payment platforms.
Current Financial Model Overlap: Alibaba generates revenue through e-commerce transactions, cloud subscriptions, and digital services.
Future Technology Development: Alibaba invests in AI, blockchain, and logistics technologies to expand its reach beyond e-commerce.
Current Customer Overlap: Facebook targets individuals and advertisers seeking social media and digital advertising platforms.
Current Technology Overlap: Facebook's technological advantage includes its social networking sites and advertising targeting tools.
Current Distribution Overlap: Facebook delivers content and ads through its social media platforms and advertising network.
Current Financial Model Overlap: Facebook generates revenue from digital advertising and sponsored content.
Future Technology Development: Facebook invests in virtual reality (Oculus - now rebranded as Meta Quest) and AI-powered content moderation and generation technologies.
Tesla
Current Customer Overlap: Tesla serves individuals and businesses seeking electric vehicles and energy solutions.
Current Technology Overlap: Tesla's technological advantage lies in its electric vehicle technology, energy storage, and autonomous driving.
Current Distribution Overlap: Tesla sells vehicles through direct sales, online orders, and partnerships.
Current Financial Model Overlap: Tesla generates revenue from vehicle sales, energy products, and software services.
Future Technology Development: Tesla invests in self-driving technology, energy grid solutions, and battery advancements to reshape energy and transportation markets.
Adobe
Current Customer Overlap: Adobe caters to businesses and creatives seeking design, marketing, and document management software.
Current Technology Overlap: Adobe's technological advantage includes its creative cloud suite and document solutions.
Current Distribution Overlap: Adobe distributes software through subscriptions and partnerships.
Current Financial Model Overlap: Adobe generates revenue from software subscriptions and services.
Future Technology Development: Adobe invests in AI-driven design tools and digital document technologies.
Ciao!
With ♥️ Gennaro, FourWeekMBA
