In a previous post, I mentioned how I am a big fan of Edward Tufte. One of the best things coming out of the Tufte school of thought is that you should be able to visually represent complex systems on a single sheet of paper that is dense with information while still making the general patterns inherent in the systems visually comprehensible. Single graph, complex system. It’s a challenge, but the results can be stunning if you look at some of the examples in his books.
So, in a prior company, I had the challenge of trying to represent a complex ecosystem of partners and competitors (we were doing Cloud Computing, so there were lots of big and small players vying for media attention) and make some sense of what was going on in the marketplace. I decided to use a single chart that represented the competitors on a single chart that I embedded in presentations to the board. I know, everyone does competitor checklists and spews about how much better their solution really is, how their competitors are missing features and missing the point, etc. But, that’s not what an audience typically wants to see. Usually the question is simple:
“Who are our friends, who are our enemies, where are they vs. us, and when will they be a real threat?”
So, I felt that a chart that could answer this questions needed at least SIX dimensions. For every competitor, we needed to understand:
DIMENSION 1: Threat magnitude: If these guys were actually doing exactly what we are doing, how bad of a threat would it be to the business? I created a 1-5 scale of measuring that threat.
1 – No concern. Even if they did the same thing, they really wouldn’t affect us at all.
2 – Probably not a threat. Maybe they’d chip away at some parts of the market we are in, but overall, it wouldn’t be that dangerous.
3 – Careful. These guys could easily step on some toes and we could lose customers if we’re not careful.
4 – Danger. This company, in our market, would significantly damage our ability to get new customers and keep existing ones.
5 – Severe. Basically, they would crush us if they entered our market and would destroy our business.
DIMENSION 2: Threat Immediacy — i.e. how quickly will this company be in our market. I looked at the world in terms of quarters.
These two dimensions provided the “grid” which I could use to visualise the competitors…. something like this:
Onto this grid, we are going to place “bubbles” that represent competitive companies. The upper right of the grid (immediacy: NOW and threat level: SEVER) is where you don’t want to see any competition. That’s why it’s red :-).
To represent the competitive companies, I wanted to capture a few other dimensions about the companies in question.
DIMENSION 3: Company Size. You can go nuts here and think about size in terms of revenues, employees, amount of funding. To keep things simple, I just classified them as…
BIG BOY (you know who they are… Microsoft, IBM, Google, Oracle)
ESTABLISHED (public or non-public companies that are funded, have traction, funding, revenues, buzz or
STARTUP: newcomers to the game but worth watching, basically in the same boat as we are.
Since we are going to represent companies as bubbles, bubbles get different sizes based on this third dimension. Like this:
Next, realizing that not all companies are necessarily our enemies and that a part of a good marketing strategy is to turn competitive threats into alliance possibilities, I decided to use colors of the different bubbles to represent their relationship to us. So
DIMENSION 4: Relationship.
ALLY: we are partners. Not just on paper, but actually know each other, like each other, sell together, share customers
NEUTRAL: go to conferences together, shake hands, are signed up for the right programs, but don’t really have a strong co-selling relationship
ENEMY: easy enough
The bubble colors look like this:
DIMENSION 5: Agility
Next, we want to indicate in some way how “agile” our competitor may be. This is different from how smart they are. Agile means they can pivot, change direction, come out with new products every quarter, quickly adopt new technologies. There are very smart companies (s.a. Microsoft) that are no longer very agile because of their size and the size of their install base. Since TIME is represented as a horizontal dimension on the grid, these arrows are horizontal. Red is dangerous, green is OK. The bigger the horizontal arrow (agility) the sooner the company has a potential for becoming a threat.
DIMENSION 6: Smartness
This is very subjective, but most people who spend their lives worrying about competitors have a “gut” sense of this aspect. How smart is your competitor? Look at their management team, look at their investors. Listen to them on videos and podcasts. Do they sound like a group of people that “gets” the market and is on top of the latest development trends and technologies?
Since “threat magnitude” is a vertical scale in the grid, the “smartness” arrows are vertical. The smarter the company, the bigger the threat it can provide.
So, there are the six dimensions: threat level, threat magnitude, size, relationship, smartness, agility.
We combine the circles, color, and arrows to create a visual representation of the company and place them on the grid (which indicates their current threat level and immediacy) to get an interesting visual competitive picture.
As my example, I’ll use the latest source of debate — FourSquare. They are well known, have some major and minor competitors and are in a dynamic market.
DISCLAIMER: I AM NOT ASSOCIATED WITH FOURSQUARE IN ANY WAY (besides being a long-time user) nor do I mean this example to be in any way seen as anything coming from 4sq’s marketing team. I am sure they have their own take on the situation. However, whether they know it or not, they probably think about the problem the same way.
Let’s list FourSquare’s competitors and summarize our opinion of them along the six dimensions I described. Please, please, please, don’t get offended by any of the labels. I am not a LBS marketing guy — just someone making educated guesses. I know that your company (fill in the blank) is the smartest, biggest, most agile thing out there, and that you pose a huge threat to every established software player in the world.
Now, we can create a visual representation of each of the competitors and place them on the grid. For example, Google will look like this:
Google is BIG, Google is SMART, Google is AVERAGE in agility, Google is NEUTRAL (as far as 4sq is concerned). We will place this Google icon in the 2011(Q1)/DANGER square on the grid.
And so on for all the others.
The complete grid looks like this:
What does this tell us? Well, our company (in the upper right hand corner) faces some threats. Some are coming from big players, some from small. Some are more agile and smarter than others, etc. It gives us a chance to start worrying or stop worrying at the right time.
If you produce one of these charts every month and compare them over time, you can see the ecosystem evolve. You can see new players emerge and change color. For example, before the Facebook “places” announcement, the color and threat immediacy of Facebook on the chart above would have been different. You can assess the effect of an acquisition by a large company of one of your smaller competitors (chances are, their smartness and agility improves, but is not inherited).
That’s the basic idea. One slide that says it all.
Once again, my apologies to the companies mentioned in this post. All my conclusions are just my opinions and I am not affiliated with any of them. I just thought a real example would be better than “NEWCO” — the standard VC term.