In business school, we were asked to run a quick SWOT analysis for a brand of our choice off the top of our heads. Naturally, a lot of my peers listed competitors under threats. I was the only one who put them under opportunities. “A competitive market is good for business” was the reason I gave.
I still stand by this statement.
“Wait a minute, Talha. Doesn’t a competitive market include identical products? How is that good for business?”
I know… I know. Hold on.
By “competitive market,” I’m not referring to the bookish definition of the type of market structure with a large number of buyers and producers/sellers dealing with homogeneous products—otherwise known as “perfect competition.”
No, sir. I’m referring to any industry where the competitors keep each other on their toes.
The point is: We’re so used to studying the competition in a negative light that we always neglect all the good that it does for the business.
Now, don’t get me wrong. The competition is, and always will be, out to get you.
You can’t afford to let your guard down and become complacent.
However, that doesn’t mean that you can’t stop to appreciate how your competitors inspire you to achieve the next big thing.
If you’re a marketer, an app developer, a product manager, an entrepreneur, or an all-rounder, who has been down in the dumps lately because of intense competition—keep reading.
In this article, I’m going to remind you why strong competitors play a vital role in inspiring creativity.
We’ll also discuss real-life examples of how healthy competition in different competitive industries helped propel companies forward.
Let’s dive right in.
Are Humans Competitive by Nature?
Time and time again, different studies and social experiments have proven that humans are naturally inclined towards achieving a competitive advantage.
At the very least, we do everything in our power to achieve “last place aversion.”
One such study, conducted by Ilyana Kuziemko (an economics professor at Princeton University) and her colleagues, sheds light on this nature.
Participants were involved in a “wealth distribution” experiment that ranked them according to the money they had.
Those in the second to last spot were asked if they’d share their wealth with the ones at the bottom. Most of the participants disagreed.
Surprisingly, they were willing to share it with those placed above them.
What’s the mindset here?
It’s simple: No one wants to be in last place (I know, it’s super disturbing).
How Does This Apply to Businesses in the Real World?
It can go either way.
For instance, when creating an alliance with the top competitors isn’t an option, those at the top instead join forces with those at the bottom.
Case in point: The bad blood between DiDi (a Chinese ride-hailing service) and Uber.
Over the years, Uber execs lost a lot of sleep because of this Chinese competitor.
To give Uber a tough time in the region by adding to the barriers to entry, DiDi invested millions of dollars in Ola (an Indian ride-sharing service).
At that time, Ola was a relatively new player, looking for a break.
It’s not clear if DiDi invested in Ola with the sole purpose of making things difficult for Uber, but whatever the case, I bet this was the reaction of every Uber exec when that deal was struck:
You can read all about it here.
Is Competition Healthy? [A Quick Micro-Level View]
We’ve all grown up hearing that “competition is healthy.” Honestly, at this point, it’s close to becoming a cliché.
But it’s true—whether you’re referring to sports, a friendly contest, or competitive firms struggling for market power.
In one way or the other, competition is beneficial.
Dr. Sander van der Linden, a social psychologist, studied how an Energy Conservation competition between different colleges in the United States impacted the climate.
As you’d expect, he found that energy-usage during that competition fell sharply:
via Sander van der Linden
Naturally, this is great for the environment. Imagine the positive impact if the competition became a year-round thing.
In the very same way, business competition, from both the macro and microeconomics, social, and ecological viewpoints, can be beneficial, even if it’s for the short run.
This brings us to:
Top Reasons Why a Competitive Market is Good
There are many ways businesses and their consumers can benefit by being in a competitive market.
I’m just going to land the plane:
1. It Drives Innovation
First and foremost, competition plays a major role in inspiring innovation.
And in a competitive market, innovation is the key to staying relevant.
With competitors at their feet, even the leading players have to cook something interesting up to stay on top of their games.
This is especially true if you’re in the tech industry.
However, keep in mind that innovation can also backfire. Remember when Apple removed the headphone jack from the iPhone 7?
In terms of adoption rates for the first two weeks, the new model didn’t perform as well as its predecessor, iPhone 6, as shown in this chart (Note: these figures are mere estimates):
That being said, innovation doesn’t necessarily have to be in terms of a new product or a service.
You can also be innovative with your marketing, distribution, employee engagement, and expansion strategies.
2. It Paves Way for Improvements
An innovative mindset ultimately leads to improved products and services.
Today, consumers are making better-informed decisions thanks to content marketing and online reviews.
Both people and businesses conduct their fair share of research before purchasing anything.
In fact, according to one source, about 72% of consumers won’t make a buying decision before reading reviews.
In light of the above, in a competitive market with a lot of substitutes, businesses have to consistently work on improving themselves—whether through new product ideas, improved customer service, building brand affinity, or whatever else it takes.
Simply put—they can’t afford to become complacent.
3. The Consumers Also Benefit
A highly competitive market creates a win-win situation for everyone.
For starters, when there’s low or no competition, a business can charge higher prices. In extreme cases, a single firm can even control both the market demand curves and the market supply curves.
On the other hand, when there are competitors to deal with (and no individual firm controls the market), companies are usually fair with their market prices (and essentially become price takers).
And of course, there’s that thing about consistent product improvements that we just discussed above.
4. Competition Fosters Differentiation
Last, but not least, competition inspires us to create a brand for ourselves.
After all, in a sea of competitors, it’s important to differentiate yourself and stand out from the crowd.
A business that doesn’t focus on building a brand and/or carving out a niche for itself risks becoming irrelevant or “just another fish in the pond.”
via Garlic Media Group
A Few Examples of Positive Business Competition
I could list a hundred reasons why having competitors is important.
However, to truly understand what it means, there’s no better way than to look at actual examples from the real world.
For that reason, I’ll detail three cases (all from completely different industries) to get the point across:
1. Apple vs. Samsung
From an economic point-of-view, the smartphone industry is usually considered an oligopoly (i.e. a market with a few large players).
This might not be technically correct, but with so many manufacturers and variations in smartphone models, one could argue that this market has taken the shape of a monopolistic competition (i.e. similar products that aren’t perfect substitutes of one another).
Without trying to sound like a smartass and dropping economic jargon-bombs, I’d like to jump straight to the point—the legendary rivalry between Apple and Samsung.
With a long history of patent lawsuits and bad blood, these titans have been at each other’s throats since, well, forever.
Both companies had one goal – to dominate the global smartphone market.
It all started when Samsung launched its Galaxy S phone—the first of the glorious series – to compete against Apple’s iPhone.
From that point, it was nothing but progress for the two companies.
To provide a glimpse, here’s a chart demonstrating the global smartphone shipments made by Samsung over the years:
Apart from data on total revenue and opportunity costs, it’s safe to say that the progress in terms of innovation has been phenomenal.
To get an idea of how far we’ve come, just compare the first iPhone with the current model.
And while neither brand would openly admit this—these companies, in one way or the other, have made each other better over the years.
2. SpaceX vs. Blue Origin
Back in December 2015, Elon Musk and the rest of the gang at SpaceX were successful at soft-landing the rocket booster of Falcon-9.
This was a historical achievement.
Since the total cost to build an orbital rocket launcher from scratch is astronomical (pun intended), SpaceX came one step closer to lowering production costs and cutting budgets for space missions.
However, contrary to popular belief, SpaceX wasn’t the only player in a not-so-free market of reusable rockets at that time.
Blue Origin, an aerospace giant owned by Amazon’s Jeff Bezos and with a focus on space tourism, landed their “New Shepard” suborbital rocket in November of the same year (almost a month earlier than SpaceX).
It’s important to note that both companies had (or still have) different goals.
SpaceX’s ultimate goal is space colonization, whereas Blue Origin wants to establish an industry for space tourism. However, the fact that both companies achieved soft-landings back-to-back isn’t a coincidence.
While the media often mentions the two together, both Bezos and Musk have said that there’s no comparison between their achievements. Naturally, Elon was a little cheeky with his responses, reminding everyone the difference between “space” and “orbit”:
Was there any competition to begin with? It’s hard to say.
However, there has been bad blood between the aerospace giants since SpaceX won the right to lease LC-39A (a launching platform) back in 2013 and Blue Origin challenged the decision.
Whatever the case, the billionaire space race has certainly shifted the gears of space exploration and research.
In the end, science wins.
3. NerdWallet vs. Everyone Else
NerdWallet started out back in 2009 as a website that offered credit card comparisons.
Its founder, Tim Chen, came up with the idea when he realized that there weren’t any platforms or sufficient content that allowed people to compare credit card options.
The rest is history.
However, to keep up with the competition, such as Credit Karma, Mint, and Credit Sesame, NerdWallet had to evolve into a source for full-fledged personal finance.
Today, the company has an extensive ocean of content, including reviews on:
- Credit cards
- Investment opportunities
- Insurance companies
On top of that, the platform also offers useful tools and actionable advice.
Over the years, the company went from an $800 venture to one of the most reliable names in the sphere of personal finance.
And competition played a vital role.
The Imitation Game: Why and How Businesses Copy Each Other
You come up with an awesome product, an unorthodox SEO strategy, or something else that’s truly innovative.
The execution goes well. The KPIs are a hit. A bottle of champagne is popped. Everything is going well.
But after a few months, one of your competitors cooks up something similar, and before you know it, they’re celebrating the same level of success as yours.
Imitation is the sincerest form of flattery.
But in business, it makes you want to punch someone, compose a rage-filled tweet, and ring your lawyer.
The fear of being copied is one of the major reasons why many people consider competition as inherently evil.
In every industry, from SaaS to marketing, there’s one thing they all have in common: The competitors copy each other at one point or another (even if they refuse to admit it).
Corporate espionage is a thing. Companies actually pay to spy on their competitors.
As scary as it sounds, that’s just how the world works.
To cope with this game of spy vs. spy, major companies have formal procedures and security measures in place to prevent vital information from leaking out. That’s why patents and non-disclosure agreements exist in the first place.
But how can someone copy another person’s authentic idea and sleep at night?
When creativity runs out and innovation isn’t an option, all that’s left to do is to look for some inspiration.
Unless you’re a new firm that wants to disrupt the game, when you can’t innovate, you have to copy. That’s the only way to stay relevant.
Let me make it clear that I’m, in no way, endorsing unethical business practices here.
All I’m trying to say is that people (including companies) can use each other for inspiration. And it’s not necessarily wrong.
The Philosophical View
Taking inspiration, or even copying, for that matter, is a natural trait.
Humans have been doing this forever.
Plato’s “Theory of Mimesis” sheds light on this matter. It states that every form of art is mimetic by nature. Or in other words, art is inspired by an “idea” that Plato called the ultimate reality. And according to him, this idea is life itself.
If you think about it, some businesses behave in a similar fashion.
Every once in a while, a venture comes up with something truly innovative. From Plato’s viewpoint, you could consider this as the “ultimate idea” that other players could use to drive innovation and get a piece of that market share.
This doesn’t have to be the actual idea – humans tend to copy each others’ goals as well (as explained by Rene Girard’s concept of “mimetic desire”). And when two parties share a desire, there’s bound to be some competition. The following diagram of a “mimetic triangle” explains this concept:
via Damien Richard
For businesses, these desires, at the most basic level, are economic profit and profit maximization.
Coming back to the original theory, let’s use Uber as an example. They were one of the first to come up with the concept of a peer-to-peer ride-hailing service.
Before we knew it, Lyft came forward with the same core concept, but with a unique take—carpooling (a company known as “Sidecar” came up with that idea first, but let’s ignore that for now).
Instead of blatantly mirroring what Uber was doing, they used their idea as a core foundation and built something similar, yet different.
The ultimate lesson here is that copying is bad, but there’s nothing inherently wrong with taking inspiration from your competitors.
Don’t Worry About Copycats—Focus On What Matters
Let’s get one thing straight: There will always be people who’ll try to copy your thoughts.
But, can you REALLY stop them from taking a page or two from your book?
Of course not. So, stop losing sleep over it.
Instead, focus on:
- Creating a Culture of Innovation – if you’re an employer in a competitive market, creating a company culture based on innovation should be one of your top priorities. How do you do that? By surrounding yourself with creative individuals and problem-solvers and crafting an environment where your people can dream bigger.
- Listening to Your Prospects – instead of worrying about what your competitors are up to, try expending those efforts towards listening to your target customers for a change. Gather their feedback and use it to drive improvements.
- Being the Superior Alternative – focus on the little things that matter (such as working on on-page SEO elements, improving your community management on social media, etc.), finding out rooms for improvements in your overall processes/policies, and offering better customer service.
At the same time, you can’t just let any old loser come along and steal your original ideas.
If you’re a manufacturer, protect your innovations with patents.
Furthermore, don’t hesitate from practicing your legal right by using non-disclosure agreements.
Here’s to All the Competitors Who Keep Us Moving Forward!
Hate em’ or love em’, you can’t live without em’.
With the right attitude, a competitive market can inspire us to become the best versions of ourselves.
In the end, isn’t it all about achieving the broader vision—to help your target audience and add value to the world?
Don’t let petty rivalries stand in the way of progress.
When the going gets tough, always remember why you started your business in the first place.