Simon Burns at Earnin is well-versed in how to respond to competitors. Startups are competitive. That’s why people get so invigorated by them. Working long hours, fighting up against a big incumbent is what gets people going.
Competition is more than Porter’s 5 Forces or any mix of different b-school frameworks. Competition starts with strategy. Key to any strategy is a thought on what the counter-move will be. How will your competitor respond?
Taking from his time at Earnin and other startups, Simon Burns from Earnin discuss lessons on competitive strategy.
- Where Is Your Moat
Moat, or sustained competitive advantage, is widely talked about but severely under-executed on in tech circles. Why? There is often a view that incumbents are complacent and slow. Bringing in new life into an industry with young talent that can build systems that scale has a catalyzing quality. Many will extol the virtues of moving fast as a key competitive edge.
However, competitive strategy would tell you, moving fast or the strength of your management team is no moat.
So, analyze where your moat is. Do you increase switching costs because of the nature of your product? Is your brand so strong that your customers will stay out of loyalty? Do you have a proprietary demand advantage? Do you have a novel supply side advantage that will allow you to have a sustained cost advantage?
Run through the possible moats and stack rank yours.
Once you’ve completed that exercise, put together a strategy for doubling down on your moats. Defending and strengthening your moat is the key to holding your position.
- Signalling, Segmenting and Holding Onto Profitability
When things start to get competitive, a dance starts. The dance is played between competitors as to how long each player is willing to lose money to gain share. The dance is played around which player will leave a specific segment and focus on a part of the market they are most ok with owning. Or, when a player is ready to throw in the towel.
Watching your competitors signalling around which strategy they are going to take requires a keen eye. A press release is overt. A conference talk is loud. Sometimes the signal can be softer, a customer may provide the information or it may percolate in a change in marketing materials.
Keep your eyes peeled, any signal will significantly alter how you should approach the market dynamics.
- Lessons from Earnin, ROIC over Share
Competitive dynamics bring up classic business conversations about capital allocation. Should you push for more market share but see your return on invested capital plummet? Or, should you see your top line flatten, and sacrifice growth for a stronger, healthier business profile?
These questions need some careful analysis and threading the needle to get right. Work with your executive team to analyze where your moats are, what your competitors are signalling and what kind of business profile you’re looking for.
About Earnin’s Simon Burns
Simon Burns is a Product Manager at Earnin where he blogs about technology and growth. Before Earnin, Simon was in product development at real estate startup Opendoor, started, Keza, a crypto app and came out to Silicon Valley for Robinhood.