By Itay Sagie
You may find yourself doing this before writing an investor deck: Saying to yourself “here we go again” as you dig your old competitive analysis chart out of the archives, throw some new logos in there, put your new logo on the top right corner of your made-up axis, and move on.
It’s time to break away from this flawed approach, which does you no favors as an entrepreneur, and embrace the power of quantitative benchmarking to gain a true competitive advantage.
Why move from qualitative and focus on quantitative benchmarking? Let’s delve into three critical pain points that you, as an entrepreneur, might face when conducting competitive analysis and benchmarking.
1. Overcoming bias
One of the primary pain points in competitive analysis is the inherent bias that arises when entrepreneurs use qualitative diagrams.
This method often allows them to manipulate axis titles and criteria, making it easy to position their offering as superior. For instance, placing a potato in the top right corner compared to an AI-enabled drone becomes misleading when the axis titles are carefully chosen. You could add “biodegradability” as an axis and the drone would rank as a failure compared with the potato. Or “affordability” and again the potato would come on top. To tackle this bias, embrace quantitative benchmarking. This approach forces you to measure tangible factors — such as speed, accuracy, capacity and more — eliminating room for manipulation and creating a level playing field worthy of discussion and attention.
2. Real-world relevance
Entrepreneurs frequently make the mistake of assuming their product or service is the best without empirical evidence. The real world is unforgiving, and future customers will undoubtedly subject your offering to rigorous testing.
To ensure you are up to the challenge, quantitative benchmarking is essential. By conducting experiments and measuring your performance against competitors, you not only understand your strengths and weaknesses but also how you stack up in the eyes of potential customers. This approach aligns your strategy with reality and equips you to make the necessary improvements to outshine your competitors.
3. Investor and acquirer appeal
Venture capitalists and potential acquirers are keen to invest in and acquire businesses that have a clear understanding of their competitive landscape.
Qualitative diagrams with logos in strategic positions are unlikely to impress discerning investors.
On the contrary, quantitative benchmarking tells a compelling story. It showcases that you’ve put your product or service through rigorous testing, revealing your commitment to excellence. It resonates better with VCs and future acquirers, increasing your chances of securing investment or acquisition offers.
Itay Sagie, a guest contributor to Crunchbase News, is a seasoned lecturer and strategic adviser to startups and investors, specializing in strategy, growth and M&A. You can connect with him on LinkedIn for further insights and discussions.
Illustration: Li-Anne Dias
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