Indirect Competition

question: 

What is an indirect competition? Please provide an example?

This is a great question because it forces people to think about the real nature of competition instead of their misconceptions about it. As we say, real life competition is unlike “game” competition because the board (people’s needs) is of infinite size; new moved can be invented at any time, and your can never know exactly who your competitors really area.

Competition is just a comparison. In business, it is a comparison among all the different ways a given customer can spend his or her money. The biggest competitor is always “no sale”, not that the customer decides to buy a similar product, but that the customer decides no to buy any product in a given category. On any given day for any company, most customers decide to buy something else somewhere else. These could all be considered “indirect competitors”.

Of course, some customers are more “indirect” than others.

For someone who sells gas-powered SUVs, an electric SUV might be considered an indirect competitor, but so might gas-powered sedan. A motorcycle is more indirect. A Uber rider, less direct. But they are all competitors in a very important sense. If, in the future, everyone rides Uber or Lyft, there is no need for SUVs, sedans, or motorcycles. If people would rather pay their cell phone bills than make car payments, so the cell phone is an indirect competitor of automobiles or, more broadly, communication is an indirect competitor of transportation. Of course, if you would rather pay your cable bill than a car payment, transportation also competes with entertainment.

No matter how you defined the “pie” of your direct competitors, you thinking is too narrowly. Those focused on direct competitors are worried about how to split up the pie rather than growing the pie. Often, this is simply wrong. For example, restaurants do better in areas with other restaurants because people who eat out like options. They will flock to that area. Yes, the traffic is split among direct competitions, but a rising tide raises all boats.

In many cases, people must broaden their thinking about the market need they addressing to avoid being made irrelevant by market changes. You are also missing threats that are just over the horizon. AT&T was in the communication business, not the land-line business. But if communication competes with transportation and entertainment, what is the need you are filling?

This is why a progress-focused strategy based on advancing your position in the minds of customers is always better than a competition-focused strategy based on tearing down the positions of others.