In our ebook on The 7 Deadly Sins of US Market Entry, we called out ignorance of competition as the third of the deadly sins. In this post, I will elaborate further. The sin was defined as follows:
“Most good ideas are being pursued by more than one company. In many cases there will be a US competitors who are better funded and have been in the market longer than new entrants from abroad. Companies need to understand the competitive landscape and find the right position in the market to succeed. Underestimate this challenge at your peril.”
Thousands of companies have made this mistake. And it is an easy one to make.
In a relatively small home market, you might well be the only company offering a new innovative product or service. You might have the whole market to yourself. As the sole innovator in your space, it might be easier, than in a “noisy” market, to get meetings with potential customers, get pilots and close deals.
But if you bring your company to the US, you will find that most good ideas have more than one company pursuing them. In the US, there might be several other companies doing what you are doing. They will most likely have been doing it longer since, unlike you, this is their original home market. They will almost surely be better funded, because funding rounds are bigger in the US than most other markets.
So what do you do?
First of all, figure out the “lay of the land”. What competitors are there, who are they targeting, and how far along are they. Since they are most likely privately held companies, you will not be able to get information on their revenue levels. However, you can get information on what funding round they are at and how much they have raised.
If they have raised a B round for example they are probably pretty far along on their growth path. You can get information on how much they have raised, when and from who on Crunchbase.
What do you do if you have serious competitors with lots of money? It means you need to think harder about how and where you can find market fit in the US. You will need to “niche” the market in a way that differentiates you. If you are a security company and your competitor is targeting biotech, maybe you target some other vertical with high security requirements.
Or should you avoid the US altogether? Actually, that seldom works. In most cases, a really successful, really well-funded competitor will get to your backyard sooner or later. Consider the global reach of Uber, or Netflix, or Amazon. At one time they operated only in the US.
While home-grown US companies may get to their first $100MM in revenue in the US alone, eventually they will turn to other geographies for expansion. As a company operating alone in your home market, you can run, but you can’t hide. Better to find your specialization and differentiate your company sooner rather than later.
What you don’t want to do.
The worst thing you can do is the “ostrich strategy”. Burying your head in the sand doesn’t work. It is just waiting for the inevitable to happen.
“Me too” companies will not succeed in the US market. The market is highly competitive, and not a good place for “generalists”. Your spreadsheet may say that all you need is 2% of a multi-billion dollar market to succeed, but that is not how the market works.
“Me-too” companies will struggle to gain traction and eventually get shut out and shut down. If you are “me-too” with your current strategy, you need to “niche yourself” and find a specialization where you can excel. Sooner is better than later. If you can successfully niche your market, and dominate your new subspecialty, you will create value in your company and have complementary value to companies dominating other niches.
Dominate, don’t ruminate.
Companies are often told to “think big”. In fact, this is one of the cliches of Silicon Valley life. But companies who succeed are the ones who find a space they can dominate. They are looking for 70% of a market, not 2%. It is OK if that market is initially a small one, as long as it leads to a big one. Facebook started with Harvard, then Ivy League schools, then other schools, then …
Most other successful companies followed a similar pattern. Amazon with books, Tesla with roadsters.
So when you look at your bigger, better funded competitors, think small. That will help you to eventually win big.
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