From the course: Becoming a Product Manager: A Complete Guide

The five criteria for understanding competitors

From the course: Becoming a Product Manager: A Complete Guide

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The five criteria for understanding competitors

- Hey, guys, welcome back to the course. All right, so this far in the section, we figured out how to find competitors, how to compare them to ourselves, how to compare potential features and potential products we're thinking of to our competition. But now we need to talk a little more broadly about as a product manager and as an entrepreneur, what in general do you have to keep tabs on with your competitors? Some I'ma introduce five separate criteria that are crucial for you as a product manager or entrepreneur to understand about your competitors. Now, a large part of what makes you successful as a product manager is your ability to keep tabs on your competitors and make sure that you are ahead of the curve and know what exactly they're going to do. One way of thinking about it (laughs) is that it's kind of like a horse race. And especially if you're working on a team that has an established product, you're going to be constantly jockeying with your competitors for users, features, press, funding, amongst a number of different things. And in order to be successful in this jockeying game, you can't just keep tabs on them. You have to have a deeper sense of what they can do. So let's talk about five different dimensions that are absolutely crucial to understand about your competitors. And the first one we're going to talk about is called the product core. Now, that's a little confusing. But what I mean by product core is product team. I'm talking about whoever on your competitor's side is in charge of making their product. If it's a physical product, it's going to be the physical engineers that are building it. And if it's a, let's say, web application, it's going to be the developers. And the question we want to answer here is how good is our competitor's product team? Mark Zuckerberg, the founder of Facebook, made a very (laughs) notorious public statement when he said that any day he would take one great engineer over a hundred average engineers. Now, that's obviously kind of counter intuitive, right? You would assume more people can do more, so what exactly does he mean here? Well, what he means is that especially in web development or development of applications, having a great engineer actually can do a lot more for you than a lot of people that can get low level work done. Top-notch engineers in general can outperform larger groups of good engineers. Instagram is a great example. Instagram, when it was bought by Facebook for $1 billion dollars, you would think was a huge company. No, actually, they only had 13 employees. I believe only eight of them were product engineers. So know how good their product core is. Make strides and make attempts to figure out that question. Now, why does this matter to you? Well, if your competitor has, let's say, a better product team, that means in general they can out-execute you. They can out-engineer you, and they can outproduce you. So if you're in a situation where you have a team that's not as good as your competitor's, you need to take that into consideration and probably not wade into features or wade into product categories where one of the key differentiators (laughs) or the key components of it is the engineering quality. Of course, if on the flip side, if you have a better product core, it's the exact opposite. You can wade into areas that rely heavily on the quality of engineering. And if you do that, that's something that your competitors will have a hard time catching up to and imitating. The second criteria we need to use when considering our competitors is to know the size of their user base. Now, why does it matter how big your competitor's user base is or how big their customer base is, in the case of more traditional businesses? It's kind of counter intuitive. Right? And immediately, it's hard to figure out what that would matter, right? 'Cause if you had a large user base, that doesn't necessarily mean you can build better products faster. Well, actually, this is a pretty important one. Companies or competitors that have large user bases have certain advantages that companies with small user bases don't have. Oftentimes, when a company has a large user base, any time they launch a new feature or launch into a new market, they have the potential to essentially dominate the market just by virtue of how many people they bring into it. They also have an easier time getting press. In general, press and press coverage is going to be more inclined to cover companies that are larger and more well-known. Another advantage is that a large user base will allow you to strike deals with other companies more easily. Much easier to negotiate when you say, I'm bringing x amount of users to the table. I'm the largest company in town. And the last thing is that size often is an advantage intrinsically. Think about social products, right? A social network is only as valuable as however many people are in it, so the larger one is inherently going to have a better product. Now, here's a classic example, and it's Apple Music. I don't know if you've heard this, but Apple's launching into the music space, specifically the subscription music space. And they're going to compete with Spotify and SoundCloud. Sorry, Cole. Now, can Apple make a better music player? We don't really know. And are they at a disadvantage because they're coming late to the market? Actually, none of that matters because their user size is so large. Consider this, Spotify and SoundCloud have something around 30 million combined paying users. Now, think about Apple. How many users do they have? It's actually one billion. So even if Apple comes into that space, converts 1% of their market into their Apple music product, they are serious competitor. All right, guys, take a sec to think about those, and I'll catch you in the next lecture, where we cover the next three, see you then.

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