How do you compare to the competition
Selling software development services sometimes feels like you are competing with everyone else on the planet.
Theoretically, any customer can choose to work with any supplier in the world, whether they are a multi-billion dollar multinational corporation or three guys working in an apartment in some country you didn’t know existed.
But this is the lazy way of thinking about competition.
How many direct competitors do you actually have?
If you try to understand your target customers, a good starting point is to document what they are looking for and what they actually need. Most of the time, these are different things. What you are likely to find is that the optimum collaboration structure from the customers’ perspective varies a lot between them.
Next, you can try to clarify the value you are providing and why anyone should choose to work with you.
If you do this, you might realise that actually you don’t have that many competitors. At least, not in the sense that people usually think about this topic.
But I stand by this: in many cases, your main competitor is not your competition.
Let me demonstrate this point.
I will use a tool: the Value Creation Scorecard. Leaner versions of this have been used by various companies since the 1990’s. I have adapted them and developed a version for B2B Software Companies.
It can be used in many ways: one of them is positioning against the competition.
To determine your competitive position, first you need to answer two questions:
- What problems are you solving for your customers?
- How are you solving their problems (what is your offering)?
There are many ways to describe all your services, benefits and “features”.
To keep it simple, let’s say that your services page on the website talks about:
- Programming Languages and Frameworks
- Level of technical expertise
- Project Management Capabilities
- Quality Control Processes
- Delivering on time
- Communication Skills
- Types of Contracts
How can you measure objective quality delivered?
If we want to be able to objectively compare you with other providers, we need to go deeper and define some different levels of quality.
For programming languages, this could look like this:
|Programming Languages and Frameworks
|Anything the client requests
|Choose the best tool for the job from a long list
|Choose from a limited list
|Only 1-2 options for each area (back-end, front-end, etc.)
|Specialised in 1 stack only
We can read this in many ways.
At first, it might seem that for a client, the more choices they have, the happier they will be. But since we all know how software development works, it’s actually the other way around. In most cases, it’s in the client’s interest to work with a supplier that has at least some experience and some degree of specialization with the programming language or framework being used in their project.
So this scale, from a Customer Value perspective, is actually a Minimum to Maximum Value scale.
In general, a client will get a higher quality work from a supplier positioned on the right end of the scale than from a supplier that is somewhere on the left side.
When you are comparing yourself with the competition, it’s important to know where everyone sits on this scale.
Next, let’s see how this looks for the Level of Technical Expertise:
|Level of technical expertise
|Have done 1-2 projects in the past
|Have done multiple projects, with different levels of quality and demands
|Innovator, capable of doing R&D level of work with given technology
Here it should be more obvious that it’s a Minimum to Maximum scale, from the customer’s perspective.
Once you have described the services you provide to this level of detail, you can easily do a comparison with some of the companies you consider to be your competitors.
I am sure you will not be surprised to hear that to fully describe a company’s offering, these 7 criteria are not enough.
Depending on your context and what you are offering, the list can have anywhere between 30 and 50 attributes, each of them with five levels of quality, from minimum to maximum.
Doing this exercise always proves useful, because it focuses the mind and can show rather quickly the gaps in the offering compared to the competition.
It highlights the strong points that could be used in the sales process and negotiations. But it also brings to light the areas that might need improvements in terms of quality.
The deeper you dig, the more granular your understanding of the customer’s needs becomes.
WHAT this means for you
The better you understand your customer, the shorter the list of direct competitors becomes, as each potential supplier will have a different combination of attributes and levels that describes their offering.
The customer is only one, so the combination of attributes of what they need and what they are looking for can be described in a narrow interval of quality levels.
And that’s the opportunity: the closer you are with your offering to that narrow interval, the higher the chances of you getting the contract, regardless of who else is competing with you.