The competitive matrix is important in a business plan for several reasons.
First, it’s a great input for strategy and looking ahead. Second, it can develop and explain positioning. Third, it is one of the most obvious, strategic visuals that business plan readers expect. It is a mainstay in pitch presentations, business plans, product development, strategy, and in-marketing messaging too (think advertising). When it isn’t there, readers miss it.
Here’s a simple, practical example:
As you can see in the illustration above, the standard competitive matrix shows how different competitors stack up according to significant factors. It is a comparison of your product or service in the light of those factors of competition. It illustrates how this product or business offering stacks up, in terms of features and benefits, against its competition. Even if you don’t recognize a competitor matrix from business plans or business pitches—where it has become even more standard than the organization chart—you’ll probably remember seeing a lot of these in traditional advertising.
Standard uses of the competitive matrix
I mentioned above that the competitive matrix is now a mainstay in business plans and business pitches. I review about a hundred of these every year, most of the time along with other investors in a group, and it does seem like we expect this visual and miss it if it’s not there.
The use of these things, in fact, has made me a bit cynical. I see competitive matrices all the time in plans and pitches, and yet I’ve never seen a single one that didn’t show that this company does more of what the market wants than all others. So, maybe that tells you something about credibility and how to increase it. After all, it’s unlikely that you will do everything your competitor does.
Still, the competitive matrices I see are all in the context of seeking investment, so maybe being “the best” the nature of the game. In this context, the goal is establishing differentiators, and validating a market need, in the eyes of potential investors. The underlying point is supposed to be that “We fill a gap. We do it better”—not necessarily that “We do it all.”
As public messaging (such as in ads), this kind of information is falling out of favor for good reasons. One obvious reason is that you are using your voice to talk about your competition to people who are at the moment with you and you alone. Think of that case on a consumer good package, for example. If the potential buyer has your box in hand, do you want that person to see a list of your competitors? Another reason that this is less common is there are some legal risks to publishing information about a competitor. And a third reason is that many people question the ethics or values of a company that openly and publicly criticizes its competitors. It doesn’t always boost credibility.
Don’t, please, discount the competitive matrix as an internal tool to help with strategy development and specifics of designing products. For this use, you don’t worry about showing how what you have is better; you use it to look for holes in the market, and needs that aren’t covered, so you can lead product development toward solutions that are better business opportunities.
Often a competitive matrix is an opportunity for creative marketing, which we might also call spin, or rearranging information so it suits your business purpose. Most of the matrices I see in plans and pitches configure the categories involved to favor their underlying point. What features are the right features to track? If you had the time and inclination to do it, you could find markets in which multiple competitors each have different configurations of categories to track in their competitive matrices. It happens all the time, and, if you set your categories well enough, you can create a visual that validates your positioning without stretching or distorting the truth. It’s all in the definitions.
Where to find the competitive matrix information
With competitive information, these days it’s not a matter of finding a needle in a haystack; it’s figuring out which needles to choose from a mountain of needles. You can find an amazing wealth of information about your competitors on the web, and in mobile apps. The hard part, of course, is sorting through it and knowing what to emphasize.
I do suggest here that you stay flexible and pragmatic. Look for available information that will stand for what you want to show. For example, I might use stars in reviews, from amazon.com or Yelp, as a surrogate for quality. That would be way more practical than conducting primary research. And it’s credible to the audience.
There was once a problem finding information on smaller, privately-owned competitors, compared to the wealth of financial information available for companies traded on one of the major stock markets. Nowadays, however, websites, social media, and reviews are widely available on lots of local businesses. Not having some way to rank and evaluate competitors is usually for lack of trying, not for lack of information. Here too, beware of having too much. Spare your readers proof of how good you are at gathering information, and give them only the information they need and will use.
Don’t assume you can get financial information on companies that are privately held. Use a surrogate if you have to, like numbers of employees, rooms, tables, vehicles, or (here too) stars in reviews. If possible, you may want to take on the task of playing the role of potential customer and gain information from that perspective.
Industry associations, industry publications, media coverage, information from the financial community, and their own marketing materials and websites may be good resources to identify these factors and “rate” the performance and position of each competitor.
Place it in your plan where it achieves your business goal
Position your competitive matrix in your business plan and pitch decks wherever you think it will help you achieve your business goal.
If your plan is to serve as background information for raising angel investment, then you’ll need a pitch deck and your competitive matrix will be one slide in the deck, in the part of the presentation that you’re using to explain and develop your product, or product positioning, or marketing. Put it close to your relevant information, and be flexible, because the flow of a pitch depends on the specifics.
Within the plan itself, it could go into either the product section or the marketing section, wherever you feel it bits best. There is always potential overlap with the concept of competition, between discussion of product, and discussion of marketing strategy.
If you’re doing a lean business plan, use the competitive matrix to help with strategy development. It fits into strategy or tactics; and concrete specific actions to react to your competitive positioning could easily be milestones.