Key takeaways
- While it is important not to underestimate your competitors, you also should not consider them perfect.
- Industry leaders often maintain their position due to certain core factors and their other initiatives can be flawed, do not assume everything they do is right.
- Simply because a competitor decided to pass on an apparent opportunity does not mean they made the correct decision, they may have misjudged the opportunity and left an opening for you.
Maybe your competitors are not that smart after all
I have repeatedly said and written to not underestimate your competition (most recently here), but experience has shown me that you also should not overestimate them.
Success does not equal omniscience
One mistake we often make is to think industry leaders are perfect. Several years ago I worked for a top-5 social game company (okay it was Playdom as most of you have access to LinkedIn). We were very envious of the leading game company at that time, Zynga. Everything they seemed to do, from new products to new features to marketing, worked. Almost always when we identified an initiative at Zynga it inspired a similar initiative. In fact, when I wanted to pursue something, I found it was best to wait for Zynga to try it and I could then easily get internal support (conversely, if Zynga was not doing it, it was usually a non-starter).
Fast forward a few years and Zynga acquired Spooky Cool Labs, where I was Chief Growth Officer. Although the bloom was off the rose at that point, I did have a chance to speak with some Zynga veterans who were there when I was at Playdom. What I learned was that many of the initiatives that “inspired” us were considered disappointments at Zynga. There were several key drivers for their success but not everything worked well, or even worked at all. Sometimes the success factors overshadowed the failures and other times they did not even initially realize the initiatives were net-negatives.
While I have had the fortune to work at both the hunter and the hunted, I have also seen many companies over-estimate the market leaders in various industries. Most automakers copied GM until they saw that GM was on the verge of bankruptcy. Foreign airlines copied US ones’ yield management pricing until the US airlines needed government aid. The list is almost endless of industry leaders leading the competition off a cliff.
Don’t assume they know more
A recent experience highlighted another mistake of over-estimating the competition. A few weeks ago we launched a new feature in one of our products. The offering was not unique; it was largely common sense for any social casino. We actually knew that our two largest competitors had considered the feature and it would have been quite easy for them to implement.
Although our feature was not a huge effort, we delayed it and spent a great deal of time looking at possible downside because our competitors had not tried it earlier. We believed they clearly knew the market and obviously wanted to optimize revenue. Finally, we decided that we might as well try it, it seemed like to good an opportunity to pass on.
When we launched the feature, we saw a 21 percent increase in revenue (through an AB test). The uplift has settled in the 10-15 percent category but given the limited effort we consider it one of our greatest successes of the year.
We still do not understand why our competitors have never launched a comparable feature (even after talking to a person who worked on a comparable feature at one that was never launched). More importantly, we now know we should not place too much credence in a competitor’s decision not to try something (feature, new product, etc). We are still conscious if a competitor scales back something they have launched as that decision is probably based on the traction that they have witnessed but we are also conscious that they are no more omniscient than we are.
Moving forward
While it is never good to underestimate your competitors – they have many smart people trying hard to succeed – you also should not assume they are perfect. Even the most successful are probably doing some things wrong, and their success may cover up the mistakes. And while they have also looked at the market and talked to customer, they do not always come to the right conclusions on the best way to move forward. It’s why competition always leads to better products and companies. Look at the competition, but also make decisions on all the information you have available.
The Business of Social Games and Casino 
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