Hello, I'm Peter Lotz, an associate professor at the Copenhagen Business School. I'm giving three lectures on competitive analysis. I've termed the set of lectures, Everybody wants to be a Rockefeller, since John D. Rockefeller was one of the world's greatest entrepreneurs. After completing this set of lectures. You'll be able to analyze the competitive landscape of a product launch, and identify potential threats form other players in the business environment. You'll appreciate the challenges stemming from competitors, both actual and potential. In particular, you'll be able to reason over which generic strategy to choose and if the company is viable for the future. The lectures deal with the competitive situation for new products and services. I'm going to show how to analyze upfront if chances for success are good. A piece, keep in mind that there is absolutely no way of securing a success, even if you make a careful analysis along the lines that I suggest, lots of things can go wrong. In this and the following lecture, I will look at the competitive environment. In this one, I'll introduce the concept of monopoly and competition. You're going to learn what constitutes a monopoly and why a monopoly is interesting from a business perspective. In a subsequent lecture, I will provide a generic example of how to deal with competitors. And I'll explain how even suppliers and customers might bother you. In the final lecture, I'll turn to competences needed to develop the idea into a real business. Everybody wants to be a new John Rockefeller or a Bill Gates. When you hear their stories they all seem simple. They had a few ideas, not even great, and boom, they were the richest men on Earth. But even if they actually did nothing more difficult or work harder than lots of other entrepreneurs, there is no simple recipe for what they did. To get success in business requires that a long series of conditions are met. Many which are very, very difficult both to foresee and if you actually foresee them to meet, many startups therefore fail. So if we turn the coin of entrepreneurship, we realize that the flip side of the is 1,000 of incredible amount of work and money seemingly wasted. The sad side of entrepreneurship is that most product developments fail, and most new ventures never fly. Of course, a lot proportion of this failure steam from the fact that the ideas behind them which significantly immature or simply didn't work. Square wheels is not a real example but a nice illustration. Moving to modern times, a more realistic example is about electric cars. It doesn't help that you invent an electric car, if batteries aren't available. Before good batteries were developed, all electric cars failed in practice. But many inventions actually do work fine, but simply aren't as good as existing products. If you develop a mousetrap which catches only gray mice, you will have little chance of success if there's already a mousetrap which takes both gray and brown mice. So lots of new products simply aren't good enough to challenge existing products. But even if you do have a unique product, that is a product which can stand the comparison with all other available products, you are by no means sure to be successful on the market. Now, it's time to introduce the competitive landscape. To get started, I want you to match in the best possible situation for a business owner. The question is, in order to earn the most money, which competitive landscape is optimal for you? To answer this question, we assume that you have some kind of a product which actually works and somebody who would like to buy it. Whether the market for the product is small or large, is not a concern at this discussion. But I will return to this aspect in a moment. The competitive landscape includes all of those businesses which can influence your company. The list of such businesses as a minimum includes competitors, suppliers and customers. In this lecture, I will deal with competitors. In the next, I'll turn attention to the suppliers and the customers. It's pretty obvious that competitors can be a nuisance. They aim to sell to the same customers as you want to serve. So they want to steal your business and you want to steal their business. If you are charging say 10 Euros for your product, they may will under beat you. In that case you can either keep your price and wind up selling nothing. Or you can follow them and lower your price. Lower prices mean lower profits. Actually, in some situation competition can lead to solo prices that you earn so little that you might as well stop producing and leave the business. In other situations, competition is not that tough. But the ideal situation is to have no competitors, to be a monopolist who can set his prices without looking to what other companies do. Peter Thiel cofounded PayPal, the online payment system, he has phrased the idea of monopoly and competition in dramatic terms. He says, competition is for losers. This is perhaps a bit exaggerated. Most companies do survive with competitors but he has a very valid point. Competition does create losers. His own venture, PayPal, was for many years almost a monopoly since nobody had a similar product. And he and his cofounders earned millions of dollars from that venture. This look at competition brings home the most important of all messages regarding new ventures, try all you can to avoid competition. Find a product, and a set of customers, that allows you to operate without too much competition. The more shielded from competition, the better. Now, let's briefly get back to the issue of the size of the market. Many would say that the most important aspect of a new venture is to find a large market. And even better, a large and growing market. A large market is indeed wonderful, but only if competition is not lethal. Remember, a large market is running the risk of getting flypapered by profit hunting entrepreneurs. You're usually not the only one to eye a large market. That's what happened in the DOT-COM bubble at the turn of the century. Tons of people realize the huge business opportunities in the Internet. But basically they out competed each other and only very, very few succeeded. But PayPal was one of them. If possible, it's usually better to shy away from large competitive markets and instead go for a smaller but more protected market with less competition. So how do we avoid competition? In market economist, the only robust answer is to have a unique product. But what is a unique product? Is it a product that looks differently from other products? Does it need to have a special design or color? No. A unique product is a product that delivers something to the customer which other products cannot give. Obviously, PayPal did that. It provided an entirely new way of transferring money. Obviously, a new medical imaging device may provide something new by allowing doctors to see what has not been visible before. Many years ago, we saw that with the introduction of the CT, and later the MRI scanners. But least maybe enough, if the usual way of measuring the content of a certain element in the blood, for example oxygen, just to take a sample of the blood from the patient and send it all for analysis in the center lab, then a portable and non-evasive device that does exactly the same trick, certainly is in the new product. Looking at one of the cases in this course namely teaching rehab. You may raise a question of whether it deliver something which other products don't. I mean, the whole point is that the patient should be trained to regain lost functionalities. And that is done already without teaching rehab. Physiotherapists can train patients. But DigiRehab promises to provide that training at a lower cost and in a more effective way. So if that promise can be kept, DigiRehab is unique compared to current standards for rehabilitation training. But is DigiRehab also without competition from more similar products? Is it really that case the no one else has stumbled over the same idea of building a software program then instructs the patient how to train? In fact, the answer is no. There is at least one other such company in Denmark. It's called ICURA and is already on the market. So DigiRehab is not having a totally unique product. In the next lecture, I will discuss how did you rehab my deal with this situation.
