Why Competition Is For Losers

What should you do if someone else is working on the same idea as you? I see a lot of solopreneurs and indie hackers ask that question over and over again.

The responses are usually horrible.

“Don’t worry about them, just keep building.”

“There’s enough room for both of you.”

This is a recipe for failure. We want to believe that nothing is a zero-sum game. Life is much more pleasant assuming there is enough room for everyone and your market will expand just because we decided to enter it. But that’s now how these things work.

The truth is, you need to be paying very careful attention to your competitors and your real strength in the market. If you don’t your idea will either never take off, or your profits will get stolen from under your nose from price competitions.

The key is to find yourself in a niche of one. That doesn’t mean that you don’t have any competition, but that you are uniquely different. Different in a way that adds more value to your customers and hold back competition. That’s the only way to truly protect your profits.

Here are the 2 ways to put yourself in a niche of one, and increase what Warren Buffett calls the intrinsic economic value of your business.

Counter Position Yourself

How many social media marketing agencies do you think there are?

How about online business content creators? or LinkedIn growth coaches?

The answer is a lot.

Hardly any of them are successful. And we would like to think that’s because the ones that aren’t successful aren’t working hard enough. — In other words, WE think success will come from more hard work.

They don’t wake up at 5 am and take ice baths. That’s why they’re not as popular as Sahil Bloom, or Tibo, or Andrew Gazdecki.

There are a lot of people trying to sell us that our success is a matter of personal development. And don’t get me wrong, that matters in organizations of 1 (or a few), because it’s all on us. If we don’t get work done, it doesn’t get done.

The truth is, not all businesses are created equal. Some businesses will make you way more money for way less effort. It’s the work of strategy to figure out what those easier - or “higher return” - opportunities are and take advantage of them.

This is where counter-positioning comes in. Counter positioning, like it sounds, means you are taking attributes or characteristics of your competitors and doing the opposite. It’s about making yourself different, so there is a reason for customers to choose you instead of their other options.

Last week I wrote about the positioning battle between Vrbo and Airbnb. That’s a great example of counter-positioning in action.

Summary: Vrbo owned the vacation rental market. When Airbnb came out they counter-positioned themselves by focusing on small stays and an app-focused user experience. When Airbnb took over leadership in the market Vrbo counter positioned themselves and dug into the position of focusing on renting entire homes. Throughout this war the entire market grew and so did both of their profits.

When there are very few players in your market, counter positioning can be simple. Your competitor does X so you do Y.

They're cheap? You’re expensive.

They’re red? You’re blue.

They have a zero refund policy? You do a full refund policy.

They have automated customer service? You have US agents on call 24/7.

When a market is more of a wild west environment (graphic design freelancers, content creators, to-do list softwares… and now anything AI) then counter positioning takes a different form.

There is only one way to counter-position yourself in an ocean of competitors. Any that’s to do something unique, that your competitors aren’t willing or aren’t capable of matching you on.

In this situation, it’s often better to think smaller than it is to think bigger. It’s what people mean when they say “niche down.” But what they generally leave out, is that you have to niche all the way down to the point where you are the only one doing what you do, the way you do it, for your unique audience.

It’s the process I went through before deciding that I want to teach business strategy to indie hackers and solopreneurs. Because they are the ones no one else is teaching this stuff to.

Winning The War of Attrition

There is one other way to protect your profits from your competitors. Though, it’s messier and generally more expensive.

It’s beating them in a war of attrition.

A war of attrition is a war where neither side has any particular strategic advantage or leverage. So the end result is usually whichever person has more bodies to throw at the problem wins.

You never want to fight a war of attrition as the little guy. You will nearly always lose. That said, you will likely still have to fight some.

Most businesses find themselves in a constant war of attrition, and that’s why 97% of businesses fail. It’s a losing prospect in most cases. Unless of course, you win. Then the reward is the crown. You take over the whole market.

For that reason, it’s best to avoid fighting them at all costs. But you should always be prepared to win them.

Advantages in these wars don’t come from product or market differentiation. Instead, they come from resources and efficiencies.

For example, John D. Rockefeller of Standard Oil always won the wars he fought in because he was a master at making the oil business efficient for him, and inefficient for others. He was so operationally efficient that no one could get a barrel of oil to a customer for cheaper than he did.

For that reason, he could get better, and exclusive, deals from the railroads that shipped his oil. Further widening his efficiency moat.

There are two common tactics for dramatically increasing your odds in a war of attrition.

The first is vertical integration. Buying ownership of every part of the supply chain, so it costs you much less to produce your product than your competition.

Some of the companies that have done this well are:

• Apple

• Tesla

• Standard Oil

• US Steel

The second tactic is bundling. And bundling usually comes from owning the distribution channels to your customers or prospects.

Some companies that do bundling well:

• Microsoft

• Adobe

• Intuit

• Google

For example, Microsoft launched Teams and stopped Slack’s growth dead in its tracks by giving it away to anyone who already had Microsoft Office.

Conclusion

As a solopreneur, IndieHacker, and bootstrapping entrepreneur, you’re almost always going to want to counter-position yourself instead of going to war.

The thing is, as soon as you take a position, and start to get momentum, you’ll have to defend it. This is why you should be preparing to fight wars of attrition by saving money and investing in future savings.