One of your main responsibilities as a product manager is to out-do your competitors. Out-doing your competitors requires you to be ahead of the curve in your thinking and predict what your competitors will do next. One way of doing this is by evaluating your competitors along the following five dimensions:

• Engineering ability
• Number of users
• Design
• Brand
• Speed

This article will discuss each of these five dimensions and give you context to better evaluate your competitors.

Engineering Ability

The first step in evaluating your competitors’ engineering ability is to objectively evaluate the abilities of the engineering and product teams. This is important because of the outsized impact that truly great engineers can have — Instagram, a company with an engineering team consisting of eight individuals at the time, sold to Facebook for $1 billion and in the recent past has been prolific at churning out facsimiles of Snapchat’s features.

A better engineering team means that the competitor can out-execute you, out-engineer you, and out-produce you. Conversely, if your engineering team is better, you may want to wade into battles that can be won on engineering prowess and quality. Therefore, evaluating your competitors’ engineering ability is key to product strategy.

Number of Users

While number of users may sound like a trite metric, it is essential to product strategy. There are numerous advantages to having a larger user base:

• Increased potential to dominate the market: There are three main mechanisms at play here:
• Power of default: Apple Music has benefited enormously from the massive iOS user base and hence its position within the ecosystem as the default streaming option; Similarly, Apple Maps has more users on iOS than Google Maps despite being a less accurate product since it’s the default maps app on iOS.
• Network effects: Especially true for social networks, where each additional user makes the entire network more valuable for everyone.
• Economies of scale: There are decreasing marginal cost of serving an extra customer or producing an extra unit of your product. Thus companies drive huge efficiency gains as their user bases grow.
• Easer to obtain press coverage: a greater number of users increases the overall impact of every new product or feature. Since each of these additions has greater impact, they consequently receive greater press coverage.
• More leverage in negotiations: The greater number of users can result in increased leverage while negotiating with potential partners.

Remember, small user bases, too, can be leveraged strategically: it’s important for larger entities to keep tabs on smaller competitors to better track novel approaches being implemented to enter the market. For instance, one of the primary reasons that music labels initially partnered with Apple to launch the iTunes store was that the changes would impact, at most, 5% of the personal computer users since iTunes was exclusively available on the Mac at the time.

Design

Be aware of your competitors’ ability to develop well-thought-out products or those that are aesthetically pleasing. Customers tend to be more inclined to use products that are easy-to-use or pretty. When thinking about entering a space that is dominated by a company that prides itself on and derives market power from its ability to churn out well-designed and easy-to-use products (think Miele, Apple, Nike, Bang & Olufsen etc.) make sure that your products are at least as user-friendly and aesthetically pleasing as the competition. If not, it is a good idea to rethink your core customer-base to incorporate users who do not place such a premium on design, or improve your product’s capabilities in other areas that may be more important to the end-customer.

Brand

Perceptions that people have of you and the products you sell can have a huge impact on the future. For instance, Facebook has a reputation for collecting user-data, aggregating it, and selling targeted-ads to advertisers which opens the door for a competitor such as Snapchat to tout its privacy features and aversion to data-collection as a means to both attract users and launch features such as Snap Maps. Thus, it’s essential for every product manager to be aware of the relative positioning of their brand with respect to their competitors’, specifically as it pertains to new products or features.

Strong brands can charge higher prices since they have a higher level of customer loyalty (the iPhone X is almost twice as expensive as Google’s flagship phone) and get the benefit-of-doubt when they make mistakes — think Apple’s iPhone 4 Antennagate.

Speed

When your competitor decides to work on a new product or feature, how long does it take them to ship the project they’re working on? As companies scale, so does the internal bureaucracy, which has the effect of slowing them down in terms of their ability to go from idea to a product in the market. On the other hand, smaller teams tend to be more focused and agile.

Having an answer to this question, for both your team and your competitors’, is instrumental to determining which projects to invest resources in especially when the success of the project is directly tied to the time at which it ships.

Conclusion

There are five dimensions along which product managers most often evaluate their competitors — engineering ability, number of users, design, brand, and speed. It is essential to get an understanding of your competitors’ ability across each of these dimensions to better understand the competitive landscape and consequently allocate resources to the appropriate projects.