Competitive analysis is the work of reading who else serves the chosen segment and how much room they leave, and it turns a segment into a position.
Michael Porter published the five forces in Harvard Business Review in 1979 to explain why some industries stay more profitable than others for decades at a time. The frame carries over to a single product with one adjustment worth stating plainly. Porter was asking what an industry can earn, and a product manager is asking what this product will be allowed to keep.
That difference decides what belongs on the slide. A competitor slide usually names three rivals and compares features, while the forces that actually take the value away are not on it at all. Four customers carrying most of the revenue, a platform that can change its terms at short notice and a buyer who decides a spreadsheet will do for another year all cost the product more than any named rival does.
The sections below take the five forces as a product team meets them. They then name the two competitors most analyses leave out and give a way of running the exercise in an afternoon. Finally they set out what the output has to be able to settle.
The five forces as a product team meets them
Only the centre box holds the competitors a product team names without being asked. The other four decide how much of the value the product creates it gets to keep, and they are where the surprises come from.
Rivalry is the one everybody already tracks. It rises when several players offer something similar, when the market has stopped growing quickly and when high fixed costs push everyone to buy volume with discounts.
New entrants matter in proportion to how cheap entry has become. If a credible product now takes two engineers and a weekend of integration work, today's comfortable position is a temporary one.
Substitutes are the ways a buyer solves the problem without buying anything in this category. Those are a spreadsheet, an agency or a process somebody has learned to tolerate.
Buyer power rises when a few large customers account for most of the revenue, when switching costs are low and when the product is easy to compare on a single axis such as price.
Supplier power rises when a critical input has one credible provider. For software products that input is usually a platform, a payment network, an app store or a model provider, and the terms can change without notice.
| Force | What raises it |
|---|---|
| Rivalry | Many similar players, slow growth, high fixed costs |
| New entrants | Low capital requirement, no regulatory barrier, cheap distribution |
| Substitutes | A workaround that is good enough, an adjacent product expanding sideways |
| Buyer power | Few large buyers, low switching costs, easy comparison |
| Supplier power | One credible provider of a critical input, high cost to change it |
The two competitors most analyses leave out
Doing nothing. In most business markets the outcome that beats every vendor is the buyer deciding that the problem is survivable for another year, that the budget is better spent elsewhere and that the evaluation can wait. This competitor never appears on a slide, it has no sales team and it wins more evaluations than any named rival. Its strength can also be measured, through the proportion of qualified opportunities that close as no decision.
The team that builds it internally. Every product sold to an engineering led organisation competes with three of that organisation's own engineers and a quarter of roadmap. This competitor undercounts its own costs by a wide margin. It still wins often, because it answers to the same budget holder the product is trying to sell to.
Running the analysis in an afternoon
The exercise turns into a research project when somebody tries to be complete, so it helps to set limits before starting. The output is one page. Each force is rated high, medium or low, and each rating carries one line of evidence with a named source or a named customer behind it. Anything with no evidence gets marked as an open question and goes to the assumptions list.
The output then gets a date on it and a trigger for the next review. The triggers are a competitor raising money, a platform changing its terms or a large customer consolidating its buying. Those are the events that move a force, and a calendar reminder in six months is a poor substitute for watching for them.
What the output has to settle
A competitive analysis has failed when the artefact it produces is a feature grid. A feature grid answers a question buyers rarely ask. The output that earns the afternoon is a statement of where the product can hold ground and what it would take to push it off. One example is a finding that the strongest force is buyer power, because four customers carry sixty per cent of revenue and the product is bought on price.
Reading the field says where the room is. It says nothing about what would let this particular organisation hold that room, which is a question about the organisation and no longer about the market.