I have been wanting to write this article for some time. Often, startups or even big companies, in order to increase their revenue, decide to launch an additional product or service which competes directly with another big company’s business. This act creates a reaction that can damage the first business entirely.
When company A creates a service or product that competes with company B, it is a declaration of war, and everything will be on the table. Company B can then react by creating a service or product that competes with company A’s core business.
A great example would be the Apple vs Nokia competition. When Nokia came up with new generation phones that could play MP3s, Apple felt threatened and ended up creating the iPhone, which contributed to Nokia’s demise. Nokia, of course, could not have predicted that, and offering MP3 playing capabilities for their phones made sense. Unfortunately for them, they did not expect the reaction, were not prepared, and did not react to it fast enough. That’s how Nokia went from being the “number one phone maker” to “what does this company do”.
A couple of other examples where competition on a secondary product led to competition on the main product as well:
Amazon vs. Walmart – Amazon launched Amazon Fresh, a grocery delivery service, in 2007 to compete with traditional brick-and-mortar retailers like Walmart. In response, Walmart launched its own grocery delivery service and expanded its online presence to compete directly with Amazon’s main product, online retail.
Microsoft vs. Google – Google launched Google Docs in 2006, a cloud-based productivity suite, to compete with Microsoft’s main product, Microsoft Office. In response, Microsoft launched Bing, a search engine, in 2009 to compete with Google’s main product, Google Search.
It is sometimes better to avoid competing with the big players, especially if you have a decent market share in another business or product that can be threatened. Or, if you do end up competing, expect the reaction to affect your main business.
This is especially true for startups working on a nice product. Big players might just not notice you, or even decide to ignore you, but once you compete with one of their features, products, or services, it’s another story because now you have a target on you.