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Competitive analysis is a crucial exercise for any business. It yields priceless insights that help companies position themselves, it identifies gaps that offer new opportunities for growth, and it helps companies formulate an effective business strategy. As important as it is, however, companies regularly forget one very important competitor that is likely stealing their business. This isn’t a company, per se, but it is just as dangerous.
What is this mysterious competitive force, and how can you prevent it from messing up your plans?
Using a term borrowed from hand-rolled cigarettes (tobacco or other), the competitive danger we’re talking about is called “roll-your-own”. This is the situation where the customer, rather than buying your product or service, creates their own makeshift solution. The appeal and/or internal desire that the customer has for building their own solution – and the resistance to change if one is already in place – is the “competition.”
The customer weighs the resource cost of their in-house proprietary solution against the monetary costs and benefits of your product. This is why it’s important to consider this competitor in your competitive analysis. What might a customer do that’s a roll-your-own solution?
- Audio processing libraries
- Sales automation tools
- Software build processes
- Graphics/UI libraries
- Customer management
- User dialogs
- Internationalization support
- Web content management systems
- Unit testing frameworks
- Debugging tools
- Internal data sharing
Hopefully, you get the idea. Roll-your-own software can be something that’s built into the products a company sells, it can be something that’s used during software development, or it can be a tool that’s used to support a company’s business such as sales, marketing, or internal comms.
Is it really a competitor?
It might seem highly impractical or nearly impossible for a customer to create their own version of your product or service. In many cases it is, and that’s why this approach is often ignored in competitive analysis. The effort in planning, building, testing, and maintaining a product can be monumental. Who’s going to bother doing this?
There are a few reasons why this can be a more serious competitor than it might appear at first glance.
- It doesn’t need to be complete. A roll-your-own product doesn’t need to do everything your product does. It needs to do precisely what the customer requires, which is usually a substantially smaller subset of features – and significantly less work to build – than what your full product offers.
- It can be assembled from open source. Sometimes, your product will have open-source competition, and those products should be considered competitive offerings in your SWOT. However, even if your product doesn’t have a direct or complete open-source competitor, there may be several open-source projects that can be cobbled together to fulfill the customer’s need. In this case, your customer is contributing customizations, glue code, scripts, and other elements to adapt those open-source solutions to their requirements.
- It can come from an acquisition. Sometimes a large customer can acquire a smaller company that has a similar product. It may be that their product is nowhere near the functionality of yours and wouldn’t be a competitor you’d take seriously. However, it may be enough to fit the bill. The customer may decide to invest in improving or tailoring that product to fit their requirements.
- It can start as an R&D experiment. Sometimes companies create small laboratory experiments that pick-up steam and get brought to prominence once it’s discovered that they’ve been integrated into internal products or processes. They may be a developer-invented solution as a short-term alternative to spending money (something most engineering teams don’t have easy access to). Or perhaps, engineering or IT hasn’t found a commercial alternative, so they’ve built their own. Either way, a solution for the short-term problem was invented in-house and has taken on a life of its own.
- It can be a business-opportunity. If the customer is big enough (or ambitious enough), they may see their home-grown product as the start of something bigger – a way to get into a new market. This happens rarely, but it can happen that a customer sees an opportunity for developing a new business line. In that case, they would rather pour their experience into fine-tuning their product rather than helping you refine yours.
It’s a software problem – mostly
All of the examples we’ve discussed so far are within software because this is where roll-your-own is the biggest challenge. However, there can be cases where hardware solutions have roll-your-own competitors.
Hardware products that occupy the middle part of the supply chain are not a commodity nor are they a specialty. These will rarely face pressure from roll-your-own forces. A product like this is hard enough to build but not so expensive that a company would bother trying to build it themselves.
However, hardware products that are commodities (or “interchangeable” goods) may have home-grown versions that are assembled from low-cost off-the-shelf options. This includes things like servers, routers, or other infrastructure components. When a company is extremely budget sensitive, roll-your-own can be the least expensive option around. While there is certainly differentiation here between your product and the hand-built alternatives (in things like mean time between failures or power consumed), it can be hard to convince the customer they should care.
On the opposite end of the commodity spectrum, some highly complex and highly expensive hardware products might have roll-your-own threats, like LIDAR, vision systems, or other advanced automotive tech. These products are highly differentiated and expensive enough that they can fuel a company’s desire to start a new business line through acquisitions or R&D.
Don’t insult or degrade your customer’s in-house solution, even if it is truly terrible.
How to combat roll-your-own
In most cases, customers aren’t going to build their own alternatives to your product. But if they are considering it, or already have something in place, how do you address it? There are five common angles that I suggest looking at. Discussing some of these might get your customers to start nodding their heads in agreement. (If you’ve used other methods successfully, let us know and we’ll share them.)
- Planning – A roll-your-own project needs to be sustained. That means it can eat up valuable time and effort in trying to keep it up to date with other tool chains or development projects. Sometimes it becomes its own project within the organization at the same level as official products or customer work, which uses up resources. Other times, it is planned haphazardly and becomes an anchor within the company’s planning process.
A commercial alternative will have a clearly planned timeline without effort on the customer’s part. It also often can be something that customers have input into.
- Development – Of course, any home-grown solutions will need development work. Often, the customer doesn’t see this, because the time spent on the in-house solution may already be a sunk cost that occurred much earlier in the company’s history. However, the development effort required to keep building out the product features is usually still ongoing between “real” work, even if it’s not officially counted as such.
However, the development for a commercial product is something the customer never has to worry about. It continues even when their own engineering staff are working on other projects in the pipeline.
- Maintenance – Keeping a roll-your-own solution maintained can be one of the biggest drawbacks. If it interfaces with other tools, when those tools change, it either traps the development staff on older, non-maintained tools, or it forces the organization to refocus on upgrading their in-house solution. Not to mention fixing bugs in roll-your-own tools is time that could be better spent elsewhere.
Compare this to a bought product, which has an entire team of people dedicated to supporting, maintaining, and fixing bugs that the customer doesn’t have worry about.
- Completeness – Rarely does a roll-your-own solution have the full feature set of commercial alternatives, and that lack of sophistication may not be necessary to solve the problem at hand.
However, by replacing the roll-your-own product with a fully designed alternative, the team will have access to more powerful functions, better options, simple integrations, more thorough diagnostics, and flexible configurations. These beefed-up features form an extremely enticing alternative to any in-house alternative.
- Evolution – While it’s attractive for the customer to think that they’re building something that exactly fits their needs – and nothing more – this is a significant danger because their organization won’t be sitting still. Whether it’s organizational tools used to power IT or enable sales, or components of products like libraries, toolkits, or frameworks, the requirements will always evolve.
When needs evolve, the homegrown solution usually doesn’t. Using an off-the-shelf product prevents companies from being trapped into ineffective solutions and avoiding major upgrades.
It’s always hard to convince customers to move from one solution they’re using to another one. (That is, unless there is a dramatic disaster involved such as a public embarrassment from an in-field failure.) The friction is always there, even when the customer is considering switching from one off-the-shelf product to another.
Remember that nobody has an ugly baby. That is, don’t insult or degrade your customer’s in-house solution, even if it is truly terrible.
However, the friction in moving from a home-grown solution to a commercial one can be even larger. The roll-your-own product has often had years of customization. It can be tightly integrated into company processes. Even when it’s an albatross, it may form the basis of some of the company’s differentiation. There will often be internal champions that have spent time working on it and don’t see the value or need to change.
The best avenues here are time and management. Given enough time, the organization will usually realize that their in-house solutions are no longer fitting the bill and need to be swapped out with commercial alternatives that are professionally supported, continually innovated, and consistently maintained. The other option is to appeal to stakeholders higher up. Not everyone in the company will be convinced that forging their own path is a good idea. Often, the further you get away from the engineering who’s keeping those projects alive, the less resistance you’ll encounter to swapping them out with commercial versions.
No baby is ugly
Remember that nobody has an ugly baby. That is, don’t insult or degrade your customer’s in-house solution, even if it is truly terrible. Maybe the developers that work on it have it as their personal passion project. The company has it in place because it’s fulfilling a need, and they’ve likely spent a lot of time maintaining it. If you’re facing a roll-your-own threat, think like Spock. Use logical and impassionate reasoning to explain why your solution is better. But don’t press too hard if you meet resistance.
Hopefully this gives you enough insight into whether your product will face a roll-your-own threat. If you’re trying to figure out your market positioning, it could be one of your fiercest competitors.