Starting Up #16 - How to Out-Specialize Competitors Who Own 80% of the Market

Speaker A: Starting a business is hard. Betting on yourself is hard. Do you know what else is hard? Working for someone else and jobs that you hate for incremental wages while hanging on to the hope that by age 65 you're going to be able to retire and do all the things that you wanted to do while you spend the best years of your life making someone else rich. That's hard. Welcome to Starting up the podcast where we're choosing the hard that gets us where we want to go faster so we can live life on our terms. I'm your host, Jay Sensei. I am a non technical founder who bootstrapped the software company from idea to multi million dollar ARR, sold it to private equity in an eight figure exit and retired at 40. All without a coding background, without outside capital, and without leaving my day job. Each episode I'm going to be sharing the real story behind how I did it. The wins, the mistakes, and the playbook that you can use to start, grow and sell a company of your own. This is starting up. Let's get into it. What do you do when 80% of your target market already has a solution? Most founders, when they discover this, do one of two things. They panic or they give up. I didn't do either. I got creative today on starting up. How I identified the biggest competitors in my space, what I learned from studying them, and how I found the edge that helped me win. I realized I'm gonna have to get a little bit more casual on some of these. If I wear a jacket for every single episode, I'm very quickly gonna run out of options. Don't have that many. So, um, let's get into it. Last episode we talked about the Ferrari versus Toyota concept. Finding buyers who want premium in a market that's mostly satisfied with basic. And today I'm going to go a little bit tactical on competition. I'm going to break down the three major players that owned my market, how I studied them, and uh, the specific strategies I used to create meaningful differentiation. Whether you're facing one large competitor or five small ones, the principles are the same. Through my voice of the customer research, three names kept coming up over and over and over. Adirondack Solutions, rms, which stood for REC Residential Management Systems, and a third one that, you know what, I'm not going to say the name. If I say the name, they're probably going to get the third or fourth cease and desist letter I'll have to add to the pile. And quite frankly, they're ass clowns. So we're going to leave the name out of there. But, uh, they were the big three in higher education housing management. Between them, they served roughly 80% of the schools that were in my serviceable market. So here's an important distinction. These companies were not roommate matching companies. All right? They were housing management solution companies. Think of a, uh, housing management solution as kind of like an all in one platform that handled room assignments and roommate matching, sometimes facility management, billing, um, and roommate matching. Right. Essentially everything that a housing department needed to operate. And so how, uh, roommate matching was really just kind of one little slice of the pie. It was one feature among dozens. But in each platform, that matching feature was very basic, functional, but not sophisticated. It maybe got the job done in one way or another, maybe a little bit better than a, uh, paper form. Got the job done, could match students, but the matching criteria were limited. The student experience was extremely underwhelming, and the outcomes were often mediocre at best. This is where my opportunity lived. Their matching was a checkbox feature. Mine was going to be the entire product. And when you dedicate your entire product to solving one problem, you can build something dramatically better than a feature that gets 5% of the larger platform's development attention. But here's the catch. Even though my solution would be objectively superior for roommate matching, I was up against platforms that schools had already purchased, already implemented, already trained their staff on, already budgeted for. I needed to ask them to add a separate tool just for roommate matching on top of what they were already paying for their housing management solution. And that proved to be a tough sell. You know, in order to sell to schools using a, uh, housing management solution already, I needed to prove enough value to convince them to pay extra for something that they kind of already had. This was my uphill battle, and it shaped, quite frankly, every strategic decision that I made going forward. The biggest mistake you can make when you discover strong competitors is to pretend they don't exist. The second biggest mistake is to try to beat them at their own game. Instead, study them. Here's what I wanted to learn and understand about these three big housing management solution companies. What were they doing well? Well, they had comprehensive platforms, they had existing relationships and trust that was built over sometimes decades. They, some of them had long term contracts, uh, they had market share, they had brand recognition, especially in the higher ed space. Where were they falling short? Well, their roommate matching technology sucked. It was a tiny feature in a massive platform, and across the board they didn't get a lot of development attention. The student experience was Clunky. The matching algorithms were sometimes non existent. It was a checkbox feature was not a priority. They told people they had roommate matching, and technically they did. Um, but it's like saying you have clothes and all you have is a pair of socks. All right? The gap between what they offered for matching and what was possible. That gap was going to be my entire business opportunity. So how did I learn all this? I didn't go undercover or hacked into their systems. I just learned through conversations. The voice of the customer. Research that I described in earlier episodes gave me incredible competitive intelligence. People would just talk. And when a prospect told me, we already have a system that does roommate matching, well, I would just ask them about it. What does it look like? What do students think about it? What do you wish that it did differently? And they told me in detail because they had been living with the frustrations of mediocre roommate matching for years, and they had a lot of opinions. Through these specific conversations, I learned that no product on the market had functionality as robust as what I was describing. The matching in the housing management solutions was kind of an afterthought. My matching was going to be the main event. That's where I would win. When you can't compete on breadth, and I couldn't because I wasn't building a full housing management solution, at least not yet. You compete on depth. The specialist always builds a better solution than the generalist for that one specific thing. Uh, think of it this way. A general contractor can do plumbing, right? But if you have a complex plumbing problem, do you call the general contractor? You call plumber. Because the specialist knows the domain more deeply. They have more experience with edge cases, and usually they deliver a better outcome. That was my positioning. I wasn't trying to be a housing management system. I was the plumber in a market full of general contractors, at least when it came to roommate matching specifically. Here's what better meant for my college roomie. More sophisticated matching logic. Instead of matching on handwritten data points or checkboxes, or assuming that every student wanted a roommate that was identical to them, we could match roommates on dozens of different behavioral, academic, and lifestyle variables. A much better student experience. My platform felt like a social media network, not an enterprise resource management tool. Students actually liked using it. Later on down the road, we did a mobile app. We were the first to do that as well. Students loved using it. We got more data, we got better outcomes, and we could actually demonstrate measurably better roommate satisfaction rates. Students liked their matches. And in a world where Student retention is a multimillion dollar concern for every campus. Oftentimes, better roommate matches means fewer transfers, fewer room changes, and just overall happier students. We were selling student experience, not just roommate matching. I think another factor was innovation in the approach. You know, I didn't just replicate the old process digitally. I reimagined it. Instead of an algorithm making the choice, students met each other online and then chose their own roommates. Mutual selection. And this was a fundamentally different philosophy. Each of these differentiators, it's kind of informed by the customer. I was doing customer research, I was talking to people, I asked them what they liked, and this is what they told me. So that's what I built. Uh, every feature I built existed because somebody along the lines told me that it mattered. I wasn't guessing. I was just building exactly what they asked for. And then collectively, these differentiators turned a feature into a standalone category. We weren't another matching feature. We were the roommate matching platform, the Ferrari. Let me give you a, uh, practical framework for analyzing your own competitive landscape. I think step one, identify the top maybe three to five competitors. Include both direct competitors, companies that solve the same problem you do, and also indirect competitors, companies that solve adjacent problems, but maybe could expand into yours or maybe the Toyotas of your world. Step two, for each competitor, map what they do well and also where they fall short. Just be honest. They're better at something than you are. Okay? It's better that you know it now, but if they've got weaknesses, you document those, you circle those. Step three is find the gap. Either the thing that they don't do or don't do well, or maybe they just haven't got around or thought about doing yet. That particular gap could be your differentiation. And step four, build your advantage around the gap. Don't try to out feature a, uh, well funded incumbent across the board. Just find one area where you can be definitively, undeniably better and own that area. Step five, talk to their customers about their pain points. People don't have any problem complaining. People don't have any problem telling you what they don't like. All right? And this is a secret weapon. Your competitors, customers will always tell you exactly what's wrong with their current solution. It's probably something they've been asking that that company to do or fix or change or add for years. And maybe the company is not listening to them. You are. They'll tell you, and you listen. You know, you don't need corporate espionage. You don't have to spy. You just need curiosity in a phone call. The the answer to competition isn't retreat, it's differentiation. If you can find the gap and you can fill it better than anyone else, you can make that gap your entire identity. Next episode on Starting Up, a comprehensive wrap up. We're going to synthesize everything that we've covered into a complete market research playbook and then we'll bridge the gap into what comes next, actually building the product. If you're getting value from Starting up, please subscribe. New episodes will drop weekly, and my book, Starting up will go deeper into every topic that we touch in in the podcast when it launches. Subscribers will get early access. As always, I'm, um, Jay Sensei. Keep Starting Up.