Depends - if you’re able to differentiate enough to be a #1 or #2 player in the market, stick with the current category. I would, however, start to amp up the thought leadership so that you can influence the category more going forward so you can start to play your own game.Not knowing more details its hard to go into specifics here, but you could also consider creating an off-shoot of the current category (again leaning into your differentiation) and tell the story around how “other vendors are doing things the old way” and you’re providing a “new way” to solve the problem [of course this requires you to be clear that the new way delivers a lot more value than the “old way”].
First thing, how are you segmenting the market and determining evolving customer needs/priorities? Great news - no product category stays fixed for very long. There’s always some new ’shift’ that the incumbent product category leaders don’t see coming that provides your company with a new business opportunity. Therefore, you want to determine, in a data-rich, customer-obsessed way, what the current requirements are for success are in the evolving category. Easiest way to do this is to build a simple 2x2 market segmentation chart. Use customer-interview data on their evolving needs and challenges to help determine what the X and Y axis are going to be and what the customer requirements are for each of the 4 quadrants. I’ll use Okta’s entry into the multi-factor authentication market as an example. Obviously, RSA has been the leader in this space for years. But plotting out a present-day 2x2 view of the market shows a lot of opportunity. On the x-axis, we had deployment model - on-premises on the left, cloud on the right. On the y-axis, we had sophistication - simple on the bottom and intelligent on the top. Then we’d bucket our customers into those different quadrants. So, security-conscious, regulated customers tended to be more on the lower-left. The broader market of companies worried about the next big data breach were on the lower-right (think Target and Equifax breaches). They’re looking for something lightweight, simple but effective to protect against pfishing attacks (eg: passwords suck). Then, in the upper-right, that’s the more progressive CISO looking at a whole new set of capabilities roughly called Zero Trust. And there’s really no-one in the upper left quadrant.Once you have the customer needs segmented, you can put the top 1-2 vendors into each bucket. Lower-left, that’s RSA. Lower-right, that’s Duo. Upper-right is also Duo but increasingly Microsoft. Stepping back and looking at both a customer and competitor view of the market shows the opportunity. The near-term goal was to build a product that took on Duo head-to-head and add that capability to our core SSO product. In the field, we ran a ‘would you like fries with that’ go-to-market motion. You already bought the hamburger (SSO) from us, so why not add two-factor authentication (MFA) to the order?Beyond that, there’s a question - go after the legacy RSA market, which requires a bunch of old-school connectors. Or move into the Intelligent/advanced side of the market.We focused on where the puck is going, not where it is today. And that’s the upper-right (Cloud/Intelligent) quadrant where the whole Zero Trust market is heading. So, a lot of time and energy spent getting into what we called ‘contextual access management’ - basically, putting a big brain on top of our MFA product that used our core understanding of identity context to know if someone is a malicious actor or not. This is a ‘play chess not checkers’ approach. Forget the old legacy incumbent, the real goal is plotting out the evolving customer priorities, connecting your company’s current product portfolio against those priorities and planning ahead for where the market is ultimately going to go.
Have a strong point of view on the market and don't be afraid to reframe the current definition, but be prepared to invest heavily in education and thought leadership. Rely on proof points to support your narrative in the form of customer advocates that evangelize your definition and why it drives value. The good and the bad news is that someone has already created the initial interest - invest in execution and authority marketing to grab market share.
Is it clear that the competitor is currently the market leader? Are they a large incumbent (thinking what Salesforce is to CRM, for example) or a few years ahead of you?
If so, it may be the case that you are indeed in a challenger position for an already defined market in which the disruption playbook is a better strategy. Alternatively, can you change the conversation and create a tangential category that is completely different?
Consider Hubspot. Would consensus peg them as a CRM/MA competitor, or are they the thought leaders for Inbound Marketing? They are a great example of a company who changed the conversation and carved out a new category and community tangential to an already crowded space.
I love Anthony's answer. I suspect he and I both spend time thinking about this exact issue from the perspective of the market leader...
I'd add that you can find a market niche that takes advantage of the market your competitor has carved out. Their leadership is creating demand, but they are probably not positioned to service all of it.
Another point about followership is that it can be less expensive, so you may have advantages in cost structure that translate into pricing advantages. This could also help you target smaller segments than your competitor.
@Anthony Kennada really has the right idea in terms of how to think about this. I break it up slightly differently, but alog very similar lines:
1. Be the category's next generation. Address the defining competitor's shortcomings by determining problems not solved by the first mover.
2. Expand into a tangential niche. Use the fact that someone else has defined the category, then point out a particular market segment (or set of segments), or use case, not well served by that competitor. In this scenario, it may not even be a competitor anymore, and its existence may in fact be beneficial.
3. Explain why that category was relevant last year, but won't be by next. That competitor defined the category, let them have it because it won't matter by the time you're done. Here, you're attacking the shortcomings of the category, not the competitor(s). Then, of course, you have to define the new category.
I agree with Anthony. If you're looking to enter a space that has already been defined, what you need to do is create a niche and/or double down on the unique approach you bring to the space.A lot of this will be reflected in the product you create, but your marketing needs to work really hard to help prospects clearly position your product in their minds relative to the product leader that has already defined the game.
I can think of a few examples here:
-MailChimp is the market leader in email marketing, but products like Drip and ConvertKit entered the market and eventually spun off into their own category (drip software)
-Zendesk is the market leader in customer support/helpdesk ticketig. Then Front came in as a "shared inbox" solution and Help Scout came in from th "customer experience" angle.