Hidden Benefits of Competition
Use competitors to validate demand and learn without paying for every test
- Difficulty
- Easy
- Time to result
- ~days to results
- Steps
- 5
- Confidence
- 98%
The Hidden Benefits of Competition model reframes rival businesses as free sources of information and demand validation. First, competitors run experiments that an entrepreneur can observe, revealing approaches that appear to work or fail without requiring the observer to spend the same time and money. Second, competitors with paying customers demonstrate the Iron Law of the Market: a group of people is willing to spend on this type of offer. That makes an established competitive market less uncertain than a supposedly original green field supported only by the founder's belief. The model does not claim that copying guarantees success. It provides evidence that demand exists and informs where to experiment. The entrepreneur must still execute well and build an attractive offer for that validated group of buyers.
Origin
Kaufman presents the concept in The Personal MBA as a correction to the beginner's fear that an existing competitor invalidates a business idea.
Core principles
- 01Competition provides observable experiments at someone else's expense
- 02Existing sales prove that buyers spend money in the market
- 03A proven market is usually a better bet than an untested green field
- 04Execution and offer quality still determine who wins
How to run it
- 1
Find active competitors
Search for businesses already offering comparable solutions to the same buyers.
Pro tip Treat their presence as a research opportunity rather than immediate disqualification.
- 2
Observe their experiments
Study what competitors offer, how customers respond, and which approaches survive.
Pro tip Learn from failures as well as successes.
Watch out Visibility alone does not prove commercial success.
- 3
Verify spending
Look for concrete evidence that customers pay for the category of offer.
Pro tip Prioritize buyer behavior over expressed interest.
Watch out Without willing buyers, the business cannot work.
- 4
Choose the stronger bet
When choosing between a proven market and an unsupported green field, favor the market with demonstrated spending.
- 5
Compete through execution
Use the market evidence to construct and test a compelling offer rather than merely copying incumbents.
Pro tip Apply the observed lessons while testing your own execution.
In the wild
Kaufman describes a beginning entrepreneur who searches a brilliant idea, discovers somebody already doing it, and concludes the opportunity is gone. The framework reverses that conclusion: the competitor supplies information and may prove that customers already spend in the market.
→ Competition becomes supporting evidence for investigation rather than an automatic rejection.
Common mistakes
Rejecting any competitive market
Existing competitors can be evidence that an opportunity is real, not proof that entry is impossible.
Confusing novelty with demand
A green-field idea remains dangerous if nobody has demonstrated willingness to pay.
Is it for you?
Best for
It is best for beginning entrepreneurs evaluating whether a market is worth entering.
Not ideal for
It is not enough when visible competitors have attention but no evidence of paying customers.
From the transcript
“having competition is a wonderful thing from multiple perspectives.”
“you get to watch other people play this game and you get to notice what does well and what doesn't without spending your own time…”
“the nice thing about having competition is it is a 100% guarantee that you're on the right side of the iron law of the market.”
From the episode
The Key Principles Of Running Any Business - Josh Kaufman - #215
Josh Kaufman