Defining Competitor Sets by Customer Needs and Control Points

Hello. In the previous lesson, you reconstructed what Alphabet and ServiceNow sell, how their disclosed activities earn revenue, and where the filings stop short of revealing product-level profit. A company profile becomes strategically useful when it also answers a harder question: which alternatives actually constrain the company in a particular customer decision?

This final lesson in the industry-mapping module develops a repeatable way to define that competitor set. You will start with the customer need, identify the alternatives a buyer could credibly choose, and then examine who controls the interfaces or resources that could change the contest. Allow about 40 minutes, including the short video and selected readings.

Begin with the decision, not the industry label

“Enterprise software,” “platform,” and “AI-native” describe different kinds of businesses. They do not tell you whether two offerings compete for the same decision. Conversely, a spreadsheet, an internal development team, and a software vendor may compete even though no industry directory would put them in one category.

Clay Christensen’s milkshake example makes the distinction quickly. It is a consumer case, but the analytical move transfers to enterprise procurement: look for what the buyer would use instead, not merely for another seller of the same product.

For an enterprise buyer, the equivalent starting sentence should be specific enough to imply a choice:

“When an employee submits an IT request, the organization needs to capture it, route it, track its resolution, and meet its security and reporting requirements.”

That is more useful than “the customer needs workflow software.” It specifies the user, work to be done, and conditions of success. It also exposes several possible responses: buy a dedicated service-management application, configure tools the organization already licenses, build an internal solution, retain the current email-and-spreadsheet process, or adopt an AI-based interface for some of the work.

Not all five are equally good substitutes. The question is whether each could credibly win this buyer’s decision under its actual constraints. A lightweight configuration might suffice for a small request queue but fail a large organization’s audit requirements. Doing nothing might still be a powerful competitor if implementation disruption outweighs the perceived benefit of change.

Write the decision’s boundaries before naming firms: which customer segment, which workflow, which users, which required capabilities, and which time horizon? If any of those change, the relevant competitor set may change too.

Add the control-point lens

Customer substitution explains who competes for an immediate purchase. It does not fully explain who can reshape the purchase—or capture more value from it. A control point is an interface, asset, or rule through which a player can influence access, choice, costs, or the division of value. Examples in software include the user’s starting interface, a workflow’s system of record, identity and permissions, integration standards, or an application marketplace’s access rules.

BCG’s What Is Your Business Ecosystem Strategy? is useful here because it treats competitive boundaries and control over an ecosystem together.

The two lenses must be kept distinct. A cloud provider may supply the compute on which a workflow application runs. That makes it an important supplier and potential source of bargaining power, but not automatically a direct competitor for the workflow purchase. A productivity-suite provider may control where employees begin their work; if it offers a credible way to handle the same requests, it can be both a distribution gatekeeper and a substitute. An AI-native interface might initially complement a workflow system by helping users find answers, then become a competitive threat if it takes over request initiation and routing.

This is why company-level labels can mislead. The relevant unit is often an offering in a defined use case, while a company may play several roles at once. Control-point analysis identifies players worth monitoring even when they are not yet winning head-to-head bids. It should not, however, promote every powerful supplier into the direct competitor set.

Test whether the alternatives really constrain one another

A plausible list is only a hypothesis. The strongest evidence asks what customers did or would do when terms changed. The US Federal Trade Commission’s 2023 Merger Guidelines discusses this in an antitrust setting. You are not trying to produce a legal market definition here; use its evidence discipline to improve a strategic competitor assessment.

In a software procurement, useful evidence includes repeated appearance on the same shortlists, win/loss accounts that identify the chosen alternative, switching after a price or service change, and concessions made because the buyer could credibly move. Evidence that one firm tracks another’s launches or pricing is informative, but weaker on its own: firms also monitor potential entrants and adjacent players.

Ask two separate counterfactual questions:

1. Substitution: If the focal offering became less attractive—or disappeared—where would this customer’s work and spending go? What capability, migration cost, or policy might prevent that move?
2. Control: If another player changed access, integration terms, defaults, or data portability, could it alter the buyer’s options or the focal company’s economics?

The first identifies close substitutes. The second identifies gatekeepers, complements, suppliers, and emerging threats. When prices are negotiated, an alternative can be consequential without taking many sales: its credible presence can improve the buyer’s bargaining position. Equally, two products appearing in the same analyst category is weak evidence if buyers rarely consider them for the same job.

A strategic competitor set is not necessarily an antitrust market. It may deliberately include an emerging substitute or a gatekeeper you need to track, while labelling its role clearly rather than treating every listed player as an equivalent head-to-head rival.

A worked competitor set: enterprise IT requests

Consider ServiceNow as the focal company and the hypothetical buyer decision introduced earlier: a large organization is selecting how to manage employee IT requests, including intake, routing, resolution tracking, and reporting. This is an illustrative decision frame, not a claim that the following firms appeared together in a documented procurement.

The table is deliberately tiered, not a declaration that every row contains a peer. Its conclusions would move with the scope. If the buyer needs only straightforward request intake, an existing suite may be a close substitute. If the buyer needs extensive process controls and integrations, it may be much less credible. If the decision instead concerns external customer support, customer-service applications that were peripheral to the employee-IT decision may enter the direct shortlist.

Now examine the control points. A dedicated workflow vendor may benefit from owning the request history and process configuration. A suite provider may have an advantage at the employee-facing entry point because users already work there. An identity provider can affect implementation and access but may remain a complement to every bidder. An AI interface’s position depends on whether it is a layer used by all workflow systems or becomes the place where requests are resolved and purchasing decisions concentrate. These are mechanisms to investigate, not proof that any one player will win.

Your evidence plan follows from the hypotheses. Look for which alternatives appear in comparable buyer evaluations, why customers reject them, which existing licenses affect procurement, and whether proposed migrations are feasible. For a potential AI displacer, distinguish a demonstration of answering questions from evidence that it can reliably handle the complete, governed request lifecycle. Do not infer direct rivalry from a shared AI label—or dismiss a substitute because it has a different label.

The same discipline prevents a mistake with Alphabet from the previous lesson. Alphabet’s Cloud revenue and ServiceNow’s subscription revenue are both part of the software-and-platforms landscape. That alone establishes neither a shared buyer decision nor direct substitution. You would first have to specify an overlapping customer need and a credible offering from each; otherwise, cloud infrastructure might be a dependency rather than the competing purchase.

Make the boundary explicit—and revisable

A useful competitor profile can fit on one page if it records the reason for inclusion:

• Decision frame: customer segment, job, required capabilities, and buying horizon.
• Core set: offerings with evidence of credible substitution in that decision.
• Conditional set: substitutes that depend on buyer complexity, installed tools, or willingness to build.
• Control-point watchlist: players that can change access or economics without yet replacing the offering.
• Evidence and uncertainty: observed buyer behavior versus your inference, plus the event that would change a player’s classification.

This structure guards against two opposite errors. An overly broad set treats every software firm, platform, or AI entrant as a peer and obscures who can win the deal. An overly narrow set contains only near-identical products and misses internal build, suite-based substitution, and players moving into the customer interface. Your objective is not a permanent roster. It is a decision-specific map that can be revised when customer requirements or control points shift.

Key takeaways

Define competitors from a specified customer decision, not an industry heading. Use observed or credible substitution to identify direct rivals, then separately identify the players whose control of access, interfaces, data, or dependencies could reshape that rivalry. Keep direct substitutes, conditional alternatives, and control-point threats distinct, and state what evidence would move a player between them.

That completes the industry-mapping module. Next, the course turns to enterprise software economics: decomposing recurring-revenue growth so you can judge whether a company is gaining new customers, expanding within existing ones, changing prices, or losing business.