I am frequently approached by new businesses with products or services to sell, and I always ask them who their competitors are. I want to know why I should be choosing them over any alternatives in the market. And when a start-up company wants me to sell their product, I want to ensure my customers will continue to get a superior value.

A surprising number of these companies claim to have no competitors. I used to treat this such companies with great suspicion because I believed one of two things:

1. The claimant must be lying, and who wants to do business with liars?
2. The claimant must be incompetent, and truly is unaware of its competitors. Why would I do business with incompetents? Michael Porter's book, Competitive Strategy, describes clearly and thoroughly, in its opening chapters, how competition in industries should be analyzed and understood.

Recently, I have realized that there is a third alternative, that the company truly has no competitors. However, this means that the product or service is brand new, unproven, and the company has little or no credibility. It can also mean that this company is the only entity that has recognized the existence of a problem it has solved. In this case, it faces an uphill battle convincing prospects that they have the problem and should let the company solve it. Either way, doing business with such a company is risky.