Monday, December 01, 2008

In praise of competition

Who is your competition?
People ask me that a lot. Usually the tone is "Who is out to eat your lunch?" And to be honest, that is the way that I often respond to new entrants into the market, or (especially) to new features introduced by existing organizations.

But the reality is that competition is good. It is good for the development of the online philanthropy market. And it is good for our own progress at GlobalGiving. At this stage, high quality new entrants in the field raise overall awareness - and they increase the size of the pie. The stream of new features that we are seeing forces us to provide better and better service to both donors and recipients.

Two of my favorite GlobalGiving "competitors" are DonorsChoose and Kiva. The three of us constantly vie to have the most compelling websites, the most efficient check-out, the best feedback loops, and the highest impact. Whenever one of us develops a successful new feature, the rest often imitate it. This is a form of collective experimentation and learning that improves our services much faster than if none of us faced competition.

Although we are competitive by nature, we also help each other out, often swapping best practices about back office systems, gift card campaigns, and PR. At GlobalGiving, we once encountered a potential major donor who was interested primarily in US education. Without hesitation, we referred him to Charles Best, the head of DonorsChoose, and he became a major donor there. The donor was happy, DonorsChoose was happy, and the vigor of the overall online philanthropy marketplace was increased.

And DonorsChoose has done the same for us more than once (someone recently told me they were going to donate to GlobalGiving on the recommendation of Charles Best, and said she found it "amazing" he referred her to a competitor ). A month or two ago, I was on the phone talking to Premal Shah at Kiva conferring about some common issues we face. Overall, we find that friendly competition helps us all.

Last year, I was at a conference at Oxford University discussing new ideas for the official aid sector (including the World Bank, UN, and bilateral agencies such as USAID and DFID.) There was much discussion of the need for "partnership" and "elimination of duplication." One speaker passionately called for the aid agencies to "divide up" Africa. USAID would take a few countries or sectors, the Swedes would adopt a couple of countries, the Brits would take some, the Canadians others.

This sounds good until you realize that each recipient country would be stuck with no choice. If the quality of programs offered by one donor were poor, the recipient would have no ability to choose a better alternative. And you can be sure that, without competition, the quality of the services offered by the donors was going to be far below what it should be.

So competition is good. It drives innovation, efficiency and better service to all users. My only complaint about DonorsChoose and Kiva is that they are run by guys who are younger and much better looking than I am. And there is nothing I can do to compete with them there :)