Aside

Making a Better Widget isn’t a Competitive Strategy

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During my day job, I help both start-ups and billion-dollar tech companies pick market niches and position themselves to compete successfully no matter what size.
Most of them start with a competitive mindset that is something like “we make a better widget”. Sound like anyone you know? Many tech companies have this philosophy. So it’s a little nuts to think that’s not the strategy. It could be, but there has to be another piece. The better widget is only cool if your customer believes that your version of “better” is truly unique and worth choosing you for. Of course, it could mean that you need to educate the customer about what is truly better so they understand your point of view, which is where marketing dollars can come in. In general, however, I would argue that the process of differentiation has less to do with the “better widget” aspect but how well it matches what the customer cares most about.
What I’m describing is almost a reverse engineering process. If more companies learned the process of working backwards from their existing differentiators to the problems that they solve, they could not only understand who they are today, but be able to communicate this core difference to their customers.
The 2nd favorite standby of all teams facing a competitive environment is the “if-we-build-it-they-will-come-mentality”. I have a tough time keeping a straight face when I hear this. I’m not good with a poker face to begin with, so this tests all my relatively-nonexistent skills. What’s cool is that innovation does fuel new products, and those ideally new solutions, which is sometimes about new companies.

If you’re lucky, you can become the “Google” of the category. They are great due to the fact that they built something cool and customers came. One of the many reasons that Google, is so admired, of course, is because they are an anomaly. Everybody wants to lead because they built the cool thing, but in most cases, it’s not gonna happen. Intuit, on the other hand, did just the opposite. It’s not as sexy, I suppose. Intuit watched customers for a long time and then become the perfect solution for financial software because it created just what the customer needed, now. On top of that, they never stop communicating with and caring for their customers so they keep innovating in a way that creates real value.

Which leads me to the greatest of all Silicon Valley product development myths. This would be the “we-can-add-more-and-they’ll-buy-the-next-version” myth. Creating value is more than doing more features. It’s about doing the things you need to do well. Sometimes it’s even about doing less. If the competitor has 4 features, I would recommend you don’t buy into the myth that you need five. More features is not really the reason to add to your laundry list. As any tech company adds more breadth to their product and service offerings, it becomes increasing more difficult to communicate and leverage all of their differentiation potential. Many companies suffer from “differentiation memory loss” meaning they keep adding to their list that they’ve forgotten what the heck makes them really valuable and unique. Further still, many companies are getting so big (see Adobe, Oracle) that they could face smaller niche competitors who would enjoy the luxury of focusing on a subset of the solution set, enabling them to compete more effectively in tough markets.
Before you add to the next gizmo feature set, or bundle things together in some big suite offer… Ask this:

How does this make the offer competitive in the mind of the market?
Can I communicate this unique proposition to the buyer?
Have I developed the buyer’s requirements to prioritize what the heck we’re designing?
And, am I overengineering what the customer really needs?

Which gets me to the idea of what makes a company really good is defining their space. Surely, it’s not about doing a SWOT analysis. I would say it’s about doing what you do – well. And, it is also about doing something that no one else already does. That’s competitiveness in a nutshell. Just like I would like each of as individuals to figure out what we truly do well (and, ideally, do it most of the time), I hope tech firms figure out what they do well.
Being competitive then would be defined as getting better and better, at the things that matter.

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0 Responses:

  1. Mike Rohde. February 27, 2006 at 1:53 pm  |  

    In a world of so many confusing products, I always appreciate products and services which clearly tell me what they offer and why I should consider them.
    I still recall how clearly the original Palm Pilot devices held to this ethic, making it clear they were an extention of my Mac as a “Connected Organizer”. Sure, they could do much more, but the primary feature was this “extension” which was useful at the time.
    Apple is very good at this — particularly with the iPod, making it clear what the device is for. It can do quite a bit, but clearly it is positioned as a very cool music player (which happens to integrate well with iTunes, play TV shows, etc.). Apple seems to know what each product is for and clearly makes it known to potential customers.
    Thanks for the interesting insights Nilofer!

    Reply

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