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I was sitting with the founders of a company we’ve funded the other day talking about their competition. I love this product and I use it every day. It doesn’t yet have widespread adoption, but it as extremely actively used by the early adopters.
This company has several competitors – long time incumbents with somewhat stale, but useful products, and several new competitors, including well-funded and noisy ones. I use several of these products regularly in different situations and have encouraged the founders to use them also.
During our conversation, we started off by talking about pricing and go-to-market strategies. As part of this, we were talking through a strategy to change the current game being played in the market, both from a product and pricing perspective. We had clarity on the product side (we have several fundamental architectural differences that enable a powerfully different approach at scale) but thrashed for a while on the pricing perspective.
I realized I wasn’t very clear on the pricing strategies of the competitors so we went through them on-line. While this was sort of useful, our knowledge of their products, how they work, and what the current limitations of them are was more enlightening. Ultimately the product differentiation drove the pricing differentiation discussion, which resulted in our hypothesis about how to change the game which we are now testing.
If we hadn’t all be active users of these competitors products, we would have had a stupid conversation. While we have limited visibility into the competitors’ product roadmaps, we know how hard it will be for them to change several dimensions of their products. Sure, we should assume they can and will do this, but as we enter the market in a serious way, I think we can carve out a unique and very significant position for ourselves by leading with the product differentiation and supporting it with a pricing strategy that undermines theirs. In the absence of the product information we have from our experience using their products, we wouldn’t have been able to tie these two constructs together, and our resulting approach would be weak.
My general approach to competition is to “obsess about their products while completely ignoring the company.” If you can identify competitors, use their products continually, if only to have that knowledge when the moment comes that you have the conversation about how you are going to change the game.
I’m mid 2011 I wrote a post titled Competition. Things in my universe had heated up and many of the companies I was an investor in were facing lots of competition. It’s 18 months later and there’s 10x the amount of competitive dynamics going on, some because of the maturity, scale, and market leadership of some of the companies I’m an investor in; some because of the increased number of companies in each market segment, and some based on the heat and intensity of our business right now.
I wrote a few more posts about competition but then drifted on to other things. But I came back to it this morning as I find myself thinking about competition every day. Yesterday, I was at the Silicon Flatirons Broadband Migration Conference hosted by my friend Phil Weiser. I go every year because it’s a good chance for me to see how several of the parallel universes I interact with, namely government, academics, broadband and mobile carriers, incumbent technology providers, and policy people think about innovation in the context of the Internet.
News flash – most of them think about it very differently than I do.
One thing that came up was the idea of creating the best product. This has been an on and off cliche in the tech business for a long time. For periods of time, people get obsessed about how “the best product will win.” Then, some strategy consultants, or larger incumbents, use their market power to try to create defenses around innovation, and suddenly the conversation shifts away from “build the best product.” And then the entrepreneurial cycle heats up again and the battle cry of the new entrepreneur is “build the best product.”
This isn’t just a startup vs. big company issue. I remember clearly, with amazement, the first time I got my hands on an iPhone. Up to that point I was using an HTC Dash running Windows Mobile 6.5. It was fine, but not awesome. I remember Steve Ballmer in a video mocking the iPhone.
We all know how this story has played out.
I remember a world when Microsoft and RIM were dominant. When Apple and Google didn’t have a product. And when people talked about “handsets”, WAP, and we squinted at our screens while pounding on keyboards that were too small for our fingers. Next time you are in a room full of people, just look around at the different phones, tables, and laptops that you see.
In my startup world, the same dynamics play out. Building the “best product” doesn’t only mean the best physical product (or digital product). It doesn’t just mean the best UI. Or the best UX. It includes the best distribution. The best supply chain. The best customer experience. The best support. The best partner channel. The best interface to a prospective customer. I’m sure I’ve left categories out – think about the idea of “the best complete product.”
This is getting more complicated by the day as technologies and products increase in interoperability with each other at both the data, network, application, and physical level. That’s part of the fun of it. And being great at it can help you dominate your competition.
Give me the best product to work with any day of the week. But make sure you are defining “product” correctly.
I’ve invested in hundreds of companies that have started from scratch and I’ve been though some crazy number of product launches, especially if you include all of the TechStars companies I’ve been involved with. These alphas, or betas, or v1.0 or v0.1 launches are exciting moments as they signify the transition from an idea to a product. And, it’s at that point that the real work begins.
Early in the life of your company you want feedback. From anyone. Of any kind.
It’s often hard to get this feedback. You spend all of your time trying to get some people to use your product. When they have problems, you try to fix them. But you are maxed out – with all the various responsibilities you’ve got and all the things you are trying to do to keep things moving forward.
Occasionally you get feedback. Sometimes it’s precise – a feature request, a suggestion for how to do something differently, or a description of something that’s not working correctly.
Reward this feedback with features. Fix the bug and then tell the person who reported it that you did and thank them for pointing it out. Implement the requested feature and tell the person that suggested it that you did it. Write a blog post about it and name the feature after the person. Be public about thanking the person for the suggestion.
In addition to making your product better, this does two powerful things.
First, it creates a feedback loop with your early users so they know they are specifically appreciated and valued. This will encourage them to give you more feedback, use your product more, and be part of your extended early community of fans.
More importantly, it builds a feedback loop culture into your business. You and your team will realize the feedback matters. You’ll show this through action. Your users will realize this. And they’ll value it, and you, more.
What do you do to get feedback from your early users?
If you are a developer, I encourage you to carve out an hour and watch TechStars CEO David Cohen’s presentation at RailsConf 2012 (30 minute presentation and outstanding 30 minutes of Q&A). He starts out with the assertion that “developers are the new investors” - how could you not be interested in hearing more about that?
David and I wrote a book last year called Do More Faster: TechStars Lessons to Accelerate Your Startup and this is his riff to a room full of developers about some of his top tips. Special bonus – see a photo of me in my pajamas at minute 7.
I was reminded of the importance of starting with the customer experience while I was watching this brilliant video from WWDC 1997 of Steve Jobs. In the video, Jobs appears to be responding to attack by a troll, but is actually doing something much more interesting. Rather than take the bait and react, he thinks carefully in real time and makes a critical philosophical point about his – and Apple’s – approach to creating new products.
The punch line happens early when he says “you’ve got to start with the customer experience and work backwards for the technology.” It’s five minutes long and worth watching, if only to see how incredibly durable Jobs’ philosophy has been over the past 15 years.
When I think about the companies we’ve invested in, some of them embody this philosophy deeply in their culture. Oblong, MakerBot, Orbotix, Fitbit, and Cloud Engines immediately come to mind. The entrepreneurs running these companies are completely and totally obsessed with the consumer experience of their products, even though their products embody an incredible amount of technology (in each case, both hardware and software innovations.)
As an investor, I often lose sight of this, especially when I’m working on non-consumer facing companies (e.g. enterprise software companies). But I believe very strongly in the consumerization of IT – namely the notion that innovation in software is now being driven by consumer applications, and correspondingly by consumers, not by enterprise IT organizations and enterprise software vendors. If you accept this, it means that if you are working on enterprise applications, you also need to be obsessed with the customer experience.
When I think about this abstractly, especially in the context of “software eating the world” or my view that the machines have already taken over and resistance is futile, I completely buy the premise that the consumer experience trumps all technical decisions in any context. Apple has proven this throughout the entire customer experience, including being exposed to the product, buying the product, implementing the product, upgrading the product, and getting help with the product. And I think it’s going to get a lot more important going forward.