The Importance of Understanding Your Competitive Advantages
While wandering the Web 2.0 Expo show floor yesterday I couldn’t help but notice a chunk of startups trying to pitch ideas and business that seemed awfully familiar. In some cases they were rehashing older ideas trying to pump them back to life with a new fresh look. In others, the companies were tackling areas that are overly saturated with competition today. As I talked to the various booth reps, I was surprised by many of the pitches, as many of them seemed to base their entire “differentiator” story by aspects of their business which are simply insufficient to truly differentiate.
It’s one thing to have a massive amount of differentiation against your competition, and to heavily play up that feature/tech/etc. For example Google grew out of literally nowhere thanks to serving significantly better search results than other offerings at the time. Notice I said “significantly better,” not just “better”. Further, timing was important - Google came to market against products whose offerings were quite poor, so the “significantly better” results were highly noticeable.
Launching a “better than Google” company today, on the other hand, is a much larger challenge (despite numerous attempts). Not only are people NOT dissatisfied with Google’s results, their products now span well beyond just search, and are tightly integrated with a huge amount of Internet users’ lives and services. I’d say Google is more intertwined with the Internet today than Microsoft ever was with integrated Internet Explorer and other products which prompted all the lawsuits. Competing with the big G is going to take a lot more work than even “significantly better” search results would provide.
Another topic that seems to cause confusion in regards to differentiating companies is user interface (UI). I’ve heard countless companies show demos and talk about how they are great because their UI is so amazing and easy to use. One company’s rep even stated that the thing that will make them “stand out from the rest” is their signup process. Baloney. This is a very dangerous ground to play in, because it’s lacking the important tactical element of understanding when UI actually matters.
First, it’s my position that to use UI in this manner requires existing products to have bad UIs (not just average or mediocre, but bad). Second, existing UIs must be bad enough that the consumers who use these products are vocally unhappy and can identify statements such as “it’s too hard to use”. Third, the “better” UI must be easy to absorb instantly - in other words a new potential customer should see your screenshot/web site/gadget interface and instantly see how easy it is to use. Fourth, and of no lesser importance, better UI doesn’t mean “prettier” UI. Fifth, it’s hard to use UI to compete against massively entrenched players, though if its a bunch of startups fighting for attention, having a better UI is good.
TiVo beat ReplayTV with a stick when the two launched, outselling them at over 10:1 ratio from the getgo (although much of this was also due to pricing models, with the ReplayTV units coming in almost double the price of a TiVo, albeit with no monthly service fee). My precious Slingbox sent Sony’s LocationFreeTV packing time and time again. In both cases the products at hand were in new categories with no existing comparative products. Today, however, competing with either is much much harder, and good UI alone isn’t enough to cut it. While my examples here are both physical products, it’s fairly easy to see how they apply to Web services and sites as well.
Whether it’s UI or features, pricing or compatibility, it’s extremely important to understand how you stack up against the crowd. The key challenge startups and even large companies with new products face is to figure out the how and what of demonstrating competitive advantage. Building great products is only the starting point. Understanding how your potential customers will perceive your products is at least as important, and proper timing and positioning is just plain essential.
In a pseudo-related note - please come check out the unconference today!
