This is why product differentiation is tricky

When a company starts to make consistent revenue and earn a handful of customers, the most obvious next step is to beat the competition and lead the category. And they try to do it by building a differentiated product.

What happens behind the scenes?

Everyone in the room, right from the founder, PMs, sales lead, and marketing lead, will propose a new idea. E.g., the founder might want to solve a unique problem that can help maximize revenue and increase market share. And the marketing lead might prefer having marketing-worthy features that can help acquire more leads.

Though each of their ideas could be valid, ensuring alignment is tricky. And that’s because differentiation is hard.

Let’s look at the most common contributors to the product differentiation exercise to understand this better:

Customer feedback

Sometimes, it’s exciting when loyal customers recommend unique solutions our product could focus on. But if we try to understand where they’re coming from, we’d notice two common trends:

  • They might have seen a similar solution in a competitor’s product.
  • They might propose a solution specific to their company’s problem or hint at how they aspire to work.

The former isn’t anything close to a differentiator, while the latter requires rigorous validation to see if it’s a pertinent problem for the entire customer base.

Adjacent categories

Some companies focus on an adjacent category that solves a different problem for the same target users. It’s the easiest way to earn additional dollars. But, if best-in-class solutions already exist in those categories, it is best, to be honest and decide whether it’s worth putting effort in. Arriving at that decision isn’t straightforward.

E.g., Zoom built a messaging experience similar to Slack. However, with poor adoption, Zoom realized it wasn’t worth pursuing. This is a classic example of a weak strategy. Now Zoom is back to focusing on being the go-to video and voice provider for business customers. 

Analyst suggestions

Analysts from large research firms are great at dispensing reasonable advice that highlights fairly successful trends. They use tonnes of data and research to prove their point. And it’s easy for us to get carried away by their suggestions and give into anchoring bias.

But the real question is whether following existing trends could lead to differentiation. Validating this requires immense research effort.

And the most challenging part while betting on a new idea is to show absolute commitment and keep the team’s morale high. In most cases, it’s like taking a shot in the dark and hoping for the best. 

Nobody talks enough about the painful journey many product teams go through to create differentiated product experiences. Sometimes it’s about taking risky bets, and other times it’s about approaching an idea with absolute confidence.

Nevertheless, only a few succeed in their attempt to build truly unique, valuable, and sustainable products.

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