Building product defensibility and why it matters early
Many people will tell you that in the early stages of a startup or a new product idea, the most important thing you need to focus on is hitting the sweet spot of having a solution that is desirable, viable and feasible — that is to achieve product market fit.
Whilst I do agree that is EXTREMELY important, I want to shed light on another factor that I think is also important to take into consideration early — and that is product defensibility.
More than often in today’s world, there are thousands of startups in every sector competing for the same piece of the market pie. Bringing a great new idea to market without putting time into considering how easy or hard it will be for competitors to emulate is a company at risk of being outcompeted and outdated very quickly. We hear time and time again — a great new product gets launched on the market, and a few months later… a similar product gets launched. Sounds familiar?
Thinking of what makes a product defensible early on is important because it helps shape the way the product is conceptualised, where emphasis should be placed on, and how the product is positioned in the market. Whilst it may not be something that is part of the initial scope, defining it early can make sure we build the infrastructure that enables defensibility to easily be incorporated in when the time is right.
How do we build product defensibility?
- Know your competition, but know your customer needs even better
A classic example of a product that has come in and taken over established companies by really understanding their customer problem is Figma. Prior to Figma, the main dominators in the design tooling space were Adobe XD and Sketch. One would think that these companies would be tough to compete with given their already well established user base and market positioning. However, Figma was quick to realise one key customer problem that was not being solved by existing tools —designers found it hard to share their designs with stakeholders outside the team and work seamlessly with their team on the same designs at the same time.
Hence, Figma’s problem to solve became — “How do we help designers more easily collaborate with others in the organisation on their designs?”
Once Figma created a collaborative design tool that allowed multiple people to easily access at once, the rest became history. Today, Figma has become the number one design tool in the market.
2. Brand innovation
In the late 90’s, the Doblin group created the Ten Types of Innovation framework, led by Larry Keeley. One of these include ‘brand innovation’. A prime example of this is Apple — who truly was a marketing genius. The brand identity associated with the apple products justified the higher cost in consumer minds, even though buyers knew that Apple laptops were not as powerful as some of the other PC models.
3. The network effect
A really common defensibility mechanism is ‘the network effect’. This is most commonly known in social media organisations (e.g. Instagram, Tik Tok) and marketplaces (e.g. Airtasker, AirBnB). At its core, the theory behind network effects suggests as the user base of a product grows, the network within the product becomes more valuable than the product itself.
However, recent studies have shown there are different rates at which network effects peak and plateau depending on the type of company and product. The network effect in itself without continuous innovation may not always be enough to circumvent competitors — take the example of dating apps.
4. Switching costs
Lastly, I revert back to Figma and Apple on prime use cases for creating clever switching costs. Creating subtle switching costs makes it harder for your existing users to switch over to your competitors. At Figma, they have made it extremely easy for you to import Sketch files over to Figma. However, Figma files are not compatible with Sketch. At Apple, the accessories that complement your laptop or mobile such as headphones and chargers are all made unique to Apple. Hence, once again, switching to another type of laptop or mobile makes it that extra little bit harder. Types of switching costs include financial, procedural and relational costs. In line with avoidance theory, as humans, we tend to avoid pain as much as we can even if sometimes the end result may be more beneficial in the long run.
These are just some of the many tactics used by companies to create product defensibility. No single tactic can guarantee a product from never been overtaken by competitors. Most organisations use a mixture of tactics.
Ultimately, keeping close to the customer needs and continuously innovating is a mindset that will help ensure the right defensibility strategy is being employed and iterated over and over again.