Product Building Traps Part 2: Competitive parity as a product strategy
Welcome to Part 2 in my Product Building Traps series. I encourage you to read Part 1: Building features instead of improving an experience first.
To begin with, I should put out the disclaimer that this isn’t about disregarding your competition. Understanding your competitive landscape is pretty important for building a successful product strategy.
I’ve seen a lot of entrepreneurs search and obsess over ideas that “no one else is working on.” If not a single other person is working on a problem area you’ve identified, it might be a red flag that you haven’t done your research properly, there isn’t a market for it, or it isn’t a real (or monetizable) pain point. Though there are exceptions to this, it’s generally a good sign if you can find competition for your startup — it helps validate the problem you’re solving and it identifies people who’ve done some work for you to figure out if there’s a market for your product.
I’ve also seen entrepreneurs who disregard their competition entirely. I was one of these very early on. As soon as I was content that a competitor that came on my radar was not doing exactly what I was doing to solve a pain point, I ignored them completely. That can also make your product strategy suffer because you’re disregarding data about what others might be doing wrong or right…and you end up executing your market adoption strategy without all the necessary pieces of information. It’s like swimming across a river with alligators in it because you believe that you’re probably resistant to alligators.
No, competitive landscaping is an important part of product strategy. It allows you to understand how your overall target market might already be segmented in terms of spend, usage, demographics, etc for a better roadmap or adoption strategy. It allows you to understand how best to differentiate. It helps with raising money when you show a deep understanding of how you plan to maneuver a particular space to an investor. And put simply, it can be the fire that drives you to hustle.
However, I’ve also seen entrepreneurs swing to the other end of the extreme when it comes to reacting to competition. Competitive pressure can also drive people to focus too deeply on achieving competitive parity in terms of product offerings or UX. Normally, entrepreneurs who lean this way are worried about losing market share and believe that once they achieve parity, then they can focus on innovating and ‘getting ahead’.
This is a product building trap for 3 reasons:
1. Competitive parity as a strategy is a gamble
I’m not here to tell you that the competitive parity strategy will never work for you. Maybe it will. But it is a risk. Doing a feature by feature comparison is all well and good, but to build your product roadmap to fill the gap without knowing the true value of those features to their own users/clients can lead to spending your precious startup resources on something that may not even work. Just because client X was acquired by your competitor because they were sold on feature Y that you didn’t have, it doesn’t mean that feature Y is providing true value to that client. Try to understand the qualitative and quantitative data behind feature Y’s impact (as much as you can since obviously you won’t be privy to everything) before jumping to add it to your roadmap. If you must lean on competitive parity to achieve market share, at the very least, mitigate risk by doing some proper analysis.
2. You tend to ignore market trends and other opportunities
By placing too much emphasis on competitive parity in your overall strategy, you risk an opportunity cost. In many types of industries, being aware of market/world trends, emerging technology, potential partnerships, etc can lead to windows of opportunities that may give you a higher ROI than having you and your team spend time and resources on bridging a feature gap. At one competition obsessed company I used to work at, we spent a lot of time focusing on competitive parity as a focus for the product strategy. Some months later, their main competitor announced a new blockchain technology on their marketplace platform. Unfortunately, I wasn’t on the team by then so I’m not sure how successful this move played out in terms of their competitor’s engagement or revenue metrics, but based on the current fervor around ‘blockchain’ as a fast emerging technology trend, I’m willing to bet a lot that it has done a lot for their acquisition goals. While my ex-employer was focusing on competitive parity, their main competitor was busy figuring out how to use emerging trends to leap forward.
3. It’s not a great way to innovate
This seems obvious, but I am constantly amazed at how hard it can be for some early stage startups to really grasp innovation. When you’re busy trying to achieve competitive feature parity, you are being a market follower, not a market leader. Again, competitive parity might have some merit in some startups’ long term plans to play catch up, etc, but considering early stage startups have few resources, I’m personally dubious about whether this strategy has actually been effective for many. And it’s not enough to hedge your bets and decide to have competitive parity and innovation as two equal priorities. I’ll leave ‘having too many priorities’ as a product trap topic for another post, but the bottom line is that innovation through experimentation, prototypes, constant collaboration with your team and your target audience takes time, energy and focus. If you force your startup to follow a roadmap where less than a majority of your bandwidth is spent on innovation, be prepared to not actually be an innovator. It’s like funnel metrics. You need a strong top of funnel to get any significant conversion out the other end. If you play lip service to innovation in your product strategy and don’t devote a significant amount of time and resources to it, you’re not going to get anything impactful out the other end.
Instead of focusing on competitive feature parity as a strategy, try instead doing the work to deeply understand your market. You can use market research, user research, your own data, etc to help you segment out your market. Try to understand the types, characteristics and behaviors of personas you are trying to target. Tools like customer journey mapping and early adopter marketing frameworks for early stage startups (I personally like the bullseye framework) can help you identify opportunities for reaching your audience and driving innovative ways to create value for them. Instead of trying to achieve competitive parity, try to position yourself ahead by thinking more holistically and leveraging the environment and tools around you to build a great product. When it comes to beating the competition, why follow when you can take the lead?
Do you find yourself relating to any of the above? Get in touch. Happy to help you avoid product traps and get you on the path to product-market fit.
