Design and differentiation in startups

The last few years have seen a lot of presentations, articles, hires, and entire funds that speak to the increasing prominence of design in the startup world. But why — how does design specifically make an impact on the things that matter in the startup world?

If you are looking to create a venture backed business, it is pretty much understood that you need to be able to create some sort of sustainable competitive advantage to be successful over time. Call it a moat or a monopoly, but somehow you need to have a significant aspect of your business that your competitors can’t replicate.

In the earliest days of VC, that was usually a deep technical advantage protected either as a trade secret or via patents. Over time other routes have emerged (e.g. network effects, unique distribution channels, scale) and in many cases have come to take the dominant role for most software and services investments.

Design can play two main roles in getting a company to a sustainable advantage.

The first is as an accelerator for other differentiation channels (network effects and brand in particular). Products that are clearly well designed have a significant advantage in many of the places that kickstart distribution (App Store features, press coverage, word of mouth) and also lead to better long term usage patterns and better sustain the network effect. The design of a product is also a key part of the company’s brand, and that is becoming more important over time.

The second (and perhaps more speculative over the long term) is as an independent differentiator in the same way that deep technical advantages are — something that is just flat out hard for others to replicate. Since the design of a product is something that you can inspect (unlike say the internals of a very complex piece of software) it would initially seem to be replicable. But, the reality is that great, complete, design is very hard and copycat programs have struggled to reach the polish and clarity of the original even when the copying is pretty blatant.