“That’s why we love product-focused entrepreneurs because product always wins.”
While I definitely agree on the importance of product (we have some great product-focused companies in the P9Family: Typeform, Kitchen Stories, Honey, …), it got me thinking about the painful cases that have taught me that the best product DOES NOT ALWAYS WIN. At least not by itself. So to all product-focused folks (including myself!), here is a reminder on how the best products can lose.
Neglect network effects
Liquidity is key for marketplaces, communities and everything that thrives on network effects. The importance of getting to significant scale first can’t be understated. Especially since these plays are typically winner-takes-all categories, getting to critical mass first will often make or break you.
In todays interconnected world you will face local competitors shortly after proving that this business model works. Or in fact even before that. This might be more important in Europe than the US, but even there you are starting to see followers enter the home markets of the pioneers (*cough* Rocket Internet *cough*).
Fall for perfectionism
I get it, you have high expectations and therefore want the product to be perfect. It‘s not enough that it’s good, it has to blow everybody away. But does it really have to right from the start? Especially when you first come to market, it is easy to fall into the trap of over-investing in product and design. Don’t forget that you can launch again.
Losing your edge
In fact, you’ll never have a perfect product. You will always be close, but since market dynamics and user behaviour change, it will be crucial to evolve to stay at ahead of the curve. Be willing to re-invent yourself, make tough decisions when you are sure that they will play out in the future and never stop iterating.
Figuring out distribution is key for survival of ANY startup. Yet product-focused teams are particularly prone to recognise the importance of this. This is a real pity! Especially since great products convert a lot better than mediocre ones, they are actually missing the chance to achieve over-proportionate results from nailing distribution.
Lack of funding
There are some great examples for product-focused businesses that have bootstrapped their way to success (Basecamp, WeTransfer and Lovoo come to mind). But for any of those, there are tens or hundreds of good products that were taken over by a competitor with a bigger war chest. You might not need or want to raise capital — but that means that one of your competitors that is willing to do so, will be able to grow a lot more aggressively than you.
All this is to point out that the hustle doesn’t stop at building the best product. While having a great product will certainly give you an edge over your competitors in a direct comparison, in a competitive market the idea that the best product automatically wins is nothing more than wishful thinking. However if you can build a truly great product, you are half way there already. Now make it happen!