Time to Get Defensible!

A man watching the horizon on the great wall of China

During the last few months I focused on providing the basic foundation for each of the ‘product spheres of responsibility’ (see here). I also covered the basics of product strategy here, and I think it’d be a great idea to revisit this post before proceeding to this one.

Today I think it’s time to step up our game and start touching some more advanced topics. Specifically, we’ll start by taking a deep dive into product strategy.

Now, as a general note, when you go deep on something (and it doesn’t really matter what topic it is) – you need to specialize. You can no longer write a general ‘catch-all’ article. 

Because of that – today we will focus on a very specific aspect of product strategy which is often overlooked – and that is defensibility.

 

If you Google ‘product strategy’ with the goal of understanding how to approach it, you’ll notice that most articles mention that your strategy must cover the market, the product and its value to the customers/users, the competitive landscape and actual goals. This is all true. However, sometimes a product strategy can’t be regarded as ‘complete’ or ‘thorough’ without addressing the defensibility of your product. Meaning – how to keep gaining market share while keeping your competition far behind..

Indeed, if the product you are responsible for is not the ‘main dish’ (the flagship product of your company and what it’s known for) – then maybe it’s ok for you to have a product strategy without addressing the defensibility angle. However, if you are responsible for the main product – I find it hard to see how you can consider your strategy ‘solid’ without explicitly addressing your product defensibility.

 

Why do I need to pay special attention to defensibility? Isn’t focusing on product market fit and value to users/customers enough?

I guess this question reflects the general state of mind of most product managers who are working on their product strategy. “Focus on the value and everything will be ok”.

Damn, I often say so myself.

And again, depending on the prominence of your product – it may be good enough… though… most likely not. I mean – if you focus on the value, the benefits to your customers and driving in full force to product market fit – then your customers most probably would love your product (unless you made some severe mistakes along the way). That’s the basis of growth.

However, don’t forget that you are not operating alone in the market. The customers you’ve just won, or the users you just acquired are the goal of your competition as well. And if your competition is worth something – then they are probably working relentlessly on doing exactly the same – improving their product so they can gain market share on your expense.

Hence, keeping your users and customers happy is one (important) thing, but preventing your competition from making them even happier is the second thing you need to worry about.

What are you going to do about it?

Hmmm… what can I indeed do about it?

James Currier from the NFX Guild (a startup investment fund) has published a wonderful article about defensibility, which I think it’s a must read. You can find it here.

This article summarizes very well the 4 different approaches to defensibility and I don’t think I can do a better job at this, so simply read it.

However, I can definitely help you put those into practical use. So let’s do just that. 

In this article James says that there are types of defensibility approaches:

  1. Scale
  2. Brand
  3. Embedding
  4. Network effect

 

Let’s go over them briefly:

Scale

When you focus on scale as your defensibility approach it means you design your product and go to market strategy to grow much faster than your competition. We are not talking about hiring more salespeople if that’s what you’re thinking. That won’t give you the acceleration and speed you need when scaling your business. We’re talking about finding a method in which you can grow 4X faster (at least) than your competition. 

At such a pace – your competition is far better acquiring you than each and every one of your customers/users.

Brand

When you are a known brand it means you’ve already achieved one of the most challenging marketing goals and that is a market education about who you are and what value you bring. You made yourself known to your potential customers and users and then will think about you first when they require the relevant service or product.

That’s a great place to be in, but sadly – this approach is very unreachable by young companies, due to the costs involved nowadays for breaking into the market’s consciousness. 

Embedding

If you take the embedding approach as a defensibility strategy it means you design your product to make it easy to onboard, but quite hard to ‘rip out’ especially as time goes by. When your customers are thinking about migrating to your competition – just the ‘headache’ involved in switching to your competitor, even if they offer better pricing – is just too big. 

Network effects

If your product has a network effect built into it, it means that each user/customer who uses the product will benefit from it much more if other users/customers will join the service as well. For example – the Whatsapp app – if you own it alone in the world – there is no value for you from this product. It’s your own incentive that drives you to add your family and friends because then your value from the product increases dramatically.

Hence, if your product is designed to have a network effect then your own customers and users will work for you to increase your market share.

This is why James and the whole NFX guild treats network effects as the best form of defensibility.

 

Wait, is that all? What about other forms of competitive advantages?

First, don’t confuse defensibility with competitive advantage. A competitive advantage is something your company does better than the competition. It’s mostly tactical and can easily change over time.

Defensibility is a strategy that doesn’t happen randomly, just because you have better salespeople or a feature the competition still doesn’t have. 

In the NFX article James lists several competitive advantages, which are certainly good to have, if you can. Take a look there for the full list. I would like to mention another one which is often referred to as a defensibility aspect, even though it’s not. I am talking about algorithms!

What’s wrong with having secret algorithms as my defensibility strategy?

Look, don’t get me wrong – algorithms are great! You can leverage (machine learning) algorithms to win market share in various manners. Here are some examples:

  1. Offer a ‘killing’ performance over your competition. For instance – true personalization which will result in an improved CTRs and engagement.
  2. Constantly offer a more efficient solution for your users. For instance – offering a better navigation route that will result in spending less time on the road.
  3. Optimizing costs for either your customers or users. For example – finding the best airline tickets for your destination.

 

So, if you can afford it – you should definitely invest in a quality data science group or even just a single person who is skilled with algorithms so they can help you improve your product’s overall performance.

However, at the end of the day – this is not a true defensibility, because if your algorithm does work, and does become a major selling point – then your competition will put the required effort and match it. It could be that they’ll come up with a totally different algorithm, but from the users’ perspective – it doesn’t matter as long as it works.

Also – it could be that even after putting in the effort their algorithm is still inferior to yours, but the gap is not big enough anymore and a better UX or UI will help them win their users back.

This is why we can’t treat algorithms as a defensibility strategy.

 

Ok, so how do I apply any of those defensibility strategies into my product?

First, let’s prioritize the order you need to consider them:

  1. Network effects
  2. Scale
  3. Embedding
  4. Brand

 

If you have a method in which you can embed network effects mechanics into your product – do so!

If you can’t – then consider how you design your product to scale blazing fast.

If this is too challenging – then consider how you can make the migration costs big enough to become a consideration for your customers or users.

Last – if nothing works – consider becoming a well known brand, though this is not how it usually works. All companies aim to become well known brands eventually. It’s not a strategy by itself in most cases.

I do know a company for which it was a strategy, but you need to understand that in such a case – it’s not dependent solely on you and needs to be part of the overall strategy of the company. It also requires a lot of funding. 

 

Now, as for how to apply it to your product – this is the tricky part: 

The right defensibility strategy and its exact implementation are highly dependent on the product itself and the target market. There is no way I can cover it all here.

However, I will devote my future posts to providing concrete examples as for how to apply each of the strategies for your product – so stay tuned!

 

That wraps up the post for today.

If you found this post/series useful – please let me know in the comments. If you think others can benefit from it – feel free to share it with them.

 

Thank you, and until next time 🙂

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