There are times when product leadership makes sense. But more often than not, market evolution and current conditions make other leadership claims more viable and valuable. If you’re a market incumbent looking back at a red ocean and forward at a blue pond, consider changing the game.
In their book, “The 22 Immutable Laws of Branding . . . ,” Reis and Reis assert that if you can’t claim product leadership in your existing market then define a new market. For example, suppose you’re a microbrewery with an unknown brand. You couldn’t reasonably claim to be the number one beer in North America. No one would believe you. But you might get away with claiming to be the number one micro brew in your home state. In making such a claim, you would be defining a new market for yourself.
Similar branding rules apply in the IT industry, but they are more varied and complex. In fact, while there are specific situations where a product leadership claim makes sense, there are other situations where such a claim can be the worst possible strategy.
When to Beat Your Chest about Product Leadership
In the IT industry, differentiating based on product leadership means touting features and functionality, in essence, claiming to have the most powerful, flexible, fastest, software/hardware in your class. When does such a claim make sense? Most commonly, product leadership is a valid strategy in emerging and blue ocean markets, where the vast majority of potential customers are under-served by early versions of new products.
Consider the distribution curve below, which depicts the relative technology needs of a market—customers with simplistic needs being in the left tail and customers with sophisticated needs being in the right tail.
In a market at this stage, the early entrant vendors are in a features race to win as much of the market as they can by satisfying market needs for more powerful technologies. With each new release, each vendor hopes to leap out in front, in the process grabbing additional market share.
Product Leadership in Mature Markets
Fast forward a few years, and some group of those early market entrants will be the incumbents, and most of the product requirements of the large majority of the market will have been met. Put another way, what was once a blue ocean, according to Kim and Mauborgne, will have turned red.
So why all the new features?
Despite having gone well beyond the needs of most of the market, it’s not uncommon for incumbents, in late-stage markets, to fight on for product-leadership. This is true for a number of reasons, the most common being that incumbents, striving to hit growth numbers, continue to build ever more powerful versions in order to drive their highest-value customers into higher-margin products and services. (Christensen. “The Innovator’s Dilemma.”)
Myopia Leads to Disruption
As incumbents myopically focus on product leadership, they become ever more detached from the majority of the market, most of which is dramatically over-served by the ever more sophisticated and expensive offerings of the market leaders.
a The inevitable result is market disruption. In Christensen’s parlance, a “just barely good enough” competitor enters the fray and begins to nibble away at straggler customers. As the disruptor gains more and more capability, eventually it will consume the entire over-served market, in the process, putting the old guard out of business and establishing itself as the new leader.
The moral of Christensen’s story is this: Dogmatically pursuing product leadership in a mature market leaves an exposed flank, which could eventually spell doom. Given my experience, Christensen’s cautionary tale warrants repeating, and often.
Another old marketing adage is this: Build a better mousetrap, and the world will beat a path to your door. While I can’t say whether this notion was ever true, I’ll go out on a limb and say it’s not true today, at least not in most IT markets. Just the same, pursuit of the better mousetrap—despite how effective the current, best offerings happen to be—seems to be the justification for a surprisingly large number of tech startups.
Here’s a common scenario: Some deep market insider with connections on Sand Hill Road looks at the inherent weaknesses in leading products and assumes that building something without those weaknesses—something over-the-top powerful—will upend the incumbents, causing their customers to migrate en masse to the nuclear-powered alternative.
But this approach virtually never works. Why? Because over-served customers, as a rule, neither need nor want more functionality. Put another way, if they are going to switch products, it will be to a just-barely-good enough, lower-priced alternative. Again, this is tried and tested theory, which asserts that disruption must come from the bottom up, not the other way around. In fact, given that incumbents have long since exceeded what most customers need, it’s likely, that the majority of them aren’t even aware of the esoteric weaknesses of their current big-brand product.
The inevitable result is that the new entrant will quickly discover that hardly anyone wants or needs its nuclear-powered mouse trap, leaving it to compete in the ever shrinking, under-served market.
Note that, for incumbents, having a sizable share of the over-served market to sustain them, competing for the shrinking under-served market may make business sense. In contrast, new vendors without an existing base are in a sort of no-one’s land, having nothing to do but retool, reposition, or die a quick death.
The key for IT vendors in mature markets is to make a leadership claim that will specifically target the vast, over-served market—that’s where real growth is possible. And there are two dominant claims that serve this agenda:
Most established vendors have a Value Network (not just their own cost basis but that of their ecosystem members) that prevents them from moving to the low-price spot in their existing market. Consequently, new market entrants typically claim this ground, which has disruptive written all over it. Customers expect less when they pay less, and some percentage of the over-served market (especially the ones that never bought in to begin with, either because of complexity or price) will, in theory, embrace the new, low-price leader’s message.
If I have a problem with the whole disruption concept, it’s this: Christensen’s theory has been so widely circulated for so long that filling that value position—the disruptor’s natural posture—is easier said than done. In markets of any real value, there could be dozens of vendors vying to be low-price leader.
For incumbents that want to stave off disruption or for new market entrants sporting nuclear-powered alternatives, the most powerful leadership claim possible, in my opinion, is Customer Journey Leader.
Back in the day, there was a common refrain among corporate executives: “No one gets fired for buying IBM.” At that time, IBM was the safe choice, not necessarily because of product quality but because of brand equity. Put another way, the IBM brand was a sort of proxy for value, providing ground cover for decision makers regardless of project outcome. But those days are gone, and not because IBM is any less of player. It’s still leading the way in any number of emerging trends and mature market categories.
Rather, times have changed. A number of studies suggest that the large number of change initiatives fail (the general estimate across studies is approximately 70%, a number that Harvard Business Review endorses), regardless of which vendors are the chosen vehicles of transformation.
By anyone’s account, transformation initiatives are inherently dangerous—almost epic in nature, with analogs to oceanic voyages, sea monsters, dragons, and demonic forces lined up against the unlucky Transformation Team leader. So ask yourself this question:
Assuming you’re the one with your head on the block, would you rather have the most powerful product, including lots of features that you may never need, or the product from a vendor that promises—and has a track record of delivering—safe passage to the promise land?
To claim this position, customer success must become your mantra, an ever increasing NPS (Net Promoter Score) your obsession, and you may need to assume a radical budgeting approach, allocating some percentage of marketing spend to service and support—a reasonable tactic for a marketing team intent on transforming every customer into an unpaid evangelist, telling everyone within earshot of the remarkable customer experience you provided them.
The Bottom Line
There are times when product leadership makes sense. But more often than not, market evolution and current conditions make other leadership claims more viable and valuable. If you’re a market incumbent looking back at a red ocean and forward at a blue pond, consider changing the game by turning the red ocean blue. You do this by solving the biggest concern most executives have in this age of failed change initiatives—a safe and sound customer journey.
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