Technical Advantage and Competitive Strategy
Products with true technical advantage are rare – and fleeting. Most offerings are lightly differentiated, or not at all. When I hear product folks touting their unbeatable technical superiority, I stop to listen for the footsteps of competitors.
Pure Technical Advantage
A handful of products are so clearly advanced that their features define their early market position: 60 miles per gallon in the city. Non-invasive brain survey with radiation beams. Gigabit wireless data transfer. First manned commercial space vehicle. Velcro. Product managers fantasize about having products/services so clearly differentiated, and so far ahead of the market, that they seem to sell themselves.
Early adopters need some specific help understanding and buying your breakthrough product (or service). Typically, they look to you to:
- Explain the value of your technology clearly and persuasively, in terms of benefits and simple use cases
- Provide financial justification so technical users can sell their financial managers on spending money.
Of course, it’s never that easy – and a complacent, narrow view of customer alternatives can make you a target. For instance… in the early ‘90’s Sybase had the first database with “stored procedures.” These event triggers let Wall Street create program trading: computers that could make real-time decisions about buying and selling stocks. Sybase grabbed a lucrative spot in the back offices of investment banks, but (within a few years) found itself out-positioned, out-sold and out-blustered by Oracle and other database players. Each vendor claimed similar capabilities, and had persuasive ways of shifting the discussion.
The Nature of the Threat
If you actually have a technical lead on your market, it pays to think through how emerging competitors will try to unseat you. The US Army calls this “red teaming.” Let’s consider a new company that’s late to the market but has similar technical solutions to our enterprise-focused problem. Assume they have some smart product marketers (trained to sell today’s less-than-perfect current offering) as well as product managers (wrestling to make next quarter’s release better).
Your “red team” is likely to pick a few of these tactics:
- Find an unserved segment. Your whiz-bank database might lack proper audit controls for banks, or wide enough fields for DNA sequencing scientists. Late-arrivers can spot customer groups that you missed entirely.
- Bundle and package. Microsoft, Oracle and Cisco often toss decent-but-colorless products into existing product suites with very little incremental cost. This helps starve single-product competitors.
- Partner with the big boys. If you can get Yahoo (or IBM or Pfizer) to mention, endorse or co-market your product, it impresses customers. Even if the big boys never come through with a single sale of their own.
- Marketecture. Savvy product marketers can always describe their solution as a better fit with standards, upcoming technologies, industry leaders and the customer’s own roadmap. Somehow, you are positioned as narrow, inflexible, a one-product company who arrived too early to see the important trends.
- New pricing metrics. Perhaps some customer segments prefer to pay per month (or per meal, per gigabyte, per job applicant, per virus detected) instead of your enterprise-wide annual license. Consider multiple pricing models.
- Sell high to non-techies. Customers use cross-functional teams to evaluate major purchases. Competitors may focus on the CFO, the compliance officer, or dangle a related sales opportunity in front of the customer’s VP of Sales. Part of selling is identifying the “choosers” as well as the “users.”
There’s no magic here: other product folks will apply these tried-and-true strategies to take away your technical advantage.
So What Should We Do?
Start by realizing that technical selling is not a purely rational process. You need to understand your target market deeply, plan your next several competitive moves, and then arm your sales force with both rational and emotional tools to close the deal. Not only feature comparisons, but also usage scenarios with clear benefits, and perceptive stories that carefully position your company. Plus solid ROI justification for the finance folks.
Avoid technology-driven optimism. Competitors may already be offering substitutes to your (apparently) superior solution. Even those players with technically inferior products are working to distract customers and re-arrange perceptions. We often see “better” products lose to mediocre – but well-marketed – alternatives.
Sound Bytes
It’s easy to believe your own hype about technically superior products, especially if it’s true. Regardless, you still need to listen for the footsteps behind you – and plan competitively.
