Some designers mistakenly believe that if they somehow make their product different, it is sure to succeed in the market. The failure of this rhetoric plays out time and again: an innovative menu that makes restaurant patrons roll their eyes, a new feature added in an enterprise software that is promptly copied by competitors, or a photo frame in a new style that is marked down 50% because no one is buying it. What is going wrong here?
That was the topic of my talk at ‘Design the Difference’, a leadership conclave that brings together design leadership in automotive, manufacturing, and other industries. This event, hosted by Altair every year, seeks to demonstrate the high stakes of design and the significant impact it has in shaping the world around us.
Although one must achieve difference through design, it is important that this difference matter to your buyers. Only then will they prefer you over competition, and that is when you would have achieved successful differentiation. Here are three points to consider while crafting a differentiated offering.
At Harbinger, when we were competing with other e-learning software vendors, we decided to make our product different by adding what we thought was a killer feature: interactivity. Sure enough, it made our product very different at that time, because our competitors did not offer it. However, we were surprised when we saw how some of our customers reacted to the feature. While they loved interactivity, they were not keen on buying our product just for that feature. They had a reason to behave that way: They were reluctant to move away from software they were already using. We were up against an entrenched habit.
One customer asked: ‘Can you not sell us just the new feature by itself, and somehow make it work with the software we already use?’ That was our ‘Aha’ moment! It gave birth to Raptivity, focused exclusively on building interactivity in e-learning. Raptivity proved to be an excellent fit with what users wanted at that time, and we signed up thousands of users in the months to follow, driving significant revenue growth.
The big lesson for us was that designing a successful product means listening to your customers.
Simply being different isn’t enough. Instead, it is important that the difference be hard to copy. The early story of Software Defined Networking (SDN) provides a great example of this principle. Back in 2012, when Nicira (later acquired by VMWare) launched its Network Virtualization Platform (NVP), its main hook was that it was decoupled from, and independent of, physical network hardware.
At that time, SDN presented a problem for Cisco, the market leader that made roughly $14 billion annually from the sale of high gross-margin switches. If they were to stay away from SDN, they could not compete with the new players. On the other hand, if they were to embrace SDN, their hardware sales would go down. With networking hardware accounting for 78% of its revenues, that move would result in a significant dip in earnings and revenues in the short and medium term. This dilemma posed by SDN illustrates how a challenger can be different in a way that is hard to copy.
For another example, consider a new manufacturer who enters market with fashionable handbags that are priced low to appeal to a certain growing segment. The entrenched player in the high-end luxury segment gets worried, seeing their overall market share slipping. However, the high-end player simply cannot go after the growing low-price segment without seriously hurting their brand image. Again, the newcomer is different in a way that is hard to copy.
In sum, copying should be hard for your competition to the point of being ridiculous. If they copy you, it should impose a heavy penalty on their position. In an ideal situation, copying you should not make any sense to them.
Lastly, product differentiation isn’t just about designers sitting in a room and coming up with the most creative ideas. A great design is necessary, but not sufficient for a making a product successful. Product success requires that a strategist study the market and find the right niche where it makes sense for the product to compete. The best-case scenario is for the strategist and designer and work together to design a difference that becomes the right differentiator.
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It is important to design a product with a difference. That being said, difference alone does not guarantee success. For a product to be differentiated successfully, it must pass three tests. One, it should be what your customer wants. Two, it should be hard to copy. And three, it should target the right segment. Agree? Disagree? I’d love to hear from you.
