SmoothSpan Blog

For Executives, Entrepreneurs, and other Digerati who need to know about SaaS and Web 2.0.

Blue Oceans and Quanta of Competitive Differentiaton

Posted by Bob Warfield on June 7, 2010

Do markets drive “AND” to the exclusion of “OR?” 
 
Sometimes it seems like it, but the reality is deeper and more mysterious.  This post was sparked by an interesting discussion among the Enterprise Irregulars group.  They were discussing how WebEx had steadily made their offering more and more difficult to love through feature bloat and how Skype’s newer screen sharing features were so easy.  I remarked by asking whether any had read the book “Different: Escaping the Competitive Herd.”
 
It’s a fascinating look at how many businesses are failing at competition simply because of what is essentially feature bloat.  We’ve trained scores of marketers (especially product managers) and consumers to think in terms of big feature matrices.  The theory is that if you can check off more boxes than the other guy, you win.  That has certainly been endemic to the software industry.
 
But, as the book points out, this practice completely kills the passion, makes for lousy products, costs the product’s owners a fortune, and ultimately leads to faster commoditization. 
 
This discussion of WebEx vs Skype is exactly the kind of thing the book writes about.  But Vinnie Mirchandani, who has written a fascinating book (well worth a read!) called “The New Polymath” sees it differently.  He says, “Bob, goes in waves.  Markets drive AND not OR as my book points out over and over.”
 
Vinnie, I hear what you’re saying, but I interpret it differently.  Markets do not drive AND over OR.  Markets know nothing of either.  They are both simpler and more complex, contradictory and inscrutable, sometimes “this” and sometimes “that”.   Markets simply optimize for what they (meaning “we”) like to buy.  Like the judge and the pornography, they don’t know how to quantify or codify what they like, they simply know it when they see it.  They are not open-ended, they are closed, and feed on themselves.  As is so often the case, this means we cannot simply extrapolate the trend and assume the line keeps going.  There are strange attractors of many kinds wherever behavior can be found and especially in Darwinian systems like markets.
 
In this case, “AND” is not a universal principle because of attention span.  When you’ve successfully added your 237th feature, and competing products already have 229 other features, in most cases the market’s attention span long ago gave up caring about your next AND.  After dragging buyers through hundreds of skirmishes over these features, they know your competitors will short have features through 237.  They’re bored, confused, or just too darned tired to care any longer.  For a time they may turn to analysts whose job it is to keep up with the minutiae, but if someone can offer an alternative, they can be reached.  They are immediately attracted to the OR proposition of not having to care about that AND.  In fact, they are often relieved to hear that all those angels on the head of that pin were actually unimportant after all. 
 
The point of the “Different” book is not to even get started on the AND treadmill in the first place.  Is it so surprising that real design rather than simple-minded list building can create a more interesting result?  Not at all.  We see it constantly at work.  If we had to build into our software every single thing the last guy had built, we would never see paradigm shifts.  That which is SaaS exists precisely because the giants are buried in their own minutiae, and the world was tired of it.  It wanted that OR.
 
As the quantum of competitive advantage gets smaller and smaller, it should not be suprising that different physics entirely can take hold.  We must understand whether our market is in the grip of the Newtonian (many features, very small quanta = brands and the Gestalt experience rule) or Quantum (few features, large quanta = features rule) realms in order to be truly successful.  Students of the “Art of War” will know what this means from a competitive standpoint:
 
–  If your market is in the grip of Newtonian physics, where brands rule, throw the feature list out.  Do something different.  Be a Marc Benioff.
–  If your market is in the grip of Quantum physics, where features rule, build a brand.  VC’s instinctively know it isn’t about the features, it’s about who will get big firstest and fastest.  Those companies are building brands.
 
Notice how in neither case was building 237 features the winning formula?
 
These insights from “Different” are just variations on finding the Blue Oceans, but they work.  Surprising how much more often we’re starting to hear this kind of sentiment.  I see it echoed in 37Signals tomes as well as my favorite blogger, Seth Godin.
Go ahead, do something different.

6 Responses to “Blue Oceans and Quanta of Competitive Differentiaton”

  1. vmirchan said

    Bob, thanks for the book mention. You cite Benioff – he and salesforce.com are a case study in my book because of his embracing AND not OR. Big AND not OR, not just small feature level.

    Remarkably, over a decade ago, he and other pioneers like Zach Nelson at NetSuite were not content to just develop code like every other sw vendor does , but also set up data centers, and they learnt how to deliver massively scaled apps management. That forced them to learn about cooling and storage and multi-tenant disciplines most sw vendors outsourced to their hosting, offshore, systems integrator partners. Their alma mater Oracle is just learning to with Sun. Others like SAP still find it distasteful. They chose to do the big AND not OR and delivered it in a package with one contract, SLA etc.

    Of course, the book doesn’t just look at infotech. It catalogs GEs and BASF’s and Hospiras which are doing the next bigger AND not OR – blending 3,5, 10 strands of infotech, healthtech, cleantech, nanotech to deliver compound new innovations. hence the Polymath, Renaissance person reference like Da Vinci good at many disciplines.

    Bob, it’s happening because our challenges in energy, medicine etc are calling for it. There are new markets beckoning…

  2. smoothspan said

    Vinnie, I like the polymath theory of applying more disciplines to out flank too much specialization, but I look at this “AND” strategy differently. Benioff did add data centers, but for me, that was an “OR”. Would you rather have all the features of Siebel CRM (“AND”) or would you rather have something less functional, but different in meaningful ways (“OR”).

    You say tomato and I say tomato.

    Cheers,

    BW

  3. […] Blue Oceans and Quanta of Competitive Differentiaton « SmoothSpan Blog (tags: entrepreneurship) […]

  4. ajaydawar said

    Bob

    Great post and great references to good information. Completely agree with the feature bloat point. I wonder what you think about Google Apps that have less features and are focused on sharing. I know there is great adoption but I am not sure how profitable that business is within Google.

    Applying the blue ocean concept and doing something different is easier, nowadays. What is hard is sticking to it. When one is a small company trying to hang on to every sale that comes along and a customer asks for a feature, it is very hard to resist. Partly because of the deal on the table and partly because of the heavy hitter industry experienced person on your staff who has worked in companies that deliver that feature and is screaming murder for not including that feature to begin with.

    When I worked at Siebel we almost never walked away from a deal if the company had a reasonable amount of money to spend. Sadly, we also never walked away from a feature. Contrast that with Unica that would tell prospects – if you have less than X million customer records then Unica is not for you; please contact vendor A, B or C. Prefer the latter. It takes a well coordinated product management function to pull this off.

    In a B2B context it used to be hard to get good aggregate data on customer needs because of the many different groups involved – sales, SEs, services, TAM, marketing,analysts etc.. I am seeing companies like 37signals, Salesforce.com use the online forums and have customers vote on features to get reliable information on which features customers really need. I hope to see more companies adopting this approach than have PMGMT or PMKTG sit on a few sales calls and assume too much about what features to put in.

    –AD

  5. smoothspan said

    Ajay, I think Google Apps has failed to be “Different Enough.”

    There are well-known studies (not well enough known that I have a link handy, HAH!) that show that when a thing appears to be something, but isn’t quite, that this is more disturbing than when it doesn’t bear such a close resemblance. There is too much cognitive dissonance if the brain is lulled into accepting it as a pure substitute.

    One thing Benioff went out of his way to do was to extoll just how different SaaS really is. He reveled in minutiae like multi-tenancy. He celebrated that it wasn’t just a “hosted Siebel clone”.

    The moral, is if you are going to build a pure subtitute, you just bought into building all the features. We have seen that movie before, and I have written about it here too:

    https://smoothspan.wordpress.com/2008/12/12/what-keeps-microsoft-office-strong-is-incompetence/

    Sorry if the language is strong when I say incompetence, but it just isn’t that hard to build a 100% compatible app.

    BTW, I think that only matters for Word and Excel for a lot of reasons too long to put in a comment. Gmail does a great job OR’ing Outlook. As much as people hate Powerpoint, I am surprised there hasn’t been an alternative that has caught on too. It’s very vulnerable.

    Cheers,

    BW

  6. […] Smoothspan – Bob Warfield […]

Leave a Reply

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

 
%d bloggers like this: