As business owners, we can get so caught up in our solutions that we can become the best in the world at something that doesn’t matter anymore. The problem space can drift right on by without us noticing. This sounds like a pithy business school abstract thing to say, but it has happened to me.
When I started my first company, my partners and I saw an unmet need that was causing quite a bit of pain. We knew it was an area where we could both have fun and make a big impact, so we jumped in and took off. The team out innovated the incumbents, worked hard (I still remember the nights we’d end up hot bunking on the futon we bought at the nearby Fred Meyers), and always over delivered. We built a multi-million dollar company that eventually employed 50 people dedicated to solving this particular problem. The team prided ourselves (and still do) on our technical prowess in this area.
Among our customers, some of the largest software companies on the planet, we were the go-to team. Whenever anyone new came around their peers would send them to us.
We were the definition of the incumbent. Which is why it came to a shock to us as our business started to erode. We were so focused on producing the best possible version of our solution we possibly could that we missed a shift. A competitor came in, elevated the problem space, and radically shifting the playing field. Our solution didn’t matter as much in the new world. It was a real wakeup call.
You can be the best and still lose business
The thing is, we were the best at what we did. We are still the best at it. Another company had out innovated us. They did it by expanding the scope of the problem and finding a solution that better addressed the bigger picture. They met frequently with our customers (and our customers’ bosses), worked hard to understand the broader business challenges, and then found a solution that addressed their business challenge in a way that made our solution less relevant.
This was a brilliant and frustrating lesson. We were dominating right up until we had to reinvent ourselves. What we were best at was no longer as relevant to our customers! The good news is our team is strong. We used this as a wakeup call to get back out in front, listening and innovating in new directions.
It is easy to lose track of the marketplace
Just in case you think this problem is unique to us, it’s not. I think it is far more common than we think. The only reason it isn’t more common is because the even more pervasive problem is the blinders we put on when we focus on our work and not the problem space.
Clayton Christensen addressed this in The Innovators Dilemma and has famously used the example of Digital Equipment Corp in multiple articles. Digital made incredibly powerful computers. They started out fridge sized but got them down to desktop sized. From my understanding, they ended up in the ~$20k range and were hands-down best in class. They were well known to anyone working in tech at the time. As Christensen lays out, they kept on selling well as the PC’s of today started to grow in a parallel marketplace. Digital’s sales stayed relatively steady as the PC market grew strongly around it, until, almost overnight, all of their customers made the switch as well.
Digital was the best and they went out of business
Nothing was wrong with the Digital’s lines of computers. In fact, they were more powerful than PCs. Back in the day, I would have taken a Digital VAX over a PC hands down for their incredible power. They were also 4-5 times as expensive and, for almost everyone, the PC was good enough to solve their problems.
It turns out, most of us don’t need the equivalent (or expense) of a tricked-out Ferrari to commute to work and get groceries (or write English lit papers and compile comp-sci homework). It is way more cost effective and convenient to spend Ferrari money on three vehicles for your family of 5. But, when that was the only thing available, we either paid for the luxury model or went without. Even now, if you go to your local racetrack, I bet you’ll see more Honda Civics and BMW 3 series than you will Ferraris.
This is a long story, but it is a great anecdote for all of us to stay in touch with our marketplace. We need to be less focused on building the best possible Ferrari and instead give our customers the best possible solution for their current problems.
We are all a little narcissistic
Some of us more than others, I know. But how can you not fall in love with your solution? You had a brilliant idea. You solved a real problem. You figured out something that was not obvious to the rest of us. It made money, saved money, and maybe even saved lives! But needs change. If too much of your energy gets funneled back into making improvements to your solution at the expense of losing your marketplace, you will end up with the best thing that no one cares about.
A note to future me
Don’t stop listening to your customers. They are the ones who will show you where to innovate.
Thanks to Jasper Gronewold and Emiliano Russo, Associazione Culturale VerdeBinario for the photos