Three gaps that trouble product companies

+ Four Kinds of Product Differentiation

A lot of digital product companies want to create real value that is unique and not easily duplicable by competitors. In the pursuit of doing this, most companies are figuring how to fill gaps across organisation.

Initially, these gaps seem to emerge as gaps in resource planning, decision making efficiency or just plain slowness in execution. If you ask your employees - which gaps exist for company to start creating differentiated value- you could create probably a dozen of categories.

In my experience that is driven by both observing and doing, there seem to be three major gaps that exist, and you could categorise all others into below three. Before we begin, do not forget to subscribe:

1. The Research Gap

A lot of research work across organisations ends up being very similar if it is driven by only market data. Who doesn’t have access to market data?

The Research Gap is defined as the lack of ability to unearth the non-obvious insights - which are not easily derivable and accessible to competitors. Can your organisation consistently derive the non-obvious insights? is the most important one to answer. And if not, what do you need to do to start making it happen?

Companies with great research culture or product discovery process tend to be always in communication with customers - asking them, through surveys, 1 on 1 interviews, focus group discussions and other artefacts, what is the top problem they face and out of those top problems - which problems can the organisation solve for them?

The more and the deeper you communicate with customers - the better and unique the insights. If you end up having an answer to the question: What is is the new insight that your company knows that other’s don’t? and can continue to answer this every month or quarter- you do end up filing the research gap.

2. Actioned Insight Gap

Now, lot of product companies do end up filling the research gap and sometimes also end up knowing insights that are unique because of access to unique/huge user base - but often fail to convert those insights into concrete steps - for example, a follow up survey , a product feature or change in business model.

Actioned Insight Gap is defined as the lack of ability to convert top insights into something concrete that ends up becoming a feedback loop to consider/discard that insight.

Often product companies continue to ‘do things’ knowing they have actionable insights not yet actioned upon. Meetings after meetings, teams would continue to say “we know a secret/insight about our customers that no one else can address” but essentially, no one actions on that insight.

Having the ability to prioritise insights and putting them into action across functions is a great way to get feedback and then decide whether to continue to double down on that insight - or let go of it.

3. The Execution Gap

The Execution Gap is defined as the lack of ability to consistently experiment and learn. The question to ask is: How many times in a month/quarter do we learn something new by executing on an insight?

For product teams, it may mean product feature experimentation (hypothesis-driven). For marketing teams, it may mean improving the funnel conversions by consistently learning what works and doesn’t. For operations teams, it could simply mean better efficient cycles and turnaround times - and consistently actioning on the known issues.

It could mean different things for different functions.

Execution is often confused with “number of features that can be rolled out” but in reality it is “how many times do you learn in a timeperiod” and the result of that learning could be scaling a product feature or killing it.

You can read the case study on Booking.com’s Experimentation Culture and Netflix Experiment Mindset to know more about how these companies aced ability to learn.

From Twitter: Four kinds of Product differentiations

1/ Scale - driven 2/ Insight. - driven 3/ Ecosystem -driven 4/ Ownership - driven Explained in <5 mins 🧵

1/ Scale-driven differentiations are those that cannot be achieved easily by any new entrant. There is unique value that big scale creates - such as 'Economies of Scale' - the cost of creating one more unit decreases as your produce more of it.

Big scale lets you build influence over suppliers, hence you're able to get good deal on cost of goods that no one else can. Big scale also often comes with strong network effects - Example Amazon has great scale and new entrant cannot possibly beat it without burning their soul.

2/ Insight -driven: Companies that know something (that can create value) secretively which no one else does. It could be a unique customer insight, unique recipe of a patented idea. It could also be a skill of its employees/ algorithms (like google's) that creates longterm value

Insight - driven is unique in the sense that great product teams through user-driven mindset can continue to create great customer insights and keep doing it for years. Thats why focus on product management has increased over years.

3/ Ecosystem-driven : Some companies create set of products and services that are interdependent and it becomes tough for users to switch. Example - someone using iPhone + iPad + Macbook would find it hard to switch to Android.

Focus of such companies is to build a whole ecosystem of experience - that even if another company copies one product or service - they cannot possibly copy the ecosystem. Meta's social media empire is a good example and they won't be too hurt if someone creates the next Whatsapp

4/ Ownership driven - means that company owns exclusive rights to do something - could be patent for a drug , ownership of real estate that generates profits, patenting your algorithm such that no one else can copy, and much more.

A lot of startups also start with a unique proposition that they think they own - or they start by patenting a unique way of doing something. Another example is regulation supporting a certain way of doing business and it helps the organisation earn more profit.

And that's a wrap of a 5 min prime of product differentiation types.

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