Defending products in the copying economy

Used under CC-BY-SA3.0 : WyrdLight.com

Recently, one of my friend was furious  as said “Damn the competition copied my product’s killer feature and I don’t know what we should do next to compete”. The blunt reality whether we like it or not : our product features will inevitably get copied overnight by competition, even worse a company in China will clone our entire product and sell it to the same customers at half the price. If features from Apple’s products get copied by the likes of Samsung what can we product managers do to better defend our products and kick butt in the market?

“A truly great business must have an enduring ‘moat’ that protects excellent returns on invested capital.” – Warren Buffett in Letters to Berkshire Shareholders (2007)

Typically we tend to resort to patents with the hope that it provided defensibility Patents have their place and purpose. But, the average cost of a patent infringement litigation tend be around $2.8 million. Thats expensive and time consuming way to defend. Patents are a last line of defense. The answer lie in a medieval castle defense tactic. Its the “moat”! The moat defended the castle and made it harder to attack and occupy.  What does a defensible moat around our product looks like? Here are 7 moats we can build around our products:

1. Two sided market places.  Take Uber for example – replicating a feature of the app is easy, getting customers is tough, getting taxi’s drivers to signup on your platform is even more difficult to replicate, providing consistent service across the globe is 10x more challenging. Two sided market places are tough to create and break into – if you can engage and create products that leverage this this make it extremely defensible.
2. Know and play your strengths: What is your businesses strength? Amazon’s strength is logistics, Apple’s in design. Knowing and building products that leverage this strength will make it tough for competition to attack you.
3. Alliances and partnerships : Strong strategic alliances and partnerships with a healthy ecosystem around the product are hard to replicate and make it tough for competition to enter and grab your market. Not all partnerships are equal – so choose wisely to work with companies the complement, extend and enhance your product value to your customers. Ensure partnerships are mutually beneficial so you can win together.
4. Physical barriers: Physical infrastructure (e.g, connectivity, data centers) takes time and resources to build out. It’s capital intensive. This can form a effective moat if the barriers offer a competitive advantage in the market place. Sometimes the same physical barriers can be a liability and can slow you down so careful  physical barrier investments can be a great moat.
5. Switching costs. Sticky products solutions with higher cost to switch to competitors are more defensible. When designing products see how you can raise the costs to switch – without holding your customers hostage. e..g, A product, Evernote is even more useful to consumers the more they use it. Customers can definitely switch out of Evernote (say to OneNote) but it’s a pain.
6. Know thy users: Most of us don’t think of this as an advantage. But, the truth is that the better and deeper you know your customers the better product choices you make as product owner and the more defensible  position your products will be. You will always will have a real edge over your ‘not so customer savvy’ competition – whether its on which features to build, how to build them and building partnerships.
7. Technology magic sauce:  Technology moats and secret sauces have been known to be very effective especially in SaaS and certain consumer products. Google’s search algorithm are their secret sauce – for your product it could be something else – but it’s a moat wort creating.

Building a defensible business is not the only thing you need to do. To kick butt you need to continue to rapidly innovate and keep taking market share.