Startups Today Are About Marketing, Not Product, And That's A Good Thing

One recent trend in technology is its commoditization. Prices for hardware, server space, and software development are plummeting. It’s getting easier and easier for a few people in a garage to build something that millions of people can use.

Ideas are also getting cheaper. Most new apps can easily be replicated by other people. Just look at what Rocket Internet from Berlin is doing. They see which startups are most promising in the US, and they shamelessly and beautifully crank out copycats within a matter of months. To make matters more competitive, they often come out with copycats in their home country and in the US in order to compete directly with the US company that inspired them! 

You can see this commoditization trend with physical products too. You can easily find a product on Amazon, and then head over to Alibaba to find numerous factories that can make it for you at wholesale rates. Suddenly, having a unique product isn’t a competitive advantage, because products are no longer unique.

The commoditization trend is fueled by technology because technology increases productivity and therefore lowers costs, which are passed onto customers as lower prices. Any startup now has the same server firepower as a giant like Netflix with Amazon AWS. With a few phone calls and Google searches, anyone can create their own line of designer handbags, list them with Amazon FBA, and start fulfilling orders without ever seeing their inventory.

The barriers to entry for new businesses are falling. It’s getting more and more difficult for one size fits all companies to exist because superior products are not defensible against new entrants. My thoughts on this are largely based on Clayton Christensen’s The Innovator’s Dilemma, and because of this I believe today’s startups need to spend far more time on marketing than on product.

This is a good thing that today’s startups need to spend more time on marketing rather than on product because it means there are more and more available opportunities. It also drives innovation which is good for consumers. 

The commoditization trend is giving rise to the startup with a market perspective rather than a product perspective.

Let’s take project management software as an example. Say you wanted to make project management software. With a product perspective, you’d probably search Google and see dozens of different companies offering a project management tool. You’d then probably be discouraged, and would say to yourself that since it’s already been done before, you better not try.

On the other hand, say you approached project management software as a market? You’d find project management tools for the Fortune 500 as well as many other apps for small businesses. But, would you find project management software specifically for video editors? Or graphic designers? Or accountants during tax season?

It’s easy to look at the market perspective with a small idea like project management software. But what about a product that requires a huge initial investment upfront, like on demand car service.

The two major players are Uber and Lyft. Uber is the leader, and caters to nearly everyone, but their branding is designed in order to make the average joe feel like a celebrity. Lyft on the other hand attempts to differentiate themselves by fostering community within their service. Both companies provide pretty much the same service as the end of the day.

From the product perspective, the market is saturated with Uber and Lyft. Uber is worth $50 billion and Lyft is worth a few billion, so you’re done in this space, right? Well, what about an Uber for senior citizens? Or an Uber for teenagers? From this market perspective the opportunities seem almost limitless.

How should you use this new trend?

On the one hand it may make you fearful, since you know it’s only a matter of time before other people copy your idea. Perhaps this is why startups like Uber raise huge amounts of money in venture capital as fast as they can, in order to scare away would be competitors. Or this trend could empower you to know that competitors only serve to validate your idea, and if you focus on a segment of the market and serve them better than anyone else, then you can confidently build a viable new business.