Stuck in a stagnant market? 6 ways to reinvent your product strategy

December 13, 2010

A systematic framework for value innovation

Expansion stage software companies, such as our portfolio companies, often hit a couple of bumps in their growth trajectory. Typically, one of the issues they face is expanding outside of a limited market, such as that of an early adopter’s market, or finding growth outside of a crowded market with many competitors. For example, one of our portfolio companies, Central Desktop, has been competing in the extremely competitive market of “project management and collaboration software”. In recent years, the maturation of this market led to rapid price erosion and commoditization of typical feature sets, forcing competitors to find new markets or niches that allow them to differentiate by some degree of specialization.

How can a new startup reinvent its product to address new markets, or to expand its existing market enough to attain the rapid growth their venture capital advisors are always urging?

These issues concern not just product strategy but also the entire corporate competitive strategy and positioning. There are some well-studied examples and framework in innovation management that can be readily adapted for these situations. Kim and Maubourgne, in their 2005 book “Blue Ocean Strategy“, listed 6 “frontiers” or “perspectives” into which innovations can be directed to create new markets or regenerate existing ones. They are:

 1. Substitute industries: That is, to look beyond direct competitors and see the market as the aggregate of both direct competitors and substitutes. For example, the most potent competitor to all project management tools is in fact Microsoft Excel.
2. Strategic groups within industries: That is, to redefine market segments within an existing market, deliver outstanding, differentiated value to those segments, and grow the market from within.
3. The chain of buyers: Most companies only focus on the immediate buyers yet they neglect to address influencers and users who might ultimately become buyers, given a sufficiently attractive value proposition. As an example, for a long time RIM dominated the smartphone market because they served the needs of corporate IT departments very well. Apple does not have great corporate email on the iPhone, but its outstanding form factor, user friendliness and versatility allows it to appeal directly to the corporate users who are flocking in droves to the iPhone, despite their IT department’s misgivings.
4. Complementary product & service offerings: Expand a product horizontally by integrating with other products and services that serve the same market segment. 37signals does this really well by integrating with many other web-based software tools that form the backbone of small business software systems.
5. Functional or emotional appeal to buyers: Sometimes the way to differentiate is to go against the industry norm. Again, Apple has written the book on this, as they keep coming out with models after models of beautifully designed, expensive looking laptops that are priced at a premium to the market, even as other PC manufacturers try to soup up their offerings with more and more powerful processors.

6. Time: This is perhaps the most subtle of the perspectives. Essentially, Kim and Maubourgne identify “shakers and movers” in the industries who, instead of waiting for external forces to shape their markets, participate fully in the development of the market, either through internal innovation, strategic investment or regulatory changes. They become the headliners, the frontiers moving vanguard that really define brand new markets.

Chief Business Officer at UserTesting

Tien Anh joined UserTesting in 2015 after extensive financial and strategic experiences at OpenView, where he was an investor and advisor to a global portfolio of fast-growing enterprise SaaS companies. Until 2021, he led the Finance, IT, and Business Intelligence team as CFO of UserTesting. He currently leads initiatives for long term growth investments as Chief Business Officer at UserTesting.