Friday, April 19, 2024
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Segmentation and Differentiation: What is This Thing Anyway?

I has a discussion last week with a friend of mine that's starting a company.  His product has some really innovative technology that came out of a university research project around managing, storing and retrieving data.  We ended up spending almost an hour trying to answer the question "What is it?".  Which of course is just a simple way of asking what is the differentiated value that the solution brings to customers. 

At a high level our conversation went like this:

Me: So what is it?

Him: It's a database.

Me: The world doesn't need another database and you won't win against Oracle.

***intense debate interlude***

Him: Well, it isn't better than Oracle at everything but it's better at certain kinds of workloads.

Me: Who has that kind of workload?

***intense debate interlude***

Him: Telecommunications companies.

Me: So that's not a database, that's a Telecommunications Data Mart.

You get the idea.  It's important because how you would go to market for a "database" would be very different from how you would take a "Telecommunications Data Mart" to market. 

So easy enough right?  Oh I can hear you now – "tell us something that isn't Product Management 101, April!"  Yeah, I know you guys are like that.  So why am I still having this conversation all the time? 
Two main reasons:

  1. If we say we focus on A, it means we're not focusing on B – The addressable market for databases is much bigger than the addressable market for Telecommunications Data Marts but let's face it, you were never going to win a significant share of that big ol' database market in the first place.  Little fish in big ponds get eaten.
  2. We will let the market decide what it is – This is a popular one these days and you know what?  Sometimes it works.  it seems to have worked for Twitter (No revenue model yet but given time the market will come up with one).  Some would argue that's how Second Life stopped being a game (and they are almost profitable).  I would argue that most of the time the market needs a bit of help.  In the above example, the market would probably have decided my pal had a pretty crappy database.  The market decided Cuil was a crappy search engine. It doesn't hurt to tell the market where you're strong if you can back it up.  You do understand your market, don't you?

Maybe I'm just being old fashioned.  Maybe in a Web2.0 world you can put a stick on the market and wait while customers decide if it is a tent pole or a toothbrush.  All I know is that if I called it "The Amazing Doggie Go Crazy Toy" I might actually sell one today.




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