Wither the low-hanging fruit close

7th July 2016
Wither the low-hanging fruit

It’s an interesting time to be a product studio. As the major distribution platforms for software have matured and encouraged loads of new market entrants, both competition and established monopolies have increased in what seems like equal measure.

These days, when one has an idea for a new product, the chance of finding at least 3 or 4 funded competitors is incredibly high. This hasn’t seemed to distract seed investors, eager to make gambles and well insulated from their downside thanks to tax credit schema like SEIS (in the UK at least), but the ’Series A Crunch’ is well documented. What does this mean for people who are dedicated to new products?

From our perspective, there are two distinct, viable new product approaches emerging. The first can best be thought of as the Slack/Uber approach: Take something people know and are familiar with, but make the experience much, much better, expanding the total addressable market as you go. The second is the opposite and most simple to understand: build a moat by doing something hard, which will take a lot of specialised effort to emulate. Today I’m going to address the first option.

On face value, this doesn’t really look that new or different, but the conditions of the market for software have observably changed. Received wisdom used to be that you’d be fine once you found a problem to solve (that people were willing to pay for). While this can still be considered broadly true, the test for willing to pay for has become a lot higher.

Due to the flood of entries into the software market, competition is fierce, and, while people are consuming more software than ever, they’re incredibly discerning about what they choose to buy. Finding a problem and knocking out a simple rails app over the weekend might solve the problem, but turning it into a real business is another thing entirely. It’s back to marketing basics; really looking at the market and trying to spot a weakness in your competitors that you can exploit and which they’re unable to react to.

The most obvious example of this is Slack. They looked at the workplace chat market and decided that, despite there being a large amount of incumbents, they all just weren’t getting it. They built a client with an engaging brand and bots at its heart and have been able to become a growing force in a very well established market.

Slack decided to differentiate on brand, design and UX because they perceived that their competitors were vulnerable in those areas. They exploited this vulnerability through smart on-boarding that allows small groups to create free channels and build a beachhead in their organisations (which likely already used one of their competitors), without requiring any organisational buy-in.

This is a textbook example of how to behave in the new reality for startups. You may perceive a problem, but you’re almost certainly not alone in the market like you once may have been, so you need to compete. It’s quite nice actually, it feels like tech is approaching the real world, rather than the fake world of easy seed rounds and no requirements for performance.

Our portfolio company, ScreenCloud, is doing this well. They have found a definable market and gone after it in a new, novel way, with both a good interface and a solid technology offering. Their cost and on-boarding process, like Slack, is much more favourable than that of their competitors, who offer expensive turn-key systems that require a lot of configuration and management. They enable people to take control of their digital signage in a new and novel way that will redefine the category, hoping to turn some of that inspiration from Slack into emulation.

This new reality this plays to our strengths at Codegent. We own Thin Martian, a specialist digital interface agency, and so are following Slack down the path of good, smart design. We think this new environment is exciting, an opportunity to really push ourselves forward to create engaging, loveable products, driven by having great UX and design contribute to strong business fundamentals, rather than by speculation. We’ve adopted to the new normal and are thriving.