One of the most common mistakes in the startup world is believing that a better product automatically leads to success. Itâs a misconception that being 30, 50 or even 200% better than the competition will guarantee market dominance. The reality? Many superior products fail because success depends on much more than just having the best technology.
A better product might not succeed for several reasons: maybe the market doesnât feel the pain point youâre solving, or perhaps you donât understand the complex dynamics at play in the industry. Great technology alone isnât enough. If you donât get the strategy, timing, and go-to-market approach right, even the most innovative solutions can fall flat.
Consider the challenge of selling to government agencies. It doesnât matter how advanced your product isâif you donât know how to navigate procurement or the sales processes that incumbents understand deeply, youâre going to struggle.
At the core, building a great product is only half the battle. Startups need to master market fit and strategy if they want to truly disrupt industries.
Example 1: Blockchain, A Solution in Search of a Problem
The blockchain industry has offered a technology with the potential to disrupt everything from financial systems to supply chains. However, aside from cryptocurrencies, there hasnât been mass adoption of blockchain-based solutions. Why? In many cases, blockchain technology is a solution searching for a problem. It promises decentralization, but the average consumer hasnât been compelled to adopt it because it doesnât address a tangible pain point.
Example 2: Quibi
Quibi, a short-form mobile video platform, launched with a $1.75 billion investment and a high-profile leadership team. Despite having high-quality content and innovative technology, it failed within six months. Why? The product didnât solve a problem that consumers actually cared about. At the same time, Quibiâs marketing strategy misunderstood the nuances of mobile consumption, and its subscription-based model was not well received. This is a textbook case of a well-built product that missed its market. A global pandemic didnât helpâŠ
Selling to Government: Itâs Not About the ProductâŠ
Governments are one of the hardest customers to win, regardless of how great your product may be. The complexities of procurement, bureaucracy, and entrenched relationships make breaking into this market incredibly difficult.
Case Study: Palantir Technologies
Palantir entered the government sector with cutting-edge data analytics technology but struggled early on. Government procurement processes and long-standing contracts with incumbents proved to be significant barriers. Eventually, Palantir adjusted its strategy by hiring experts who understood the intricacies of government sales and aligning its product to solve specific issues for intelligence agencies, which enabled its eventual success.
Incumbents: The Power of Market Entrenchment
Incumbents can be unseated, but it's harder in some industries than others. Established players benefit from long-standing customer relationships, brand recognition, and capital that allows them to outlast newer competitors.
Example: Microsoft Office vs. Google Docs
For years, Microsoft Office dominated the productivity software market. Google Docs entered with a 100% free and collaborative platformâarguably better suited to the cloud era than Microsoftâs desktop applications. Yet, it took years for Google Docs to gain significant traction in enterprise settings, largely because Microsoft had deep integration into corporate IT systems and a loyal user base. While Google eventually found its niche, Microsoftâs market entrenchment shows how incumbents can hold off challengers for long periods, even when those challengers offer better solutions.
The Innovatorâs Dilemma: Why Incumbents Fail
The Innovatorâs Dilemma, as coined by Clayton Christensen, explains how successful companies can lose market leadership by focusing too much on current customer needs, ignoring the potential of disruptive innovations. Startups can exploit these gaps by offering new solutions to underserved segments or by leveraging emerging technologies. The quintessential example is Blockbuster and Netflix.
An Unseated Incumbent: Kodak
One of the most striking examples of an incumbent getting completely unseated is the fall of Kodak. For decades, Kodak dominated the photography industry with its film-based cameras and was synonymous with capturing lifeâs moments. But when digital photography started gaining traction, Kodak didnât move quickly enough. Ironically, Kodak had developed the first digital camera in the 1970s but failed to embrace the technology, fearing it would cannibalize its lucrative film business. Meanwhile, companies like Canon and Sony capitalized on the shift, focusing on digital innovation and ultimately taking Kodak's market share. By the time Kodak pivoted to digital, it was too late. The company filed for bankruptcy in 2012, unable to keep up with the technological revolution it had initially pioneered but failed to embrace. Kodakâs downfall is a classic example of an incumbent failing to adapt to disruptive technology, leaving room for competitors to step in and take over
Strategies for Startup Success
Identify Real Problems: Focus on tangible pain points that customers are willing to pay to solve.
Understand the Market: Take the time to thoroughly understand market dynamics, customer behavior, and competitive landscapes.
Tailor Go-to-Market Strategies: The best products still need the right sales and marketing approach to succeed.
Be Prepared to Educate: Especially when introducing novel technology, educating the market is often necessary.
Adapt and Iterate: Flexibility is key. Startups that can adapt quickly to feedback will stand a better chance of succeeding.
Conclusion
Having a better product doesnât guarantee business success. Superior technology must be paired with a deep understanding of customer needs, effective market strategies, and the ability to exploit gaps where incumbents are vulnerable. At Hawkhill Ventures, we believe in backing founders who have the vision to create groundbreaking products, the market savvy to find an edge and the ability to execute against that backdrop.
A massive congratulations to Paul and Julia who got married this past weekend. An incredible celebration for an incredible couple. Very grateful to have been included and wishing them an amazing next chapter. Here is a blurry photo of them dancing up a storm.