However, there are many instances when execution alone is not sufficient. For example, many marketplaces have significant network effects which give first entrants an important advantage. Once a marketplace has sufficient users, it becomes very difficult for a competitor to acquire users to a new marketplace where there are only a few buyers and sellers. The switching costs for existing users are simply too great and new users have an incentive to go to the platform where they will have the greatest number of buyers and sellers with whom they can transact.
Despite the crucial nature of execution, there is therefore a preceding step which entrepreneurs can use to differentiate their startup. In particular, you can build a product or service which is different from what the competition is offering. If you are imitating a competitor which is reasonably skilled at execution and are fortunate to be in a field where the first mover doesn’t have a significant advantage, you are likely to capture a similar fraction of the market at best. If you happen to be an imitator in a field where the first mover has a big leg up, the outcome will likely be much worse. But if you do something that your competitors are not doing, you have the chance to create a new market or to capture a much greater share of an existing market.
A case in point is Ginger.io, a big data startup which uses passive and active smartphone data to help physicians and hospitals monitor their patients. The key differentiator here is the passive data. Most competing healthcare startups rely on active input from patients to monitor the progress of their disease. This is costly for the patient in terms of time and effort as they often need to input their data multiple times a day. Patients may forget to record their data or be unwilling to disclose information if they feel like they aren’t making progress. The benefit of passive data is that it requires no patient input. By monitoring a patient’s smartphone usage behavior and changes from a baseline, including who they call or message, how long they talk for, and the time of day when they use their phone, Ginger.io is able to complement a patient’s active data with passive information to more accurately monitor the progression of their disease. Best of all, obtaining this information requires no effort from the patient. The information is then used to help physicians and hospitals produce better treatment outcomes in a shorter amount of time, which ultimately reduces healthcare costs.
As Ginger.io is experiencing, there are very real benefits to doing something that your competitors aren’t doing. You find it easier to acquire customers who are attracted by your novel approach which is a great improvement on the status quo. This cascades to other areas of your business. Current employees are more motivated because they are pursuing a cutting edge idea, and prospective employees are easier to hire because they want to be part of the innovation which you’re producing. It’s also easier to raise capital because investors see more defensibility in your idea. You’re no longer simply competing on execution, but also on product. For all these reasons, the next time someone tells you that it’s all about execution, remember that you’ll be much more likely to succeed if you’re executing in a different direction than your competition.