A Simple Playbook for Out-Innovating the Competition

February 11, 2015

Startup Competitive Advantage Playbook

The most successful innovators don’t allow the competition to dictate their next move. They create their own game plans and force others to react.

I love the opening scene from Patton.

If you haven’t seen it, the clip portrays General George S. Patton (played by George C. Scott) delivering a speech to American troops at the onset of World War II. It’s brutal, honest, and inspiring — and a surprisingly appropriate metaphor for modern business.

Patton’s Opening speech to the troops – George… by josephwouk

You can watch the full clip above, but here’s my favorite section from it:

“No bastard won a war by dying for his country. He won it by making the other poor, dumb bastard die for his country….When you were kids, you all admired the champion marble shooter, fastest runner, big league ball players, the toughest boxers. Americans love a winner and will not tolerate a loser.The very thought of losing is hateful to Americans.”

And it should be hateful for SaaS entrepreneurs, too.

In fact, I think the script above is what business is all about. Successful software entrepreneurs never start a company thinking they’d love to the be the 6th or 7th best product in their market. They start — and scale — with the goal of becoming the champion that puts every other competitor out of business.

The Path to Becoming a Market Leader

When SaaS companies are founded, they fundamentally begin in a position of relative weakness.

They have fewer resources, no distribution, minimal brand awareness, and far less capital than entrenched incumbents. Of course, those disadvantages can also be advantages (see: Slaying Goliath: How Smaller Companies Can Beat Larger Competitors). Fewer resources encourages efficiency, and fewer people allows for faster decision-making and agility. Combined, those advantages can allow a startup company to build more innovative products in less time and quickly gain momentum against larger competitors.

Unfortunately, that product-driven momentum doesn’t last forever.

Over time, incumbents begin to notice you. And, depending on the proprietary nature of your product, they’ll likely be able to copy or mimic the product you’ve created. Ultimately, this means that there’s virtually no way to always have the best product at every moment in time. Instead, SaaS startups are often forced to weather development cycles — exchanging blows with bigger competitors and playing a high-stakes game of leap frog.

In the short-term, that approach might allow your business to record some wins. But in the long-term, product-based innovation is not a winning strategy. As Larry Ellison, one of my mentors at Oracle, used to say:

“If you play chess by following your competitor’s every move, you’ll lose every time. When you’re competing with people, you can’t follow your competition’s playbook. You have to establish your own and create your own differentiation.”

A Simple Playbook for Out-Innovating the Competition

In my book, winning in SaaS is all about operational execution and process simplicity.

As I wrote above, you won’t always have the most innovative product. But you can continuously innovate how you sell, how you service, and how you do business. In fact, the more you simplify and optimize how customers buy, use, service, and interact with your product, the better your chances are of becoming the dominant player (see: “Overcoming Impediments to Scale: Why Simplicity is Always the Answer”).

This is precisely the strategy that one of OpenView’s portfolio companies, Intronis, is taking right now (disclosure: I sit on Intronis’ Board of Directors). As an expansion-stage company in a crowded market (cloud backup and disaster recovery), Intronis isn’t the singular, dominant player. It may take years to achieve that position. But that doesn’t mean the business is satisfied with that timeline.

Instead, Intronis wants to win as soon as possible. And its strategy for doing that is directly in line with the theme of this post. Here are just two examples of how Intronis has leveraged operational execution to capture market share faster:

  • Innovating on price: In 2014, Intronis CEO Rick Faulk and VP of Sales Rob Merklinger observed that the biggest issue in every contract it signed revolved around pricing dynamics. Historically, cloud backup and disaster recovery solutions have priced their services on a per GB basis. So, in June of last year, Intronis announced a simplified storage pricing plan that offered its partners a more predictable flat-fee option. This took cost concerns off the table when Intronis negotiated deals, which removed risk for buyers of its services and immediately improved the win and churn rates.

Both of those moves — along with a handful of others that can’t be disclosed in this post — have enabled Intronis to innovate through operations. They’ve made it easier for customers to buy and use their products, and significantly improved customer acquisition and retention in the process.

Winners Call Up New Plays While Competitors Wait and React

Of course, like advantages created by product innovation, the advantages of new business practices, operations, and messages have a shelf life, too. Typically, they might last between six and eight months. Long before that expiration date arrives, however, SaaS executives must begin thinking about their next big innovative play.

What’s the best way to build out your own innovative playbook? By answering these three simple questions:

The best businesses win by finding new answers to those questions before they even show up on their competitors’ radar. Winning, after all, doesn’t happen by accident. It’s the result of intense focus and planning, and relentless execution. And the SaaS companies that truly dominate are the ones that perpetually move the ball down field and force everyone else to catch up.

So, ask yourself a question: Is your SaaS business leading the pack or mimicking the playbook of other competitors? If it’s the latter, you should seriously consider making changes or you’ll never survive.

Photo by: Alan (football play diagram was added)

Venture Partner

<strong>George Roberts</strong> is a Venture Partner at OpenView. He enjoys partnering with companies and helping them achieve their goals through strategy, focus and operational execution. From 1990 to 2003, George spent 13 years at Oracle Corporation, most recently having served as Executive Vice President of North American Sales. While at Oracle, George was responsible for over $1 billion in revenue and more than 2,000 employees, reporting directly to the company’s CEO and Chairman, Larry Ellison.