It’s a choice of your basis of competition
One of the fundamental questions you need to answer about your product strategy is whether it’s good enough to just offer your product or service as a world-class point solution–or if it’s time to consider expanding to a suite of products.
Let me explain what I mean by this.
A great example that explains the context behind a point solution versus a suite comes from the software world. If you go back in time, you could choose from two spreadsheet products on the market: one made by Lotus 123 and the other by Microsoft Excel. By all counts, the Lotus product was superior to Microsoft’s Excel, and it attracted a lot of users. But, before long, those same users were converting over to Excel in droves–leaving Lotus in the dust. Why? Because Microsoft offered a suite of products–Word, PowerPoint, Access, etc.–that all worked seamlessly with Excel. That meant that even though as a standalone product it lagged behind the Lotus offering, Microsoft won because it convinced users about the power of the suite. The product graveyards are full of the technically best point solution that was beaten by a suite.
This same scenario plays out in other markets as well. While many startups disrupt and penetrate markets with point solutions, they often need to eventually expand into offering suites or risk losing business to competitors who move in that direction first.
Let’s consider another couple of examples.
We have one customer who worked with us as part of the Inc. CEO Project who offers a point solution where they offered healthcare education programs to consumers. The firm gets hired by big pharmaceutical companies, to help educate consumers about their offerings. And the firm is good at what it does–they are far and away the best at what they do.
The catch is that some of the large pharmaceutical companies they sell to are moving their business elsewhere. The reason is that other companies are offering a suite of offerings that also includes consumer education as one part of a more comprehensive offer. The value to them is that they only must sign a single contract to get access to a range of services as opposed to trying to hire a bunch of point solution providers. Because the education company only offers one solution, they are missing out on some significant opportunities.
Another example of this dynamic is happening in the debt collection business. There are multiple stages of collecting debt that go beyond the practice of hard collection. That might include other kinder and gentler collection services like credit counseling, offering short-term loans, and more. It turns out this revenue cycle management approach yields more collections in total. So, if you’re a company looking for help in recovering payments on debts, you may look beyond hiring a firm that offers only the point solution of hard debt collection in favor of a firm that offers a more comprehensive suite of offerings that match the goals and values of your firm.
Again, it probably makes sense for startups to begin by focusing on a point solution to shorten the window to generating cash and profits. Then, over time, look for ways to drive deeper customer intimacy by looking at the kinds of products or services that are around yours in the value stream to begin building a suite.
A good illustration of this comes from the world of cloud software tailored to small and medium-sized businesses where Zoho, started out with mail management and customer relationship software. But it has since expanded into other areas such as invoicing and accounting. The evolution into a suite has helped separate it from its point solution competitions like Mail Chimp and Constant Contact.
This is also a good illustration of why it can play to your advantage to move first in offering a suite–getting the jump on your competitors–because it forces them to play catch up in a big way.
Strategically, this is a choice to be an innovation competitor, by offering the best and most creative technical solution versus being a customer-intimate competitor and offering a suite of products that solve a business problem. Microsoft won over Lotus because they understood that businesses were more interested in moving data within and across organizations than having a better spreadsheet program. In the debt collection example, the companies offering a suite understand that customers care about the yield on their receivables, not how it is done.
So take a look at your business and ask yourself if you’re like the executives at Lotus who used to sleep well at night believing they had the best point solution product on the marketplace, (and they did)–naïve to the fact that the Microsoft suite was soon coming to eat their lunch by solving the bigger problem.
Maybe it’s time for you to take the initiative and see where a suit that solves a bigger problem might take your business into the future.