Competitive Differentiation

Medium will de-amplify Generative AI generated content from its platform and will actively evolve its personalization system to spot and de-amplify AI written content.

Any new, and better way of doing things is technology.

Why it matters: Technology allows you to do more with less.

How: Technology has never been an automatic feature of history. We have to build it.

Footnotes:

• Zero to One

Commodity businesses are businesses without Competitive Differentiation and tend to have low pricing power, slim margins, and a crowded, competitive field. For example, editorial products.

Why it matters: On the bright side, if you intrinsically understand them, then they can become a solid foundation to earn capital and cashflow because:

• They’ve a low barrier to entry making them easier to start.
• There is already an existing wide customer-base. Hence, it becomes a question of standing out. Such markets tend to support many adequately sized businesses.
• Finally, if there isn’t much of a competitive differentiation, then customers tend to stick to whoever is habit-forming and matches their sensibilities.

How to operate: In running a commodity business, there are three primary areas to focus on:

• Owned Identity: Can you tell your story better than your competitors?
• Owned Network: Are you the preferred choice for customers and employees alike?
• Operations: Can you outshine your competitors in efficiency and effectiveness?

Footnotes:

• https://twitter.com/RomeenSheth/status/1664068522421506049

Outsource things that don’t give you Competitive Differentiation. This includes:

• Fixing technical debt, for example, data migration for integrating into one CMS
• Infrastructural elements, for example, warehousing clickstream history

In contrast, you shouldn’t outsource future looking waves of growth. You want to win the wave and not teach vendors how to operate in your domain so that they can sell the same service to competitors.

AI requires a tonne of data and processing power. Compared to local server providers in India, dedicated servers cloud on Cloud Platforms and on-demand servers on Cloud Platforms are 50-60% and 30-40% more expensive respectively.

Inference: Typically, a 4core 32GB machine will you give you 20 TPS.

Training in GPUs: Add another ₹50L in opex for GPUs.

Switching costs is a Competitive Differentiation when customers face significant time, money, or effort barriers to move away from your product and service. This can result in customer retention and recurrent revenue, protecting the company from competition and contributing to its long-term financial health.

Optimizing too early stunts iterative discovery. Instead spend significant money so that it becomes a barrier for others to follow.

For example, many corporates like Google, Apple, McDonalds, Jio, etc. think of themselves as ecosystem and thus invest in and sustain suppliers/investments to expand the entry barrier for competitors, even if their aren’t enough immediate cash returns from those suppliers/investments.

Specialists build labor and judgment in one field across years, which in turn leads to information asymmetry. Then there are generalists.

Why it matters:

• We live in a disruptive and ever-changing world. To stay ahead and innovate, you need specialists to identify and execute on which bets and trends are likely to succeed.
• It is easier to train specialists to become generalist managers but not vice versa.
• Long term, it promotes a culture of excellence because specialists can mentor and nurture other specialists by investing in high-potential people.

In contrast:

• When in leadership positions, generalists talk strategy and big picture. They give high-level directives and then withdraw. They are neither interested nor trained in the nuances of the trade.
• Specialists realize that to grow they need to become generalists and they give up on building labor and judgment.
• Eventually, the whole system fills up with generalists and the system loses its ability to make bets. There is a lack of middle management that can truly roll up its sleeves, obsesses over details, and convert strategy into tangible action.

Product Manager, not Product Owner, should always be on the lookout for secrets, hidden insights and unique perspectives that can fuel Competitive Differentiation. The key is to uncover anything that enables you to deliver superior value or consume fewer resources.

Why it matters: Information asymmetry helps you to identify opportunities and stay stand head of competitors.

The details: These treasures may take the form of exclusive Proprietary Technology, strategic supplier relationships, unparalleled user experiences, cutting-edge Artificial Intelligence algorithms, untapped markets, or game-changing partnerships.

Finalize your conceptual architecture before proceeding to optimize various aspects, such as:

• Product: It allows for the inclusion of more detailed use cases, adding depth to the product.
• Engineering: The technology can be scaled to accommodate a larger user base, potentially expanding to millions.
• Business: The system’s unit economics can be evaluated and improved.

Why it matters: It is slower to experiment and iterate on a scaled product and slows down discovery of competitive differentiation.

The tech differentiation bar has been significantly raised by innovations like OpenAI’s ChatGPT. Companies will soon have to decide their tech footprint – whether they want to be compute-heavy or compute-light.

• Laggards will dismiss off Artificial Intelligence
• Compute-light organizations will mix mainstreamers products like WordPress and with off the shelf products like Notion, etc. that provide Artificial Intelligence without exposing the complexity to users. Such companies acknowledging that they lack the investment capacity to significantly leverage technology for competitive differentiation.
• Compute-heavy players who will invest in obsessively collecting clean data and train models that are specific to their use cases. These are the only players who are likely to gain sufficient competitive differentiation to become market leaders.

Most organizations spend their marketing budget (operating expense) on news products to purchase Digital Advertisements. Billionaires purchase news products in the form of capital expenditure. Below are some news businesses owned by billionaires:

• Ambanis own Network 18.
• Adanis own NDTV and a stake in The Quint.
• The late Steve Jobs’ wife owns The Atlantic.
• Jeff Bezos owns Washington Post. He is the largest individual shareholder in Axel Springer SE.
• John Henry owns Boston Globe.
• Patrick Soon-Shiong owns The Los Angeles Times and The San Diego Union-Tribune.
• Pierre Omidyar owns The Intercept.
• Marc Benioff owns Time.
• Elon Musk bought Twitter.