Differentiated Problem

You want to grow your customer base — fast?

Then you need to get noticed and considered. Prospects need to perceive you as the most compelling choice against competing options.

That’s obvious, right?

So, this usually leads to the realisation… “we need to differentiate!”

Good thinking. But, this can be a trap. Why? It depends where the initial focus for this initiative goes. Founders and executives will often zone in on the product they have built first — by defining a differentiated proposition.

A gross oversimplification of how that goes down:

Founder: “How can we differentiate our product in the marketplace?”

Executive: “We can talk about the unique features and benefits we can provide”

Founder: “Great, let’s do that”.

The problem with this?

Prospects don’t buy unique features and benefits in isolation. They need to connect it to a visceral pain.

This also sounds f*cking obvious. But, it’s the nuance that matters. The no.1 mistake I see companies with functionally differentiated products make is defining the problem they are solving too similarly to competitors.

Inside-out (looking at the market from the perspective of the company), it doesn’t always feel that way. But, to prospects (outside-in) it does.

The problem you are solving can’t be so subtle that only a category connoisseur notices or cares, it needs to be shockingly apparent. So your prospects can distinguish it from competing options after seven shots of tequila and two back-to-back redeye flights.

This rarely happens. There’s often huge overlap in how companies in a category define the problem their proposition exists to solve. Your product could be functionally amazing and unique. But, if prospects think you are solving a similar problem to everybody else, it will not stand out nearly as clearly.

Overall, this category sameness is a favourable dynamic. It’s is your opportunity to really differentiate amongst competing options. Other words: before you define how your proposition is functionally differentiated, first define a differentiated problem you are solving. A problem you can carve out and own as the go-to solution in the minds of prospects.

That means: a pain no one else is pinpointing and articulating acutely. It feels novel, demanding of attention. Sometimes it’s something your prospects have experienced but haven’t found the words to explain themselves. Other times it’s something no one else has highlighted and brought to their attention, or, distilled into such a resonating way before.

The objective is to turn shades of grey into black and white.

You want to be Company D…

Everyone else is solving ABC problem, you’re solving XYZ — creating demand.

Methodology

The way I have laid it out above looks super easy, with the graphics. Once you have identified your differentiated problem it does feel simple and obvious like this. But, that’s just it. Hindsight bias.

The journey to identifying and defining the differentiated problem you are solving can often feel like mental gymnastics. Sole searching. It’s squabble-triggering amongst team members — because its rooted in identity. You have to get in the ring, so to speak.

Why? The notion of ‘the problem’ being solved is buried unconsciously in how everyone innately perceives the existence and purpose of the company. The exercise of prying away at this often surfaces delicate misalignments, uncovering bifurcating truths about what problem the company is actually solving. As it often turns out, a tacit compromise has been met. Meaning: everyone has agreed on a lowest common-denominator definition of what problem the company is solving, which wraps around all of the nuanced perspectives in order to resolve conflict.

The weakness? This ‘compromise problem’ definition will likely be unfocused. If it’s unfocussed, it’s unlikely to be differentiated.

The good news? Your differentiated problem is probably hiding in plain sight.

Here’s what I suggest to uncover it:

1. Interview everyone in the company separately (just key people for larger companies)

2. Ask open ended questions regarding:

   1. What problem the category exists to solve and who for

   2. What problem the company exists to solve and who for (if you are building a new category these will both be the same)

3. Follow up on answers given to probe and tease out insights. For example:

   1. What assumptions are being made?

   2. What evidence is there to support these assumptions?

   3. What are powerful anecdotes?

   4. If something is “practical”, what does “practical” mean?

   5. Use “think back” questions

4. Topics to avoid:

   1. Talking about the product

   2. Talking about features and benefits (both hard!)

Once this is done, gather all the answers and unpack it in the group over several rounds. There is no right or wrong at this point — the least common answers are as important as the common.

Buried in these perspectives should (hopefully) be an insight that helps you define a differentiated problem. A problem that maps to a hypothesis about the type of prospect you are targeting (or helps make this clearer). Namely, a prospect that:

• ⁠Has felt the pain, stakeholder of problem

• ⁠⁠Has tried to achieve similar value, with time and investment

• Solving the differentiated problem is aligned with core motivations

• The delta between where they are now and where they want to be is more than most other competing priorities

As a rule of thumb: the differentiated problem should feel focussed. Really focussed. This is a strategic choice, which involves significant sacrifice. It’s not so much “we’re going to solve this differentiated problem and a bunch of other problems”… it becomes your focus. This IS the problem you are solving. If it doesn’t hurt defining it (in terms of the scope of potential customers you are turning away), it probably isn’t focussed enough.

Before the fact, a differentiated focus is usually not plain to see. If you went treasure hunting, you might imagine finding a nugget of glistening gold on the ground. In reality, the nugget will be partially concealed and covered in dirt. You have to first glimpse it, extract it, and clean it up a bit. That’s mentally how finding a differentiated problem works.

Example

Let’s take a trip down memory lane…

Back in 2013-2014 I was at the start of my journey in building an adtech startup called Yavli. We provided an ad monetisation product for digital publishers in a specific category: content recommendations. At the time, this was a hot and fast growing category (and we were certainly not the category leaders).

Because it was so competitive, it was hard to gain traction. Every player in the category was framing the problem similarly, so the category leaders inevitably gobbled up the most clients by leveraging their VC cash stash and larger advertiser network.

We probed around to find content vertical niches: finance, viral, male millennial, etc. At one point there was a splattering of hope, but nothing took off. Ultimately, the problem we claimed to solve was too similar to the rest of the category. There was too much overlap. Customers (publishers) would swap us out for a competitor without blinking.

Then, we noticed something subtle. One of our early customers reported that our ad unit was loading for ad blocker users (it wasn’t getting flagged by the ad blocking community and removed). When we dug into the numbers, this cohort of traffic was monetising really well. The best across the entire network.

There were a million other things going on at the time, but over the course of a few days (and directional retrospectives) it started to become clear THIS should be our focus: monetising ad blocking traffic.

Going down this direction involved sacrifice. It meant we would be saying “no” to 80%+ of Internet traffic (at the time). But, there was a clear upside: we could highlight a material problem that zero of the players in our category were tackling. Once publishers were made aware of the problem, they were naturally interested in a solution.

Further, this focus took us out of the confines of our category: publishers no longer saw us as a content recommendation solution, they saw us as an ad block revenue recovery solution. Other words: the content recommendation part of the proposition was just a means to an end, not the main selling point. This effect is what I call a Focus Up strategy. It worked!

In summary, how the problem we were defining to publishers changed:

Undifferentiated problem: you aren’t making enough revenue from your content recommendation inventory

Differentiated problem: you aren’t monetising your ad blocked inventory (at all!)

That’s it for today. I’ll be back in your inbox soon. 🤘

Martin

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