Why Product Managers Need To Learn To Love Being #2

by drjim on April 16, 2012

Sometimes second place is where product managers want to be…

Sometimes second place is where product managers want to be…

If you’re a product manager, then you always want to be a winner, right? It’s almost an integral part of our product development definition — you want your product to storm into the marketplace and kick some butt and become #1 overnight. You want to climb to the top of your marketplace and you want to stay there forever. Sounds simple, doesn’t it? You’d be right if it weren’t for the fact that sometimes you’ll be more successful if your product is #2…

The Problem With Becoming #1

Yes, becoming #1 sure seems like a great thing to do. Look at Apple’s iPhone, look at Google’s search product. We all know that these products are #1 and that they are very, very successful. That’s the kind of story that every product manager wants to add to his or her product manager resume

However, what we’re missing here is that it’s very expensive in terms of both time and effort to become #1. Also, there’s the downside in that once you become #1, everyone else in your market starts to try to take your position over – you have become a target.

The other challenge with becoming #1 is that nobody ever stays #1 for long – it’s always a temporary position. This was the challenge that I faced recently when I was working with one of my customers who sells products in the telecommunications space.

They had just developed a new product that promised to provide the fastest service to a very specific segment of their market. They were very excited about this new product and they wanted my help in determining how they could go to market with it in order to gain the most market share.

The problem that I quickly identified was that the customers that they wanted to go after had already solved the problem that their product addressed. These potential customers had needed a solution and so they had gone with the only solution that was available to them – which just happened to be offered by my customer’s competition.

The majority of the potential customers for this product were now locked up into multiyear contracts and there really were not that many customers available to buy my customer’s new product no matter how great it was. Talk about a product management problem!

Why Being #2 Is Sometimes Better

The more that I looked into my customer’s problem, the more that I realized that the end customer for their product was actually spending a lot more money on a solution than we had originally realized. It turns out that yes, they had solved their initial problem by selecting a competing product. However, they were required to also have a back-up communication path just in case something happened to their primary solution.

What this meant is that they were spending a lot of money to stitch together a second solution. Ah ha – an idea was born.

I sat down with some potential customers and discovered that they were eager to find a better solution for their backup solution. The way that they had solved this issue was not elegant and they weren’t very happy with it. Clearly this was a market that was waiting to be tapped.

You might think that that was the end of the story, but it wasn’t. My customer had a hard time with this idea. They were very, very proud of their product and they really wanted to go to market with a big splash and become #1. I think at one time or another we’ve all felt this way.

I ended up sitting down with them and having a long talk with them. The concept was simple, the explaining took some time. I pointed out that capturing a part of the “I’m #1″ market would be good, but it might be a struggle to make and keep their product profitable. However, there was a real opportunity for them to capture the lion’s share of the backup connection market and nobody else would be competing with them for that.

When you are #2, you generally have to price your product lower than the company at #1 does. However, there is a real good chance that you’ll be able to sell a lot more of your product and this means that your product could end up making a lot more money than the #1 product. In the end, isn’t that why we do what we do?

What All Of This Means For You

Everybody likes to be #1 and product managers are no exception to this rule. We’d all like to think that being #1 is a part of our product manager job description. However, sometimes we need to pause for a moment and determine if being #1 is really the best thing for our product.

When a product manager focuses on making their product #1, then it takes a lot of time and energy to get there. Assuming that it’s even possible, once you become #1 it can be very difficult to hold on to that title when there are so many competitors trying to steal your crown from you.

An alternative is to shoot for the #2 spot. This can be a much less contested position for a product. Additionally, it may turn out to be more profitable for your product because the available market may be several times larger for you.

Product managers always have to consider what’s best for our product. Sometimes our own ego can get in the way – we all want to be #1. Next time you have an opportunity to consider where you want your product to fit into a market, give the #2 spot a consideration – it might be a perfect fit…!

- Dr. Jim Anderson
Blue Elephant Consulting –
Your Source For Real World Product Management Skills™

Question For You: Do you think that there is any effective way to convince your sales team that being #2 is better than being #1?

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What We’ll Be Talking About Next Time

As product managers we are always looking for someone to tell us how we could be doing our jobs better so that we can look even better on our product manager resume. The problem is that it’s all too often hard to find someone who can give us good advice. Is it our boss? Our competition? Somebody that we bump into at a trade show? Or could it be the 90-year old former CEO of the successful Bergdorf Goodman retail chain of stores?

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