Competing with incumbents: Balancing innovation and legacy
Competing with incumbents: Balancing innovation and legacy
Flanking alone is insufficient
In the fiercely competitive world of B2B software, simply differentiating your product with innovative features isn’t enough to win over customers from established incumbents. Earlier, I had mentioned how flanking your competitors with unique capabilities is a vital strategy.
That, however, is only part of the equation. Successfully converting customers from an incumbent product often requires not only innovation but also a nuanced approach that includes integrating core, sometimes even outdated, features that these customers still rely on.
The limits of differentiation: Flanking alone isn’t enough
Flanking, as a competitive strategy, involves developing and emphasizing features that your competitors either cannot or do not offer. It’s a tactic that can help a new entrant gain attention and establish a foothold in the market. However, relying solely on building differentiated features is often insufficient when trying to convince customers to switch from an incumbent product to yours.
Customers, especially those who have been using legacy systems for years, often depend on certain core functionalities that have been perfected by incumbents. These customers have built their workflows, processes, and even their own customer relationships around these features. If your product lacks these essential capabilities, no amount of differentiation will make up for it. In fact, the absence of these capabilities could be a dealbreaker.
To successfully attract customers from an incumbent, you must first match the core capabilities that these customers expect. This might mean developing features that seem orthogonal—or even outdated—relative to your differentiated ones. For example, if your competitor’s product has a robust, albeit old-fashioned, reporting feature that your target customers heavily rely on, you might need to build a similar feature into your product, even if your innovative capabilities are far more advanced.
This requirement introduces significant challenges: balancing the development of innovative, forward-looking features with the need to incorporate legacy functionalities. Ignoring these core features can alienate potential customers who see them as essential. However, by including them, even if they seem outdated, you increase the likelihood of convincing customers to transition to your product.
This complexity doesn’t just affect your product development; it also profoundly impacts your go-to-market (GTM) teams, particularly sales and marketing. The way you position and sell your product will vary depending on whether you’re targeting prospects who are not using legacy software or those who are entrenched with an incumbent’s products.
1. Messaging to non-legacy prospects
Focus on innovation: For prospects who are not tied to legacy systems, your messaging should emphasize the cutting-edge, innovative features that set your product apart. Highlight the future you are building and the unique value your product can deliver in a modern, forward-looking context.
Ease of adoption: Emphasize the ease of adoption and the immediate benefits of moving to a new, innovative solution. These prospects are likely looking for the next best thing, and your messaging should resonate with their desire to stay ahead of the curve.
2. Messaging to legacy customers
Bridging the gap: When addressing customers entrenched in legacy systems, your messaging needs to be more nuanced. You must acknowledge the value of the features they currently rely on while gradually pulling them into the future you are projecting. This involves showing how your product can not only meet their current needs but also offer new capabilities that will future-proof their operations.
Gradual transition: Position your product as a bridge to the future, offering a blend of familiar and innovative features. Your sales team should focus on how your product can deliver immediate value while also preparing these customers for long-term success in a rapidly evolving technological landscape.
An essential part of this strategy is recognizing that not all legacy customers will be a good fit for your product. Some may be too entrenched in their current ways, valuing only the tried-and-true features they’ve always used, and showing little interest in your differentiated, forward-looking capabilities. These customers can keep your product stuck in the past, demanding features that don’t align with your vision for the future. Avoid these customers.
Instead, focus on attracting and winning over legacy customers who are believers in the future you are projecting. These are the customers who recognize the value of your new capabilities but still need some of the functionalities they’ve relied on in legacy products. By targeting these forward-thinking customers, you can create a customer base that not only appreciates your current offerings but is also excited about the direction your product is heading.
Navigating the complexity of balancing innovation and legacy
Integrating these seemingly disparate priorities—building both cutting-edge and legacy features—creates significant complexity across your organization. On one hand, you need to drive forward with the development of new, highly differentiated capabilities that set your product apart from the competition. On the other hand, you may find yourself going back in time, developing or refining features that have been standard in the industry for years.
This dual focus can strain resources and challenge your product development strategy. Your engineering team might feel pulled in two directions: innovating with the latest technologies while simultaneously working on features that, by comparison, might feel like a step backward. Meanwhile, your GTM teams will need to juggle messaging that emphasizes your product’s cutting-edge nature while assuring potential customers that it can do all the things they’ve come to expect from the incumbent’s solution.
However, this complexity is necessary for long-term success. The reality is that customers are unlikely to switch to a new product unless it offers both the innovative features they’re excited about and the dependable, tried-and-true functionalities they need.
Embrace the complexity!
The key to overcoming these challenges lies in embracing the complexity rather than resisting it. Recognize that building a successful product requires both innovation and respect for the past. Your differentiated features are what will ultimately set you apart and win new business, but the legacy features will be what convince existing customers to make the switch.
Moreover, your GTM strategy must be adaptable, recognizing that different customer segments require different approaches. Not every legacy customer will be a fit, and that’s okay. By focusing on those who see value in both your innovative and legacy capabilities, you can build a customer base that is aligned with your vision for the future.
In conclusion, while flanking your competitors with differentiated features is a critical component of your strategy, it’s not enough on its own. To truly win over customers, especially those loyal to an incumbent, you must ensure that your product meets their core needs—even if that means developing features that seem outdated. By embracing the complexity of balancing innovation with legacy requirements, and by tailoring your GTM messaging to different customer segments, you can position your product for long-term success in the competitive landscape.