Strategy as a Leap Three Steps Ahead
5 Strategy Mistakes I Made as a CEO — and How I Help Others Avoid Them. Part 2
Your product is better than the competition? Then you've probably already lost.
What you see as a competitive advantage might just be a nice-to-have for consumers.
iTunes for photos
In 2009, Pierre-Olivier Latour was traveling through Asia with his girlfriend. He got mad about how difficult it was to store and organize all the photos he was taking.
That’s how the idea for Everpix, a cloud-based photo storage and sharing app, emerged. It wasn’t the first app of the kind, but Everpix aspired to be “iTunes for photos.”
Latour and his co-founders launched Everpix in 2011. It made it easy for users to organize and enjoy their photos scattered across multiple devices.
For $4.99 a month, the service would let you store an infinite amount of photos. It was user-friendly and intuitive.
A feature called Flashbacks sent users daily emails of their photos from the same day in prior years.
Critics raved. Users loved Everpix.
But in 2013, the product died.
Business, like marriage, needs love between two sides — the company and its customers. The difference? In business, love without money doesn’t last.
The founders fell into a strategic thinking trap that lurks around all CEOs and entrepreneurs.
Four strategic cognitive biases
Oversimplification has killed more strategies than overcomplication ever did.
At the strategy retreats I conduct, it often takes all my willpower to stop the team from falling for the sweet lure of deceptively simple logic:
They research the market.
They spot a product or service that doesn’t exist but could succeed
They jump to a conclusion — we have to build it! Bingo!
But if you can build a product, it doesn't mean you should. If it were that simple, the creators of DeLorean, Segway, or MySpace would be swimming in money.
If you follow this logic, you risk falling prey to four strategic cognitive biases at once:
1. The No-Change Fallacy
2. The Iceberg Effect
3. The Empty-Niche Illusion
4. The Satisficing Trap
1. The no-change fallacy
Imagine you took a snapshot of a busy highway. Would it help you figure out how to cross it?
When we research a market for strategic purposes, we often forget that it’s changing every minute. What your CMO shows you in their slide deck is a snapshot that’s already outdated.
If you spot a gap in the market, it's worth thinking about. But don't assume you've struck gold just yet. Your competitors won’t wait politely while you’re rolling out your strategy.
In 2009, when Latour came up with Everpix, 172 million smartphones with cameras were sold globally. In 2010, that number grew to 297 million — and to 472 million in 2011.
In 2010, Apple introduced the iPhone 4, which featured a high-quality front-facing camera, and the term ‘selfie’ began its rise to everyday use. In 2013, Oxford Dictionaries named ‘selfie’ the Word of the Year.
Even investment bankers couldn’t resist posting breakfast pics and beach selfies.
Around the world, people were reinventing the way they captured memories — ditching their cameras and hard drives in favor of smartphones and the cloud. In 2012, Facebook acquired Instagram, which had just 50 million users, for $1 billion.
That was a paradigm shift. In times like these, change moves faster than your ability to process it.
On the surface, Everpix looked perfectly timed. But in reality, the team was developing the product too slowly to keep up with a fast-changing market.
Conclusions:
Never rely solely on market research for strategic decisions.
Dive deep into customer needs and look for the subtle, less obvious ones others overlook.
If you spot a gap in the market and still believe it’s a real opportunity — move fast.
2. The Iceberg Effect
It’s not the competitor’s strong product you should fear — it’s the one they haven’t built yet.
When we research the market, we're only seeing the tip of the iceberg. We can analyze the products our competitors have already released — but not the ones they're currently working on.
In 2010, Apple started developing iCloud, but Everpix’s team didn’t know that. On June 6, 2011, emaciated and weakened by his terminal illness, Steve Jobs introduced the cloud storage. Suddenly, Everpix users had a convenient — and free! — alternative. And as practice shows, “free” is still the most powerful marketing tool ever invented.
Conclusions:
1. If you’re up against big, powerful competitors, operate on the assumption that they’ll try to close every significant market gap — even if they haven’t yet. You can either look for marginal niches or create your own market (find more on the topic at the end of the post).
2. If your product is only marginally better than the competition’s, keep digging — it’s not enough.
3. The Empty-Niche Illusion
If you have a feeling that you’ve found a huge empty niche, trust me — it’s just a feeling.
Latour and his team spotted an untapped need — but underestimated the number of eyes already on it. Pictures have always played a significant role in people's lives — they helped us hold on to memories. And in the early 2010s, as photography was being reinvented, more entrepreneurs than ever wanted to give users a whole new experience.
Finding a huge untapped market niche is harder than hitting the billion-dollar lottery.
If you see a big open niche, it’s either an illusion — or it’s already starting to fill up. Look for small, less obvious niches.
Conclusions:
1. If you believe you’ve spotted a large, attractive niche, take it as a warning — you’re either overestimating its potential or already too late.
2. Jim Dator, a longtime director and futurist at the Institute for the Future, once said: “Any useful idea about the future should appear to be ridiculous.” Many great strategic ideas seemed ridiculous — even absurd — at first glance. Look for the non-obvious ones.
4. The Satisficing Trap
Most people stop looking for perfect once they find something good enough. It's called "satisficing."
Everpix failed to position itself against giants like Apple and Google, who offered fairly robust — and mostly free — Everpix alternatives.
Everpix had some features that Apple and Google didn’t offer. But users basically said, “Whatever — we’re fine as it is.” To users, Everpix’s features felt like nice-to-haves — not must-haves.
As a result, Everpix failed to attract enough paying users to cover the bills — and had to shut down.
Conclusion – leaping three steps ahead
These days, businesses offer customers more products and solutions than they can make sense of. To stand out from the crowd, you need to build unique products and create your own markets.
Creating new markets means that you have to “leap three steps ahead,” that is, change three out of ten characteristics that define any market.
As we discussed before, these characteristics are:
Target customers – people or organizations who satisfy a specific need in this market
Customer needs – the needs they seek to fulfill
Customer value (value businesses create for customers) vs Customer trade-off (what customers have to accept to receive the value).
Monetization model – how businesses convert the value they create for customers into revenue
Sources of captured value – who actually pays for the value
Efficiency drivers – how businesses turn revenue into profits
Place of purchase – where customers buy products
Time of purchase – when they make the purchase
Occasion – what triggers the purchase at that specific moment
Customer experience – the emotions customers feel while buying and using the product
For example, Costco changed the target customers (families with cars only), the core need (buying cheaply), the customer trade-offs (having to buy in bulk), the monetization model (membership fees), and the place of purchase (stores located outside the city) — and now their revenue exceeds $100 billion.
Your market also shares these ten characteristics.
Change one, and you’ll create a new product.
Modify two, and you’ll carve out a new niche.
Alter three or more, and you’ll shape a new market.
Build a new market, and you’ll have no competition.
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These four strategic cognitive biases overlap to some extent, but my goal was to highlight each of them individually. The secret to success in today's business world remains the same: dive deep into your customer's needs and look for what others have overlooked.
If any of these biases sound uncomfortably familiar — you’re not alone. Let’s chat.
Today, June 24, marks exactly one year since my book Red and Yellow Strategies: Flip Your Strategic Thinking and Overcome Short-termism was released.
I’m preparing a special anniversary edition of this newsletter you’ll get on Friday — but in the meantime, you can enjoy a special price on the book here or here.
Visit my website.
Read other posts of this series here.
Nice article. Thanks for sharing your thoughts!
Some good advice for founders in the world of ai