At Oyster we have religion around product. We are happy when our customers tell us that they love our product and when they don’t, we try harder to make a product that they will love. I don’t know of any other way to build a sustainable competitive advantage. I’ve heard lots of proposals over the years that involve trying to short cut the process. No matter what you are selling, the product or service you are selling needs to answer the following: do your customers want to use your product instead of anything else that’s out there and will they pay you to do so. The best product – with good execution on all fronts including merchandising, marketing, and distribution – wins.
This is even more true on the Internet because distribution is available to everyone. If you’ve got a widget that you want to sell via Walmart, selling to Walmart is a skill you have to have before your customers can buy your product at Walmart. No matter how good your product, if Walmart won’t carry it, you won’t sell any at Walmart. The Internet is virtuous in that it’s easy for customers to find the best product and because it makes it easier for customers to tell each other how much they love your product; email, forums, marketing in search engines, Facebook, Twitter, IM, etc all dramatically lower the cost of getting the word out, Also, if your product is great, your customers do a lot of the work for you. They link to you (drives your success in Google), they email their friends and family (the level of engagement we get on Oyster from customers clicking on a link in email is awesome), they post your product to Facebook and they tweet about you. Three of those channels did not even exist ten years ago. Arguably they were not even all that relevant as recently as 5 years ago because the Internet was not yet fully a mainstream consumer experience and was instead more focused on early adopters (techies). The best part of all this? No going to Walmart to get them to carry your product. No slotting fees (paying a retailer to put you on the shelf), no Walmart buying cycles to contend with: “we can’t carry your product until we are past our pre-Christmas rush and have more bandwidth to deal with a new product”.
Building a great product is not everything but it’s a huge part of it and in most businesses it’s gating. The execution parts of a business are critical but if you have a great product, it makes it far easier to hire great people who know how to do the execution parts really well. It’s far easier for Apple to find a great retail executive when that executive gets to sell Apple products. Great people want to be around great product and other great people.
Along these lines, here is a great quote from the Sequoia Capital website. With an approach like this, it’s not that surprising that they’ve had the success they’ve had (Google, Cisco, and Kayak just to name a few):
Sequoia Capital in the U.S. caters to the founders and management who have selected us as their business partners. We have learned that the only way to help develop a fabulous company is one step at a time. This only happens if the company makes wonderful products or delivers a service that thrills large numbers of customers. If that occurs then founders, management and employees of these companies prosper. It is only then that the investor deserves to be rewarded. It has to happen in that order. There are no shortcuts.
