The DNA of Product Differentiation

“How can there be so many video conferencing softwares? It’s like one creates a new feature and the rest copy it. What’s their goal?”

A talented entrepreneur asked me this question recently. Smart.

“What’s their goal?”

It can be difficult to define someone’s goal through observation. What they are striving for might beyond what you’re able to observe.

Setting aside goals, keen observation unveils greater truths.

The greater truth here is that competing products are demonstrating one thing. Survival. Whether it’s their goal or not, it’s what they are doing. They create new feature and it allows them to survive. They copy another’s useful features and it allows them to survive. Some don’t survive – we just don’t see them so easily.

It’s reflective of the evolution of species. A species, whether it’s a stated goal or not, either survives or it doesn’t. The ones that do survive are the ones that evolve. They adapt. They develop new features or die, whether those new features are novel or identical to that of another species.

What underlies these features is DNA. An underlying codified specification that is conducive to life in a particular ecosystem. Like video conferencing software in today’s work environment. Or an Eagle over the Mississippi River.

Over the lifespan of a product, similar to that of an organism, the DNA subtly changes. A whiteboard feature or backdrop feature is added.

Once in a long while, something more than a subtle DNA change emerges. Mutation. A mutation is when the DNA is modified in a way that the product, similar to a species, veers off course in a significant way.

The internet was a mutation of computer communication. MySpace was a mutation of personal websites.

Once a mutation proves it can survive, it becomes a new branch on the evolutionary tree. More subtle DNA changes emerge. New subtle features are created and copied, all resulting in a family of similar products. And the cycle continues until the next major mutation.

A biologist might become excited when they find a new mutation. Their curiosity causes them to study the new species to understand why it branched off and how it survives. It’s a gift that keeps on giving. As the species evolves, the biologist is first-in-line to identify and study the new subtle DNA changes and the major mutations. The biologist also has the knowledge to quickly speed up their research as evolutions continue.

This helps explain my focus within web3.

Using marketing platforms as an example, I view most web3 marketing platforms as a subtle, albeit not too subtle, evolution of existing web2 marketing platforms. They are a bit different in that they market to web3 audiences. Sometimes the platform itself is built on a blockchain. These are small DNA changes. I’m looking for more. A differentiation in the underlying model itself.

The mutation, in my view, is a new feature that creates a new branch of the species altogether. From which more DNA changes and mutations will emerge, all from a distinctly different branch than any marketing platforms before the particular new feature was mutated into existence.

One example of a special new feature is what I call “token-centricity”. When a platform is token-centric, its primary measure of success is the utilization of its token. These platforms don’t strive to suck revenue from its users by selling data or from its marketers by selling clicks. They are not beholden to profits. They don’t kneel to quarterly or weekly P&L reviews. Instead, they build services absent any need for revenue models.

Token-centric platforms, measured by token utilization, are expressly focused on providing utility to their users and advertisers. As the platform increases its utility to users and advertisers, demand for the token itself increases.

Token-centricity liberates platforms from antiquated financial incentives that force them to suck money from the many to pay the few. It enables them to become a new branch on the evolutionary tree that flourishes by focusing on creating utility value that benefits customers, advertisers and the platform alike.