A playbook for Generating Business Ideas

3. Same Problem, Similar Solution (Differentiate)
“Differentiating” means solving the same problem for the same or a slightly
different customer segment as an existing company with traction, except with a
slightly different solution. In other words, it means competing with an existing
company on a new or different competitive axis. It means providing a certain
competitive axis, or product value proposition, better than existing companies.
The customers could be the same as those of the existing company, or slightly
different. Depending on the product, the customer could use your product in
addition to, or instead of, the existing company’s product.
Examples of competitive axes which you could compete on, which I’ve included
in the following section, are product, privacy, price, and unbundling. I’ve
provided examples of companies that have applied this strategy.
a. Product/User Experience - iPad
Steve Jobs, Founder of Apple, is widely considered one of the best product
visionaries of all time. Apple’s iPad was one example of many extremely
successful products that Jobs helped pioneer. The “do what’s working”
methodology applies to the product development of the iPad.
Apple’s iPad is a variation of two existing products that had validated customer
demand. The iPad is a handheld portable computer. It is larger than the iPod and
iPhone, but smaller than laptops like the Powerbook.
Compared to other potential products, the iPad was a lower risk venture because
of the validation that the iPod and Powerbook had achieved. The success of the
iPod and Powerbook indicated that there was demand for portable computers,
both small and large.
How to apply product differentiation to your next venture? Analyze one or more
successful products within a category. What aspect of the product might
customers want to be differentiated?

---

b. Privacy - DuckDuckGo
DuckDuckGo is a search engine. They compete almost directly with search
engine titans like Google, Yahoo, and Microsoft. DuckDuckGo competes with
these highly successful companies on the basis of privacy.
Google and others have validated that people see their solution (search engine)
as a viable solution to their needs.
By providing a very similar solution to the one that Google and others have
validated, DuckDuckGo reduced the risk of building something that no one
wants. There is a risk that the competitive axis that they compete on, privacy, is
not of value to customers. But compared to a product with no previous validation
of any kind, that risk is almost certainly lower.
Privacy may even be considered a “known need,” as defined in the previous
chapter. People have been paying for items that provide privacy, such as clothes
and private property, for a very long time.
DuckDuckGo is still a young company. However, especially after the recent
publicity over the NSA’s spying, people seem to be finding privacy over their
personal data more and more valuable. DuckDuckGo is backed by some of the
world's most successful venture capital investors.
How to apply differentiation on the basis of privacy to your next venture? What
other online products put people’s personal data at risk? Could you create a
similar product, but compete on the basis of privacy? Perhaps a private social
network would be valuable to people.
c. Price - Robinhood
A third business model aspect that companies can differentiate on is price. In
practice, this could mean supplying something with a high price and providing it
for less or for free. In order to find the business, the company would have to
either find a different way to make money, or raise a bunch of venture capital.
Examples of companies that differentiate on price are JetBlue, Ryan Air,

---

Scottrade, and Robinhood. Robinhood is an interesting case so I’ll explain that
company in more detail.
Robinhood is a commission-free, retail stock brokerage. Customers can use
Robinhood to buy and sell stocks and receive the best possible trade execution.
Stock brokerage has been supplied to date primarily by big financial institutions,
and often at high prices. It was only recently that discount brokers such as
E*TRADE and Scottrade entered the market and started supplying brokerage at
as low as about $7 per transaction. Many of these financial institutions are very
large and profitable. They are some of the biggest companies in the world.
Robinhood has replicated the service that these companies provide. They are a
“second mover.” More literally, they are a tenth or twentieth mover. Robinhood
differentiates their offering through the business model aspect of price. The
company provides transactions for free.
Robinhood is using venture capital to fund the company. According to
Crunchbase, Robinhood is funded by Andreessen Horowitz and a few other of
the most respected and successful venture capital firms in the world. According
to Robinhood’s website, “Robinhood will offer margin trading as well as API
access, which will allow partnered developers to build applications in
conjunction with Robinhood. Robinhood will also receive remuneration for
providing trade volume in certain markets. In the future, we plan to offer
premium services for active investors.”
How to apply pricing differentiation to your next venture? Think of a product or
service that people pay for. If you provided this product or service for free or
extremely cheap, how else could you make money?
d. Unbundle
It used to be very expensive to package and bring a product to market, so
products were bundled. To buy one product or service you usually had to buy it
with several others. However, technology has made it more efficient to package
and deliver individual products.

---

By unbundling, the offerings can be improved because producers are completely
focused on that specific offering. The products may be more specialized, lower
in price, or a better value.
By supplying a product, service, or value proposition that was previously
provided within a bundled offering with validated demand, you reduce the risk
of building something no one wants. If the bundled offering has traction, there is
some data to support the argument that the product, service, or value proposition
has market demand.
Instagram unbundled the photo sharing component of Facebook, and was later
acquired by Facebook for $1 billion! Online education companies like Udemy
and
Skillfeed
unbundle the learning component of education.
Fedora
has
unbundled the software component of Udemy for instructors.
Below are a few examples of other industries that are unbundling or are ripe for
unbundling:
●
News/media – We used to buy one newspaper and get world, local,
sports, etc. Now it’s all from different sources.
●
Banking – Entrepreneurs are picking off offerings of large institutions
and offering them as network-based business models, or differentiating
them in some way. For example, Lending Club for peer-to-peer consumer
lending, and Robinhood for stock brokerage (as discussed above).
●
Education – Large institutions have been bundling things like physical
location, professors, libraries, networking with other students, learning,
etc. Each of the many value propositions that college offers could be
offered as discrete products or services. In many cases, these value
propositions are already being offered in unbundled offerings.
How to apply unbundling to your next venture? What products or services do
you buy for more than one reason? What products that you use have more than
one value proposition or benefit? What product or service could you supply that
would cover just one of those value propositions?

---