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Good enough theory: Why large players still win with sub-par products
Jul 17, 2020
4 minutes read

Startups always seem to be at war with larger players. Snapchat felt an impending doom when Instagram launched Stories, despite Snapchat having a three year lead on the feature. Slack was scared when Microsoft Teams launched, or at least scared enough to buy a full-page ad in the NYT, despite a four year lead.

And in both cases, the copy-cat product had an inferior design and user experience than the original. Instagram Stories initially didn’t let you post old content, didn’t have location filters or stickers, and didn’t have selfie face filters. Microsoft Teams had (and continues to have) a variety of user experience issues and stability problems.

So why is it that startups are worried about larger players with inferior products copying them? Shouldn’t the best product win?

Good enough theory

On the contrary, Snapchat and Slack were right to be extremely worried, due to something I call the good enough theory. This theory is, in short: dominant platforms don’t have to build a better product, just a good enough product to discourage users from leaving their platform.

Snapchat's declining growth in DAU since the launch of Instagram Stories

For example, when Snapchat launched Stories in 2013, they had around 30M users, compared to Instagram’s 100M. When Instagram finally launched Stories in 2016, they had over half a billion users, and there was a precipitous decline in Snapchat’s growth rate. Snapchat built Stories to acquire new users, while Instagram built Stories to be good enough to keep their existing users from switching.

Microsoft Teams overtaking Slack in DAU

The story repeats with Slack and Teams. By 2015, just two years after Slack launched, they had over 300K users, of which 20% were paying, which was unheard of for a productivity workplace product since Dropbox. And yet again, Microsoft launched Teams in late 2016 and in just three years overtook Slack. While Slack needed to sell to new customers, Microsoft just had to make Teams good enough to bundle it into Office 365 for free. The real value came when customers renewed their Office 365 subscription without needing to separately purchase Slack.

So what can startups do?

What can we learn from this? First of all, building a startup is unfair. Not only do you have to build and sell iteratively while staying afloat, but you’re competing against large companies with established customers and hundreds if not thousands of employees that can be deployed against you at a moment’s notice. But if it was easy, it wouldn’t be exciting.

There are still several things startups can do:

  1. Focus on building the best product for your users. People who use Slack love Slack, and that’s how they’ve managed to grow so quickly. As long as they continue doing this, they can maintain their existing user base while the rest of the world realizes that Slack is a superior product to Teams.

  2. Solve major problems for a small subset of users. Microsoft won’t invest in any solution that can’t reach the majority of their user base, while Slack can afford to build extremely specialized solutions and integrations that only a small subset of their customers are willing to pay a lot for. Once you’ve solved for a smaller userbase, take what you’ve built and learned and expand horizontally or vertically. Eventually, you’ll have an established relationship with many paying users while also building a huge barrier to entry for larger players.

  3. If all else fails, solve a different problem. Slack’s new strategy is to become the social network for enterprise. With their acquisition of Rimeto and launch of Slack Connect, they’re targeting a different market than Microsoft, which is now positioning Teams as a Zoom competitor with increased video and voice capabilities. This allows Slack to answer the critical question they’ll face when trying to get any new user – “We already have Office 365, which comes with Teams for free. Why should we pay for Slack?”

In summary, Slack has a much better outlook than Snapchat, which is latching onto its younger demographic as a last-ditch effort of differentiation. All social networks fade, but enterprise products only die with the company. That’s why companies like Oracle still exist despite subpar products but nobody knows what Myspace looks like today.

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