September 9, 2023

How to build a 10X product?
Over the last 15 years of my career as an innovation consultant and investor, I've had the privilege of witnessing the rise of numerous "unicorn" startups in Silicon Valley. I've discussed the concept of "10X products" with my executive clients on countless occasions. However, I've never had the opportunity to share my insights on this subject with a broader audience — until now. I am writing this essay in the sincere hope that someone will find my observations useful in enhancing their own product.

What is a 10X Product and Why does it Matter?
In the fast-paced world of startups, the term "10X product" is often cited as the epitome of disruptive innovation and business success. Unlike products that offer incremental improvements, a 10X product is 10 times better than existing solutions in one or more significant ways.

Most of the unicorn startups that have emerged over the past two decades owe their success to their ability to introduce highly disruptive products into the market. Therefore, if you aspire to transform your startup into a unicorn, it's essential to understand how to amplify the disruptive potential of your product and to learn from others who have succeeded in doing so. While the idea of a 10X product may serve largely as a metaphor, it is a compelling one that helps ignite the imagination of new startup founders, elevating their ambitions and expectations.

Below, I outline what I believe to be the key elements that contribute to making a product a 10X product: Superior Quality, Competitive Pricing, Better Delivery, and Innovative Business Model. I'll also later, in my next post, discuss the origins of these elements, all of which play a crucial role in defining a product's disruptive potential.

However — and this is important — not all these elements are equally critical for every product. The weight assigned to each element can vary significantly depending on a multitude of factors. In other words, different 10X products derive their value from different combinations of elements, forming their own unique "DNA."

Understanding these variables is invaluable for startup founders. It allows them to identify strategic trade-offs among these elements and to make informed choices that will enable them to build disruptive products more quickly and efficiently. By doing so, founders can consciously shape their strategic competitive advantage based on these trade-offs and decisions.

Key Elements of a 10X Product.

1. Superior Quality
Superior quality isn't just a differentiator; it's often the cornerstone of a 10X product. Whether it's a better user interface, more reliable service, or groundbreaking features, quality sets the stage for customer adoption and market disruption. It's not merely about better — it's about redefining best. Take Tesla for instance. Elon Musk's electric vehicle wasn't just another car; it was a revolutionary rethinking of mobility, with its autopilot feature, long battery life, and state-of-the-art software.

However, high quality is not an essential prerequisite for a 10X product. In fact, many disruptive products initially enter the market with lower quality compared to existing offerings. Take Google's document and spreadsheet software, for example. Introduced in the early 2000s and later rebranded as G Suite (now Google Workspace), it was initially inferior in quality to the then-dominant Microsoft Office.

Nevertheless, Google managed to capture at least 30% of the market by leveraging other elements that contribute to a 10X product: competitive pricing, better delivery, and an innovative business model. Google's software was free, making it difficult for competitors to beat the price. Furthermore, the online accessibility of Google documents enabled seamless, uninterrupted collaboration from nearly any device. The company also employed a then-innovative business model by funding the product through paid advertising in their search engine.

Google's example illustrates that while quality is undoubtedly important, it isn't always the defining factor. Sometimes a disruptive price, quicker delivery, or an ingenious business model can offer enough value for customers to overlook other limitations.

2. Competitive Pricing
A 10X product often disrupts the market by introducing a competitive pricing model. Whether through a freemium approach or by drastically undercutting competitors, pricing can rapidly shift market dynamics. Consider Skype, for instance. It didn't merely make phone calls cheaper; it made them virtually free. Such pricing strategies don't just adjust market dynamics; they fundamentally alter them.

However, just like superior quality, competitive pricing alone does not necessarily make a product disruptive. The converse is also true: 10X products can command higher prices than their existing competitors and still dominate the market. Several examples exist of 10X products that are priced higher yet have managed to captivate markets.

Take Apple's iPhones or Tesla's electric cars as cases in point. These premium products came with much higher price tags compared to their competitors, but customers eagerly purchased them for the substantial value they offered in terms of superior quality, better delivery options, and innovative business models. Concerning quality, the iPhone redefined what a smartphone could be, offering an unparalleled user experience, exquisite design, and a cohesive ecosystem. Tesla's electric cars, on the other hand, boasted long range, high performance, and cutting-edge technology. In terms of delivery, Apple's efficient supply chain and retail presence facilitated quick purchases and seamless software updates. Tesla's direct-to-consumer model enabled more personalized deliveries and offered software updates over the air, treating the car more like a software product. When it comes to innovative business models, Apple's integrated ecosystem locks users into a range of high-margin services, from the App Store to iCloud, while Tesla's focus on software and its direct-to-consumer sales approach are similarly disruptive.

Both Apple and Tesla serve as excellent examples of how a product can command a premium price yet offer incredible value through either superior quality, expedited delivery, or an innovative business model. These instances highlight how technology companies can build 10X products that not only disrupt existing markets but also create new ones—even when they aren't the most affordable options available.

3. Faster Delivery
In our fast-paced world, consumers prize quick and convenient delivery — be it a physical product, a digital service, or customer support. A 10X product often excels in speeding up and radically improving some aspects of delivery, thereby enhancing the customer experience. In a world where patience is a dwindling currency, speed thrives. Amazon Prime, with its two-day, and sometimes two-hour, delivery promise, is a classic example of how speed can build empires.

If fast and convenient delivery isn't your product's forte, don't be disheartened, and don't assume your offering can't qualify as a 10X product. You can still excel along other dimensions, such as quality, pricing, and business model. Numerous products and services have succeeded in disrupting markets despite lacking in delivery speed, primarily due to their revolutionary quality, competitive pricing, and innovative business models.

Take for example new advanced manufacturing systems or 3D printers. They are much slower than mass-produced items, especially for complex designs. However, when it comes to quality, they enable localized manufacturing and rapid prototyping, while being much more cost-effective for small-scale production and price-sensitive customers. They also offer more efficient business models by shifting manufacturing closer to the point of use, reducing logistic costs and enabling customization.

Another example is the Linux operating system in the software realm. In terms of delivery, it was slow and required much more time to install and configure compared to other OS like Windows. However, in terms of its quality, it was highly customizable and robust for various applications. Additionally, being free and open-source, it disrupted traditional pricing models and was further bolstered by a large and enthusiastic developer community.

Each of these examples shows how technology companies can successfully disrupt existing markets or create new ones, even without the advantage of faster delivery. What they may lack in speed, they often more than make up for in quality, affordability, and innovative business models.

4. Innovative Business Model
Sometimes, what elevates a product to a 10X level isn't merely the product itself but the way it's sold, serviced, or monetized. Innovative business models have the power to disrupt traditional markets and even create entirely new ones. Consider Netflix, which redefined what a 'subscription' could mean, moving the focus from product ownership to continuous experience. Netflix didn't merely replace Blockbuster; it challenged traditional media companies and television networks—and continues to thrive.

An inventive business model alone can sometimes make a product or service a game-changer, even if only temporarily. Take Zynga, the social gaming company. Its games were often criticized for being derivative and lacking in depth. Its freemium-based business model was viewed as costly and annoying, and the delivery of its games was plagued by bugs and performance issues. Despite these setbacks, Zynga succeeded in disrupting traditional video game marketing and sales channels by pioneering the distribution of games through social networks.

Groupon serves as another example of a disruptive product propelled primarily by an innovative business model. While Groupon's offers could be hit-or-miss and merchants frequently provided mediocre service to Groupon users, the company nonetheless succeeded in disrupting traditional local advertising markets. It introduced a novel model that enabled local businesses to attract customers by offering deeply discounted vouchers, albeit with certain time constraints for redemption.

It's worth noting, however, that neither Zynga nor Groupon managed to transform their disruptive models into sustainable long-term advantages or become market leaders. Despite this, they each had a substantial impact on their respective markets, underscoring the point that a groundbreaking business model can be a critical factor in defining a 10X product.

Creating a 10X product is an ambitious goal that requires a deep understanding of not just the technical aspects of the product, but also its positioning in the marketplace. While traditional measures of product success such as quality, price, and delivery speed are undeniably important, the modern landscape is ripe for disruption through innovative business models, network effects, and strategic market positioning. Companies like Tesla, Airbnb, and Uber have shown that a novel approach to solving old problems can indeed yield exponential returns.

It's equally crucial to understand that not every 10X product excels in all the traditional categories. Companies like Zynga and Groupon, for instance, leaned heavily on their disruptive business models even when other aspects of their offerings were lacking. Meanwhile, products like Google Docs and Linux prioritized accessibility and community engagement over flashiness or conventional standards of quality and speed.

A 10X product doesn't have to be perfect; it has to be transformative. Whether it's through leveraging new technologies, exploiting untapped market niches, utilizing network effects, or employing disruptive business models, these products change the way we think about what's possible. They redefine industries and consumer expectations, often creating new ecosystems of products and services that thrive in their wake.

As the pace of technological change continues to accelerate, the potential for 10X products to emerge is greater than ever. But to build such a product, entrepreneurs and innovators must think beyond conventional wisdom and be willing to take the risks that come with aiming for exponential impact. In a world where incremental improvements are often the norm, the quest for a 10X product remains one of the most challenging — and potentially rewarding — endeavors in business and technology.