What to Do When a Competitor is First to Market
HRTech is in a pretty heady heydey at the moment. VC funding is at an all-time high, companies are getting millions if not billions of dollars for features, and huge legacy corporations are building innovation labs to create new and innovative platform value-adds at a breathtaking pace. In Josh Bersin’s recent HR Technology Market 2019: Disruption Ahead report he notes the HR technology market grew at an astounding 10% last year, with organizations increasing their investment in HR tech by 29% year over year.
If you’re in charge of an HRTech product or platform, you’re either part of this breakneck rollercoaster or you’re wondering how to get on the ride. After all, global VC investment into HR technology in 2018 surpassed $3 billion. With companies merging and buying startups all the time (taking the tech with them)…how can you ensure your platform stays relevant and competitive?
Typically, there are three strategies leaders can employ when a competitor suddenly comes out with a game-changing feature or product. Build, Buy or Bust. We’ll discuss the pros and cons of each because it seems like no field is quite so exciting as HRTech these days and new competitors are constantly cropping up.
When a competitor is first to market, everyone else in the landscape or vertical will be paying very close attention. Some will get caught flat-footed and others will be working on a game-changer of their own. And some will choose to build.
Build Your Own Version of the Competitor’s Tech
There are a lot of great reasons to build your own tech in-house. By building on your own you can direct the product roadmap, you can watch any missteps your competitor makes and avoid them, you’ll own the IP, and it will integrate very well because…well, you made it.
But building your own tech in-house has its drawbacks as well. For instance, your CTO might be frustrated at the use of resources and changes to the product roadmap, your CFO may feel it’s just too big an investment to make this year, and practically speaking…it just takes too darn long! By the time your product is scoped, built, tested, and launched, your competitor will have majority market share. If your goal is to compete in this new category right away, the building is a poor choice (Not to mention you’d be taking resources away from enhancing your core product with this approach).
Buy a Startup Who’s Built Similar Tech
Another common reaction to a new leader in a category is to acquire a company that seems to have the technology or platform to provide something similar to what your competition is selling. And in some cases, this has worked out really well. Buying a startup has its advantages. You can go to market more quickly, and cut the market share of your competitor, you’ll own exciting new technology and possibly some really smart people, and everyone loves a post-acquisition press barrage.
All of the above sound pretty great but they’re only true if you do your research. And most companies scrambling to get out there and sell don’t. The flip side of this rosy picture is that sometimes the tech doesn’t integrate perfectly or even at all causing more problems than having no technology at all. Another common con is that the tech may not be as advanced as it looked at first blush. This can make the purchasing technology route a little worrisome.
Dismiss a Trend and Keep Your Head Down
In HRTech, we’ve seen lots of companies try this approach. Job boards come to mind. It can be comforting to keep your head down when a new trend hits the market but it’s a dangerous long-term strategy. Eventually, the new and shiny will become standard and then your solution will end up at the back of the room. While the immediate advantages are obvious, there are a LOT of cons to this strategy. After all, the global human resource management (HRM) sector is projected to reach $30 billion by 2025.
Partner with Trusted Technology Partners
I sort of fibbed. There is a fourth way to deal with a sudden market leader emerging and that’s to find a partner who is doing it well. An interesting trend is cropping up in the HRTechnology space wherein marketplaces, co-marketing, and partnership initiatives are making the landscape more competitive. Instead of one end-to-end system, HR buyers now have access to best-of-breed solutions and can pick and choose how they want their total talent management to look and feel, from core HR to Talent Management and Payroll.
Partnering or integrating with a product that’s already gone to market and been vetted is the best way to ensure the underlying technology is sound, the company won’t suddenly be purchased, and your solution doesn’t have to wait forever to build its own. Some companies (mine included) even offer the possibility of owning part of the intellectual property…ultimately making your company more valuable and keep clients satisfied they’re getting access to the most cutting-edge technology
About the author: An experienced executive in startup, growth, and turnaround businesses, predominantly in IT, John Cusack has held commercial, sales, marketing, and general manager roles. In addition, he has mentored companies for Enterprise Ireland (Irish Government body) and the Irish Management Institute (Business school).