SEASON 2 - EPISODE 0083 - NOV 15, 2023

Underdo the Competition

In business, the idea that more is better often leads companies to engage in an endless race to add more features while losing sight of what truly matters to their users.

Consider the iconic success of the iPod. By excelling at one thing, done exceptionally well, it attracted legions of unwaveringly loyal fans.

This same philosophy is why the team at 37signals consistently aims for simplicity, recognizing it as the secret sauce for creating unforgettable products.

In this episode, Jason Fried and David Heinemeier Hansson sit down with Kimberly Rhodes to discuss the art of “underdoing” the competition as outlined in their book “REWORK.”

From Basecamp’s high-level simplicity to the disruptive potential of their new product line, “ONCE,” the conversation explores the success of products that have rewritten the rules through simplicity, focusing on the small details that elevate products to greatness.

Check out the full video episode on YouTube.

Key Takeaways

Simplicity is the key to crafting unforgettable products. Why prioritizing value at the simpler end leads to success.
Mere imitation without significant differences leads to failure—why challenging industry giants like Gmail requires radical differentiation AND originality.
Small details = big impact. Learn from Tesla’s success, where even seemingly insignificant details contribute to a unique user experience.
Explore how 37signals is poised to offer radically simplified versions of existing products at better prices under the “ONCE” umbrella.

REWORK is a production of 37signals. You can find show notes and transcripts on our website. Full video episodes are available on YouTube and X (formerly known as Twitter).

If you have a question for Jason or David about a better way to work and run your business, leave us a voicemail at 708-628-7850 or email, and we might answer it on a future episode.

Links & Resources

Transcript

Kimberly (00:00): Welcome to REWORK, the podcast by 37signals about the better way to work and run your business. I’m your host, Kimberly Rhodes. In their book, REWORK, authors Jason Fried and David Heinemeier Hansson write about the concept of underdoing the competition and embracing doing less than your competition to actually get ahead. Here to talk about it are the authors of REWORK and the co-founders of 37signals, Jason Fried and David Heinemeier Hansson. Jason, why don’t you catch us up. When so many people think in business, more is more is more. You guys are taking the angle that sometimes less is more. Tell us about that.

Jason (00:34): Yeah, the idea here is that most problems are actually quite simple. And what’s strange is that the biggest market is actually at the low end. Everyone kind of thinks the big market and the big opportunity is actually at the high end by constantly creeping up and adding more stuff to your product so your probably can do more and more and more and more and more. And in some cases there might be some more revenue to up there because people want more and they’re willing to pay for more if they get more and it’s business software and the whole thing. But really the biggest market is down low, and down low most people just are basically doing nothing. So there’s this idea of competing with non-consumption that people aren’t using software or aren’t using a service or aren’t using a system to solve a problem. And if you can just be slightly better than what they’re not using, then all of a sudden you’re actually really incredibly useful.

(01:25): The step is significant from nothing to something versus from something to something that’s a little bit better or a little bit better, a little bit more, a little bit more. So we try to stay as much as we possibly can at the simple end of things. Now, that’s not to say that our products don’t do a lot. Like Basecamp does a lot. In fact, it’s a huge product, but the things it does are quite simple. If you need incredibly extensive to-do lists with all sorts of priorities and conditions and dependencies, Basecamp’s, not for you. But if right now you’re using no to-do lists or using to-do lists on paper or you’re scattered in a bunch of different places, Basecamp is organized and structured enough that it’s going to be a massive leap for you even though we’re staying in the low end. So when we came into this world, we we’re basically competing with Microsoft Project at the time and today we’re competing with a bunch of other products. We always try to keep Basecamp simpler than the rest and not try to beat them by doing more, but by doing less in a sense and doing those things that are really high level, but keeping them simple and sort of under the threshold of too much, if that makes sense.

David (02:31): I think one of the problems with more, more, more is that it’s very easy then to get sucked into a comparison game where you start comparing your product or your service to a bunch of checklists that the competition have. Oh, they have this feature, we’ve got to add that feature, or you got to have have this feature, we’ve got to have that feature. And you cram in a bunch of stuff that looks good on a checklist and this is one of these kind of problems with some forms of advertisement. You go like, oh, people like checklists. They like to compare products by looking at what does it have, what is the other thing that doesn’t tell you anything. It doesn’t tell you whether people want to use it. It doesn’t tell you whether you can get others to use it with you. So all of these harder to quantify features if you will, is the product easy to understand?

(03:20): Is it fast? Is it user-friendly? Can I get others to use it with me? You can’t put in a checklist. Everyone always will say, oh, our product is really simple. Yeah, we have simple software. Whether that’s true or not true, it’s one of those statements you can’t know until you actually use it. And I think this is one of the driving ideas we’ve always had for Basecamp, is that when someone actually starts using it, no, that’s when it counts. It’s got to be at home good, not just in-store good. I think is one of those parallels we make in the book, and you can get quite deliberate about this. One of the books we’ve referred to several times is this book called Blue Ocean Strategy, which basically gives you the idea of charting out your product against the competition as a series of pylons where you say, do you know what?

(04:09): Here we’re going to be exceptional. We’re going to be exceptional on packaging for example, and then here and here we’re just not even going to compete. We’re not even going to show up. And if you take that idea that you cannot be the best at everything across all metrics all the time, it’s really a liberating notion, a liberating notion of saying out of the thousand barometers someone might evaluate a project management solution on, we’re going to take a bunch of them and say, we’re not even going to compete there. As Jason said, there’s a bunch of very sophisticated emails or to-do list sorting things and permission things and whatever. We’re just not going to do that. We’re going to compete over here where this product is actually enjoyable and easy to use. And I think once you get into that mindset of looking at your product as essentially a graph that goes up and down across certain spectrums, you become much more deliberate and much more capable of going, do you know what we’re going to do less intentionally system set us free to do these other things.

Kimberly (05:14): And you guys in the book use the analogy of the Flip camcorder of how many features that didn’t have and that actually made it really successful.

Jason (05:22): Yeah, wow. That was an old example and at the time it was a great example, but also it’s another example of what can also happen, which is they got crushed by the iPhone essentially. Once phones had cameras and video cameras that were better than the Flip and they did other things. So this is not a fail safe strategy. You’ve got to keep in mind that you can also be passed by other things. So this is a balancing act. It’s not just keep it as simple as you can, you’re going to win or whatever that you can lose too, but you could also win for a while and that might be, I mean Flip actually had a huge impact on the industry and nothing’s going to last forever. And I think GoPro is another example of something that’s like, GoPro is interesting because I’m not sure how well they’re doing right now, actually, I don’t know.

(06:09): But what’s interesting about GoPro is they made something that is as simple as a flip camera, which was just like, it just records video essentially, but they made it for action sports in a way that phones aren’t really good for sticking something on your helmet or whatever. So they took it from a different direction, which is just not making a camera but making a camera for a very specific use case, primarily action sports and things like that, which is another way to then carve out more of a niche that other devices, even though they do more, can’t do that as well. So there are different ways to handle this, but yeah, I think it was still a good example at the time and there’s still lessons to take from it, even though good and bad lessons I would say even though they kind of got passed over.

David (06:55): I think what’s interesting with the Flip camera is it’s essentially a parallel case study to the iPod. It just so happened that the people who killed the iPod were the makers of the iPhone. It was Apple themselves that cannibalized the iPod market. And when the iPod first came out, I vividly remembered the reception that it got, which was from the tech community. This is shit, why would you buy this? It is basically just, there was this infamous quote from slash dot, which was a popular site at the time, less space than a nomad dozen whatever, run some operating system. Lame. Completely missing the point that the appeal of the iPod was making it much easier to listen to music on the go, not just listen to music, but get that music onto your device without having to finagle around with MP3s and a bunch of different programs.

(07:49): The vertical integration that Apple does so well is another example of this of yeah, it did less. Oh, I think the other one was no wireless, right? It didn’t have wireless. You had to plug it in to actually do it. It didn’t matter, right? This was one of the various or points where Apple just went, do you know what wireless, that’s something a bunch of geeks at the time at least care about. It doesn’t fit with the rest of it. We’re going to sacrifice that, but we’re going to make it really easy and we’re going to make it cheap to buy a single song for a dollar, which was the paradigm at the time, which itself later got passed by Spotify and all these other subscription services. But this idea that there’s an intentionality around saying we’re not going to do a thing that people actually say they want because there’s a much broader and bigger group of people who first of all aren’t saying anything.

(08:34): They’re not showing up to slashdot review whether the new iPod has wireless. They’re just consumers who are waiting for you to create a demand in them. They’re like, oh yeah, yeah, I’d like to listen to a bunch of, I like to have a thousand songs in my pocket. That was one of the original marketing slogans that they had that just go like, this is the kind of digging in deeper into the market rather than just listening to what the very online people will say they want. You realize that there’s a different configuration of features and benefits and price and packaging that could be a slam hit. And the whole point is to arrive at a blue ocean, is to not dive into direct head to head competition with someone else who is essentially just like you, where you get trapped in this notion of having to compare the checklist of a hundred features and that, oh, product B is better than product A. If you have 102 features versus a hundred features, do you know what? That’s a really bad place to be competitively. It’s where margins disappear very quickly. It’s where everything gets turned into a commodity. The place where you get to charge above commodity pricing, where people actually will love your product because it is different is when you have a different configuration and are willing to say it’s not going to do all these things.

Kimberly (09:51): And you guys say in the book too that it’s playing defense. If you’re trying to do everything else that everyone else is doing, you’re not actually being proactive and making a change. So I thought that was interesting.

Jason (10:02): The other thing I would say about that is when you’re aiming for a feature parody plus one, you’re really not doing anything. You don’t need to exist. So if you’re trying to come into the market and you’re like, well, I want to beat Asana. Okay, so we’re going to have to do everything Asana does. If you want to beat them, we have to do everything they do plus a few other things. Well then the only thing you are is plus a few other things and you spent all these engineering resources just trying to match what already exists in the world. That’s not really going to do it for you. You need to take a different tack, probably like a very different thing. It’d be quite a bit different from what exists in the market if you want to stand out and have a chance. So I think this idea, but you see it a lot with new companies like, well, we’re going to survey the market, we’re going to do market research, we’re going to see what exists, what the baseline is, we need to deliver that plus something else. I think that’s a recipe for wasting a lot of time on things that already exist. Something that we try to do is, HEY is a great example of this. Hey, our email service is radically different than Gmail. It’s not Gmail plus, it’s not at all Gmail.

Kimberly (11:11): It’s like the anti Gmail.

Jason (11:13): Yeah, there’s some baseline stuff with email you need to send and receive and the baseline functionality, but after that, there’s a lot of things we didn’t do that they’ve done, and there’s a lot of things that we’ve done that they would never do, and that’s what sets the product apart. That’s why it’s an alternative. It’s a choice. If it’s just Gmail plus a few of the things, it’s not actually a choice. You might as well use Gmail. But if you want to use email in a very, very different way and have a different sense of priority about what’s important about email and what frustrates you about email, doing what Gmail does is not going to do anything for you because that’s what you’re frustrated by. So we had to do something radically different. So that’s what we try to do when we build things and we’re building some new stuff right now that’s quite a bit different from other things. So that’s how we try to enter the market is bringing novelty, useful, practical novelty, not just one different thing.

David (12:03): And I think that’s specifically important when you’re going up against someone who’s heavily ingrained and fortified. Gmail is the ultimate fortification. There are people who’ve used it for free, 10, 15 plus years. You’re not going to get them off Gmail by being 5% different. You have to be radically different. I think this is a lesson that keeps getting taught in the technology industry in particular. If you look at, for example, all these competitors to Twitter that try to be basically as much as Twitter as they could be without the ownership of Elon Musk or something else, like a small little edge thing, they might see a spike briefly from someone like, oh yeah, I’m really interested in exactly this thing just without that piece. For example, the owner Elon Musk. That’s not a long-term business strategy that is not going to yield you success. It’s funny, I actually tried to look into this last week.

(13:03): It was like, oh, I wonder how Threads is doing? Do you know how well they’re doing? No one’s fucking talking about how well they’re doing. That’s how badly it’s going. I think a month and a half ago or two months ago, everyone was like, oh, the use of Threads is down 80% from their initial launch. And I was like, oh, okay, that’s interesting. I wonder how went ever since? Zip, nada, nothing. No one is talking about it because no one fucking cares. And I think that just goes when you think of that, right? The Meta, every advantage you could possibly imagine, they have so much money that Zuckerberg could flush down, what was it, 40 billion on creating the shittiest VR experience ever known to humans and just go, poof, that didn’t happen. That’s how much money they have. So they have essentially unlimited funds. They have a user base of what, 2 billion users under other platforms. With all of that, blowing all of it into it and exceptional engineers, I’m sure the people who build Instagram goes over on Threads.

(14:05): Every single advantage you could line up if you were like, oh, let’s imagine everything you could do. And still you could not unseat sort of the main thing when all you tried to do was being exactly that thing, but just a little bit different. And not even different in any appreciable way, just like a spiritual difference of it’s Zuckerberg, the billionaire owning it rather than Elon Musk, the billionaire owning it. That’s just not a differentiation anyone gives them hoot about. So I thought that was just such a beautiful illustration of the fact, do you know what if Zuckerberg and the rest of Meta with all those advantages can’t make it happen? There is no chance in hell that you will ever be able to outdo say Twitter being 5% different or anything else being 5% different once it’s ingrained.

Jason (14:50): Bluesky is another good example of that, right? Bluesky is essentially Twitter basically. And then Mastodon of course is slightly different than it’s decentralized, but still the fundamental interaction model, the concept is still the same thing. There’s just not enough there to really move the needle elsewhere. Someone has to come up with something else. And this is kind of the magic of Twitter, which has been around for a long time. There is an atomic unit here which is really strong. There’s just something very simple about the model and the way it works, a little bit of text, a few things you can do with it. It’s going to be really hard for someone to unseat that by doing the exact same thing. And doing it slightly differently is not going to be it either. Someone needs to just that model is going to exist and that company is probably going to dominate that model of it, just like Facebook dominates the Facebook model of it and Instagram dominates the Instagram model and TikTok dominates the TikTok model.

(15:46): Although Instagram’s had a bit of an impact there, but not really. And Snap for a while was doing their thing. They still are, and Pinterest is doing their thing. You don’t see someone kind of out pinteresting, Pinterest. It’s just not going to happen. You got to bring something different and new, and that’s part of that could be underdoing, but another part of it’s just simply doing something else. And then when you do something else that’s original, you don’t have to outdo or underdo anything because it’s new. And that’s another way to approach this, which is incredibly hard of course to invent something new. That’s the hardest thing there is.

Kimberly (16:18): Well, a couple weeks ago we talked about something new, a new umbrella of products at 37signals under the name once. Did you guys think about this underdoing, the competition kind of concept with the creation of Once? It kind of seems like they go together.

Jason (16:33): It’s fundamental to it. I mean we haven’t really gotten into detail about the kinds of things we’re going to be building, but I can go into a slight detail here, which is like they’re going to be radically simplified versions of other things that exist in the world. So radically underdoing. We’re basically looking at things that are commodities that are still priced, like luxuries and making them into the commodities that they actually are. And so what is the nugget of this idea? What is the fundamental thing that everyone’s using about these other things? Like let’s just do that and do it really, really well. Price it really, really low, make it really, really simple and run with it. And so the whole underdo is very much built into the idea of Once and as people see the products that roll out, they’ll understand that.

David (17:17): I think a great illustration in that with Once is the notion we went into it with, you know what we don’t have to create a bunch of product innovation here, which is something we normally really enjoy. Like HEY is the ultimate in product innovation where we just went with a ton of different novelty, a completely different way of thinking about email and then once is so some way the exact opposite. Let’s pick a bunch of luxurily priced services that could be commodities, not by out inventing them in terms of the implementation of the product, but doing very different things on pricing, doing very different things on distribution. So if you look at the graph, the blue ocean strategy graph like product innovation will be quite low. Distribution innovation, pricing innovation, all these other things, those are the ones that are all the way up. And I think being mindful of that and making it an explicit choice from the get go is just such a great way of opening the landscape. Because again, if you go, oh, it has to be better, cheaper, easier, whatever, prettier than everything else out there, you’re like, yeah, okay, fine.

(18:31): If that was first of all possible, someone else would probably have done it, right? It’s quite rare that you can just again, go out and outdo everyone else on everything. You really need a high level of arrogance and I think we’re relatively arrogant in the grand scheme of things, but not that arrogant. Not that you can be better than everyone else at everything at the same time in a reasonable timeframe and expect that to be a success. So just making that chart, we’re going to be like par, mid for a bunch of things that just are not going to be the essence of why people buy this product. This is again, I mean I’ve been on this Elon kick and I think Jason has as well reading Walter Isaacson’s new biography. This is one of the things I love about Tesla. And I was just thinking about this driving the car yesterday.

(19:21): Most cars I’ve had, the floor mats that are in the car are fixed in four different points by these little fasteners. And they’re always kind of finicky and they’re attached to the floor and then you push the mat down on it to keep it in place, right? And one of the things I noticed yesterday was the Tesla doesn’t have that. None of the mats are fastened in any way. They’re simply laid on the floor. And I thought, do you know what? That’s really curious. I’ve had this car for four years, it’s a model X. The carpets have never flown around. So somehow they identified in the grand scheme of thing like fasteners, and this is the most minute detail you could possibly imagine, but if you take that minute detail and you amplify it about a thousand times, you end up with something very different. People don’t care about floor mat fasteners.

(20:07): Here are, let’s say, what are they? It’s like a dollar in fasteners in each but perhaps even more so actually installing them. There’s $5 here, let’s say four fasteners in your car, do a thousands of those. Well there’s 5,000. 5,000 is a new category of pricing that you can do. You can enable yourself to do different things. Your assembly line can work differently, it can be much more fluid and all of a sudden, boom, you’re producing what, 2 million cars in a year. So I think you need to really internalize this and integrate it in how you think about products from the micro level of fasteners, format fasteners and be able to zoom all the way up and say, do you know what on this product, for example, as we’re doing with once, product innovation as a whole group of all the features is not that important. It’s distribution innovation. It’s pricing innovation, it’s these other things. I think once you master that, you develop an eye for why certain products are different and do well. I think it’s much clearer to me seeing it through that lens why Tesla for example, has succeeded with their quirky, unique, funky, sometimes mad package and that consumers are just going like, yeah, that’s the one I want. Even though it doesn’t have all the things, all the check boxes that someone else would compare it to a traditional car.

Jason (21:24): And to continue to really quickly on the Tesla line, the thing they invested in was infrastructure. The fact that you can charge your damn car quickly anywhere. I have another electric car that’s not a Tesla, and I mean I charge it at home overnight, but if I’m going to go on a road trip, I essentially can’t because you have to go to an Electrify America location. There’s hardly any of them. And I’m in California where there’s the most of them and there’s hardly any of them. And there’s typically four stalls. They’re usually next to a Tesla charging station. So you’ll see there’s four Electrify America stalls. You’re competing with seven or eight different brands now for four spots. They’re typically slower chargers.

David (22:02): And half of them don’t work.

Jason (22:04): Yeah, you don’t even know. They don’t really work very well. And I’m looking next door and there’s like 16 Tesla chargers right next to that. Six of them or eight of them are open at any one time. You can charge quickly and they’re all over the country and they invested heavily. This, it’s actually part of the car. This is the thing people don’t get. The Tesla charging network is part of the car nationally and internationally, it’s just distributed. So charging is part of the electric car experience. It’s the most fundamental part of it actually. It’s two things like speed, it seems like, and charging. And Tesla’s nailed both of those better than anybody else. And it’s not a small detail. So the floor mats are shitty or thin and maybe it doesn’t matter if they roll around, whatever, I haven’t even noticed that, but it doesn’t even matter.

(22:48): Let’s say that’s an important detail. Panel gaps not a big deal. There’s some quality issues. People know there’s quality issues when you buy Tesla. They’re not, the paint quality’s not there. There’s over spray, it doesn’t really matter so much. What matters is the car’s fast, it performs well. It’s simple. It’s actually quite simple, and the charging is great, and I can get this thing charged anywhere. I can go on a road trip and it doesn’t matter. Those are the criteria that they invested in versus everything else. Not that everything else doesn’t matter. It matters to a certain part of the population. Clearly BMW is competing with Mercedes is competing with Audi and quality in different levels. Tesla’s not competing in those levels and they can’t compete with Tesla and what Tesla does well. So it’s also just about carving out niches that are big enough to sustain a great business, even if you’re not getting all the customers.

Kimberly (23:35): It also makes me think, what else are you buying? You’re buying the car, but that means you’re buying the power that you can get everywhere when you buy a piece of software. What else are you buying? You’re also buying their customer service. I feel like this is a whole nother episode, but we could go into that for sure. Exactly. We’ll get it next time. But until then, REWORK is a production of 37signals. You can find show notes and transcripts on our website at 37signals.com/podcast. Full video episodes are available on YouTube and Twitter. And if you have a specific question for Jason or David about a better way to work and run your business, leave us a voicemail at 708-628-7850 or send us an email to rework@37signals.com and we will answer it on a future show.