When a company is well established, the question of feature vs. product is seldom asked. However, in an early-stage startup, the lines are blurred, and entrepreneurs get confused with what defines the other. In this piece, we'll try to put things in order.
What is a startup company?
First and foremost, a company is a legal entity. Any company is a statutory entity registered with some authority. Most startups in the US are registered in Delaware due to its ease of registration and favorable corporate laws. The legal entity will dictate a specific structure, primarily a capital table with ownership (for a corporate type of company), management roles with responsibilities, and company obligations to the authorities such as financial reporting. A company isn't actually required to do anything. It can be a legal entity that is pretty much idle and even doesn't hire any full-time employees.
Depending on the company's size, a company will usually have supportive functions such as HR, legal, finance, facilities, investors-relations, etc. Although these functions don't directly drive value to the customers, they are crucial to a functioning company.
Every startup is a company. Not every new company is a startup.
If a company is registered to deploy a well-known business model, it is a new company, not necessarily a startup company. For example, if you open a fast-food restaurant and you register it as a company, you have great examples of how such a business operates. Who are the potential customers, what do they value, what would you be expected to deliver, how to market to such an audience, etc.
Unlike the above example, a startup company is established around a set of assumptions. These assumptions are unknown aspects related to its startup business model. It might not be clear on its product. It might not be clear on its sales channels. It might not be clear about its customers (probably the worst).
Every company will have founders (could be one founder and co-founders), and in the case of the startup, they will form the startup's core team.
Startup founding team vs. startup management team
In the early days of a startup, the startup can have a founding team even before a company exists, i.e., before a legal entity was registered. Due to the above definition, it's not even a company yet. The founding team is trying to validate some primary hypotheses. If they are successful, they might form and registered a company as a next step. If not, they might scrap the idea or iterate until they feel they are ready. Once a startup company is set up, a startup management team is required. These are the company employees that will fill out the management functions in the company, primarily the startup CEO - Chief Operating Officer, as that is an official role that every company must-have. There can be an alignment between the founding team and the management team, in which case the founders will take on these roles. Still, in some cases, employees will be hired to fill out managerial positions, depending on the founding team's skills and aspirations.
When discussing companies and their goals, it is crucial to identify the difference between product based and service based company.
What is a service based company
A service based company will offer services in certain specialties delivered by the company's employees. The simplest example is a legal firm that provides legal services to its customers. Those services can be legal documents drafting and review, court litigation, IP registration, etc. While the services are in the same field, the end result from one customer to the next is very different. Other examples are financial services, IT services, marketing services, and so on. Practically, any service you can imagine can be provided by a services company.
What is a product based company
A product based company will have one or more products it delivers to its customers. The products are uniform, and the same possible product customization is available to most customers. The company can be identified by its products and vice versa.
Notice that some companies that provide services are actually product companies. For example, food delivery apps such as Wolt or DoorDash, provide food delivery services, but they are not services companies but product companies.
What is a product?
A product is something the customer can interact with or grants value to the customer via some other interaction in the background. A product will have a set of features, and it can be a physical or digital product. It is practically impossible to deliver customer benefits without a product that will encapsulate and provide those helpful features of the product.
Let's look at some examples.
A social network is a product that aims to get users to engage with one another and collects data about those users during their interactions. The product will allow its paying customers to send targeted ads to users based on user's interests, as were identified by the product. The product provides benefits to its users via various features, such as searching for friends, sharing information, like button, notifications, etc. Most of the product features aimed at the user will have a goal of increasing user engagement with the product, and most of the product features aimed at the paying customer will have a goal of increasing their spend on the platform.
Anti-virus software is a digital product that, in an optimal state, will have no zero interaction with the user. It provides value and customer benefits by scanning the system in the background, removing malicious software, and updating its code when needed. You have not encountered such a stealth anti-virus because intrusive scans and detailed reports will characterize most anti-virus software. That is not because these reports have direct value to the user. Rather, these reports are trying to communicate the product value to the user. They might also try to highlight their unique product features as part of that communication, such as provide a message that an update had already occurred. Communicating the value is not the same as providing the value, and it serves different purposes such as sales, up-sales, or user retention.
What is a product feature?
A feature is a product characteristic or functionality that is intended to create a benefit. It is practically impossible to deliver a feature to users without it being contained within a product, and thus, some products will be defined by their unique product features. A product feature that creates user benefits can reduce "pain" or grant other value. Some features aim to serve the user, while others might seek to help different stakeholders like the company support.
Let list some standard product features and some unique product features.
The login screen is a common feature in many digital products to authenticate the user and provide privacy protection.
The Facebook Like button is a unique product feature. It's unique in its design as well as with how it is intended to provide benefit.
What is the difference between product features and customer benefits?
A customer benefit is the thing we are trying to manipulate.
The product feature is the device with which we hope will create the intended manipulation.
Notice that we used "manipulation," but you shouldn't give it any negative context.
For example, we have identified the following points in customer interviews:
- "I manage many documents. "
- "Documents are updated frequently and have many versions."
- "Each document has many stakeholders who care about the document's content. "
- "Documents are being shared over email and messaging apps, but it's unclear who refers to what."
- "I wish I could revoke document access from employees who left the company."
Assuming our product can manage documents, reduce customer pain, and provide customer benefit, we can add a "document sharing" feature that will allow all stakeholders to refer to a single source of truth.
We are trying to manipulate or affect the pains as were identified above.
We are doing that by providing a product feature we hope will address it.
Will our product feature solve the customer pain? It is impossible to tell in advance. Maybe we didn't identify or articulate the pain well enough. Perhaps our solution is not solving the pain. Possibly our solution is complex to adopt. Maybe our solution introduces new pains that did not exist in the first place, e.g., "the sharing scheme is so complex, that even after employees left, they have access to new and updated content on existing documents."
Note that adding or removing features might drastically change the product positioning, either as was intended by the company or perceived by the user.
Many entrepreneurs get confused about what to start with. Should I set a company first? Should I build a product? How to choose which features to include in my product idea etc.
We are in the opinion that you must ignore all of the above. The only thing you need to focus on is identifying the customers you want to serve and understanding if there are enough customers of that type to sustain a business around them. Features will be developed, validated, or trashed. You can deliver several products and have multiple customer offerings. But customer engagement and understandings are very costly to any company, and thus you should start identifying your customers first. Who do you want to serve?
Who do we serve at Tlaloa and why?
We will share our detailed target customer definition in another blog, but for now, here is a quick example:
- English speaking tech entrepreneurs (simply as we can't communicate in any other language)
- Who are (or considering) building B2B startups with high growth potential
- Who are primarily working on a SaaS, software, or app.
- Who are developing their product on the cloud
- Who's product has not hit $1M in annual revenues (as an indication of pre-product-market fit).
- Who have not raised over $5M to date.
Why this audience? We were part of it in the past. We meet this audience daily. We understand it well, and we can communicate with them. We can reach them. We can validate our ideas with them. They want to cooperate with us.
Because we have a passion for serving them.
Feature vs. product vs. company in a glance
A Feature is intended to create a user benefit.
A product encapsulates features for user delivery
A company is an organization set around a goal, such as delivering products to users