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Wedge and The Evolution of GTM Strategy
How Wedge is Different from Positioning And How It's the Same
For a long time, the positioning of a product stayed as a theoretical concept with me. I read the book ‘Positioning’ by Al Ries in 2015. It seemed like a fascinating idea. A better understanding of the concept started developing in 2016-18 when I was working at upGrad. upGrad provides online upskilling courses for professionals in data science, product management, digital marketing, etc. upGrad did a fabulous job in positioning itself in the Education Tech market. It provides college degrees and certifications along with the course content. Adding credibility to online education was a great positioning in a market full of small courses. It has worked for upGrad, as it crossed the $200 million run-rate in Sept’21.
upGrad helped me understand the importance of positioning. I wrote about Positioning on Growth Catalyst last year in this post. From the earlier post,
Once you have figured out the market need and the product that solves for it, the next challenge becomes how to position it into the market. If you are building reusable rockets 🚀 like Elon Musk, this isn’t a big challenge because you have virtually no competition.
But more often than not, you are building a better version of something that already exists. Or if you are working in a bigger company, you are trying to launch something similar with the assumption that a stronger distribution channel or 💰 will make your product successful. That is where positioning helps.
I was still puzzled though — there are companies doing pretty well while expanding beyond their initial positioning. There are numerous examples of that. The Tata Group definitely has been able to create a trustworthy brand and added various lines of products based on that. A more recent example would be Zomato, which started as a restaurant discovery app. Over time, it added delivery and the Zomato Gold subscription. Zomato has been doing well in those segments. It is no more a restaurant discovery app, which was the initial positioning of the app. There are other food delivery apps (Swiggy), and dining subscription apps (DineOut). But Zomato has been able to enter these adjacent markets and capture a sizeable share.
A good explanation for this phenomenon is that as consumers associate Zomato with food, they can do various things around food like subscriptions, delivery, etc. The same can be applied to other products. However, this theory breaks when we apply it to another giant, Amazon.
Amazon started as an online bookstore. Over the years, it expanded into an online marketplace. So far, the theory holds true. Then Amazon entered into Cloud with AWS in 2006 and has been doing various other things since then like Prime Video, Alexa, etc. The positioning of Amazon has transformed from an online store to a brand that does things in a certain way using its 16 leadership principles.
So the question remains — how does a single product with a strong positioning goes on to do things successfully that don’t fit its initial positioning? To answer this question, we will have to understand the concept of a Wedge.
The Concept of a Wedge
A wedge is an object with a pointed edge and a thick edge. A wedge is used to cut or split apart objects. Force is applied to the thick end of the wedge, and the wedge, in turn, applies force to the object along both of its sloping sides. This force causes the object to split apart.
What happens if both ends of the wedge are thick? You won’t be able to split the object.
The concept works in a similar way when applied to products and markets. The initial product can be thought of like a wedge to penetrate the market. The force applied is the resources you have like the team, investments, product, etc. The thin edge of the wedge represents focus on a few use-cases to start with. If you go after the whole market, you won’t be able to make a difference because of the lack of focus. Once you create a product loved by a segment of the market, it’s easier to expand to adjacent use-cases.
Going back to Zomato’s example, the discovery of restaurants before Zomato was difficult. Zomato came and solved the problem. After doing that, Zomato could do various things like food delivery and subscriptions in the market because it had a strong team, a better understanding of market problems, and investments to fund projects.
In the same space, Swiggy entered by picking a different product wedge - delivery warm food to people sitting in the comfort of their homes. Over time, Swiggy has expanded into other delivery services. It launched Instamart and has started delivering groceries. It also launched Swiggy Genie, using which you can send specific items from one place to another.
By now, you might have gotten a good sense of wedge. It does not look quite different from positioning. So why do we need to introduce a new term?
Positioning Constrains, Wedge Liberates
The positioning is how end-users remember you. To retain your positioning, you might not want to do various things that confuse the users and dilute that positioning. That way, the concept of positioning constrains one’s thinking and might hurt the chances to win the market in the long run. A case in point here is the battle between Swiggy and Zomato. If Zomato had fixated itself as the restaurant discovery app, Swiggy could have won the delivery market and then entered into restaurant discovery as well since they have the required data from customers and restaurants to build the restaurant discovery. However, Zomato entering into food delivery helped them push off the competition by creating a stronger relationship with consumers while generating an additional source of revenue.
The concept of the wedge, on the other hand, allows you to think about other ways to gain/expand the business. If you think of the initial product as a wedge, you can be focused on that use-case until you hit a certain market share. Post that, you can naturally start thinking about how to build for adjacent use-cases and bring more users or revenue. From the previous examples, Amazon did so by continuously expanding into various markets, and so did Zomato and Swiggy.
Picking a Wedge
Starting is the difficult part, be it a startup or anything. Starting to work on the right thing is even more difficult. Picking the right wedge for your target market can make a lot of difference. So it’s important to spend some time there.
There are two major criteria to pick a wedge:
Find a value proposition which a customer segment needs
Find the constraints within which you and your team can deliver that value proposition
Most people when starting to build a product stop at #1. Let’s take an example and understand why both criteria are important. Before Swiggy started with food delivery, other players like TinyOwl, FoodPanda, Zomato, etc. had tried their hands on food delivery with no success. The value proposition from all of them was the same, but only Swiggy succeeded. The reason for this? Other players connected customers to restaurants but “outsourced" delivery to either restaurants or third-party logistics providers. This had a couple of problems. First, the cost of logistics was hard to reduce over time as it was outsourced. Second, the end-user experience was difficult to standardize since you didn’t have enough control over the logistics.
Swiggy was convinced that the only way to crack the food delivery market was to build an extensive logistics network, with a vast fleet of their own delivery boys and technology to back them. Swiggy also invested in a large sales force to bring and keep popular restaurants onboard. It also invested in building technology to make its logistics network more efficient. In short, they found the right value proposition and delivered the right solution to it. It’s important to do both.
Constraints to Find the Right Wedge
There are four constraints you can think about to create a wedge:
Geography — Starting in particular geography helps you gain leadership in that geography. It can become pronounced especially when the difference between two geographies is enhanced. That is the reason different companies are market leaders in different geographies. Here is the meal delivery market share of the online food delivery companies.
Geography isn’t a strong wedge as a better product can any day come and take over the market.
However, geographic constraint plays a crucial role in creating two-sided marketplaces. Swiggy started operating within a small region called Koramangala in Bangalore, rather than going to the whole of Bangalore. Uber constrained itself in New York before expanding itself. Expanding too fast in a two-sided marketplace can create problems with demand-supply matching.
Category — Amazon started with books, and then moved to sell everything online. A lot of other eCommerce companies started with fashion and then started selling other items. The category is a good constraint since focussing on a particular category can lead to cost leadership, differentiation, or both. Therefore, it’s hard for some other competitors to come and build a better experience.
Price — Offering something valuable for free, while figuring out something else to sell is another good wedge. A lot of disruptions start this way. Jio gave voice calling for free in India which was a paid plan for all other players. It focussed on monetizing through data and internet plans. It gave Jio a strong wedge in an already overcrowded telecom market.
Behavioral segment — Our society contains various types of people. For example, there is a vast difference in the way people think and behave in rural and urban areas. Going after an underserved segment is another important constraint you can put. An example of this is apps built for Bharat (tier II+ audience which doesn’t understand and speak English). Sharechat created Facebook for the vernacular, Bharat audience in India.
By now, we have understood the importance of wedges, and how to find the right wedge. We will conclude this post by covering the last topic - the right time to expand in a market.
The Right Time to Expand
One question that often appears once you start thinking about wedge and positioning: when is the right time to expand use-cases? The answer to this particular question is whenever you are done gaining a leadership position in the first set of use-cases and have significant gains to a distant second. If you haven’t gained the leadership in your initial market, going after other use-cases will lead to defocusing in the initial market. You might lose your positioning and market share in the mid-to-long run.
One startup in the Indian ecosystem that recently expanded beyond its initial positioning successfully is Meesho. Meesho started in 2015 by creating a new category of commerce in India - social commerce. It enabled small businesses and individuals to sell fashion and accessories within their network via social channels such as WhatsApp, Facebook, Instagram. Meesho created the inventory and logistics infrastructure for resellers. The resellers could gain a commission for the items they sold. The social commerce aspects of Meesho were clear from its play store description.
By 2021, it became a market leader in the social commerce space. According to a note by Bernstein released on September 27, 2021, Meesho was India's largest social commerce platform with over 13 million resellers, 45 million customers, and over 1 lakh suppliers.Most recently, Meesho raised $570 million from Fidelity, B Capital, others at a $4.9 billion valuation. Other social commerce platforms like GlowRoad have raised money at a valuation between $50-100 million and Meesho is far ahead of its competitors.
After gaining the leadership position in social commerce, it has now moved to a far broader market. Meesho wants to target 100 million small businesses and has started selling direct to customers, a plan that puts it against online retail majors Amazon and Flipkart in India.It is now changing its positioning from a reseller model to a B2C marketplace. Here is how the play store description of Meesho looks right now.
As you can see, its current positioning and model is similar to other eCommerce apps like Flipkart and Amazon :)
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