When Phil Knight started Nike in 1964, only 4% of footwear in the United States was imported.
He knew if he wanted Nike to succeed, he had to be different (or cheaper) than the masses. He started by importing shoes from Japan where the cost of labor was much lower.
That 96% was his competitive advantage.
Today, almost every shoe sold in the United States is imported. Phil Knight and Nike no longer compete on price, they compete on brand and celebrity spokesmanship.
Obviously, Nike has been wildly successful. But the way Knight was able to time his competitive advantages and adapt to the changing world may be the biggest learning for the rest of us. When it comes to technology, software development, and offshore labor, it begs the question. As an industry, what competitive advantage should we care about?
The Case for Cost
For many years, cost has been the driver of software development decision making.
Do you hire internally? Externally? If externally, on-shore or off-shore? What the heck is near-shore?
As Phil Knight found, outsourcing overseas can be a competitive advantage - companies might be able to save costs with cheaper labor. But, as Nike has also found, that advantage is eroding. More companies have followed suit, so the idea of beating your competition on price isn’t accurate anymore.
Software development isn’t sneaker manufacturing but we’re seeing the same thing. Off-shore and near-shore development teams have grown in popularity since the early 2000s as a perceived cost-advantage. Even over the past few years with new economic headwinds, almost every client we talk to has explored offshore options. But, given the access, the playing field has evened out faster than it did in shoe manufacturing (it’s a lot easier to contract a development team than build a manufacturing facility).
But even the idea of off-shore cost savings is being questioned as companies get smarter. They’re realizing that cost isn’t just an hourly rate, it’s the hundreds of hours spent communicating across time zones or cultures, and the ongoing billing on bug fixes and rework from low-quality code. Not to mention potential security concerns and IP theft (our clients tell us horror stories related to intellectual property laws outside of the U.S.).
With global access to developers, cost is no longer the competitive advantage it once was. It’s a question of trade-offs and the type of working relationship that works best for your company.
Cost continues to matter - you should always try to get the best deal - but when you look beyond hourly rate and focus more on total spend, it’s hard to carve out a competitive advantage and it certainly can’t be done categorically (i.e. “off-shore is cheaper than on-shore”) and needs to be approached on a vendor to vendor basis.
The Case for Speed
It’s hard to introduce Nike as an example without mentioning speed.
But we’re not talking about shoes, we’re talking about time to value in software development. Should you care about speed as a competitive advantage in building your product?
For the most part, no. Similar to the cost conversation around on-shore and off-shore developers, a relative floor and ceiling has been established for code production. Sure, some development teams are faster than others but most are not appreciably different.
However, there are exceptions - both for development teams and your business situation.
Here are a few situations where what’s going on with your business may impact your need for speed:
- You’re a startup trying to be first to market (or chasing a competitor that could scoop up valuable market share).
- The work that needs to be done is impacting customer experience.
- You (personally) are being held accountable to a deadline.
- There are other parts of the business that are waiting on work completion before beginning a separate initiative.
You know your business best, there are more. But speed can be a huge competitive advantage in these situations.
Relatedly, you also need to be aware of what you’re asking the development team to do and how the ask may impact the time it takes them to deliver production-ready code (or what they’ll have to stop doing in order to take on this new work).
The acceptable floor and ceiling for work speed can quickly fly out the window when you’re asking developers to work on technology they’re not familiar with, or build something from scratch when they’re used to working within an existing stack. Similarly, stopping work on one thing just to get the other thing done by a certain date doesn’t really move the whole body of work forward any faster.
It’s in these cases where speed really does matter and should be prioritized.
So, as a competitive advantage, speed is important, but only insofar as it gets you where you want to go.
The Case for Quality
If cost and speed in software development have normalized, the only competitive advantage we should care about is quality. Bad software takes just as long to build and costs just as much.
While it may seem counter-intuitive, because we have more development options than ever, it’s never been easier to stand out. Low-quality software is everywhere.
But what does quality mean?
From a user’s perspective, a quality product functions like they expect it to, the UI accurately reflects the brand it represents, and the UX makes features easy to interact with.
That may not seem like a competitive advantage. You can think of many apps that offer a great user experience. But the key to quality isn’t just in the experience you have today, it’s in the consistency (and gradual improvement) of that experience over months and years. That’s the quality that stands out, cultivates customer loyalty, and makes businesses grow.
What makes that possible is the side of the product that users never see - the clean codebase, minimal technical debt, great documentation, and reliable design principles and patterns.
These things allow development teams to modify or extend features in a timely manner, get new team members up to speed quickly, and deploy with ease.
Simply put, quality software gives users and developers alike a great experience.
That’s incredibly rare. We get to look into countless codebases and see what’s going on behind the scenes for many of our favorite products. It’s not pretty and we know unless things change, it’s only a matter of time before those hidden issues become very apparent to users.
And as sad as that is, it’s also their competitive advantage. Build and adjust for quality now and you’ll stand out.
Cost, speed, and quality all matter, but it’s about timing. The best software leaders know when and how they can separate themselves from the pack.
Starting now, it’s all about quality. Don’t miss it.
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