In a much discussed blog entry Don Norman argues that customers prefer complex products to simple ones. He makes some compelling arguments but also misses an important aspect. Faced with two similar products, users will often choose the product with the greatest number of features. This would seem to lead to the inevitable conclusion that feature parity is the best way to compete. In reality there is a much better (and leaner) way. Armed with the right differentiator a small product can compete with a large one.
What is a differentiator then? A differentiator is a set of features that gives a product a unique capability. Take Google Docs as an example. In terms of feature count it cannot compete with Microsoft office. The key differentiator that incites people to use Docs is collaboration. In Google Docs two people can work from different locations on the same document at the same time without loosing edits. Without this differentiator Docs would never have taken off the way that it did. Microsoft is fighting back with Office2010 which promises to include similar capabilities, but it has taken years to rework the Office products in this direction.
If you want to compete with an incumbent it is much smarter to find and exploit a differentiator than it is to compete on feature parity. It’s kind of like the tortoise and the hare, you can get to the finish line before your competition realizes that the race has started.