Why Your Product Is No Longer a Competitive Advantage

Jan de Vries · 2026-10-29

A friend of mine runs a software company. In most sales meetings, he shows what the system can do, and the prospect leans in, asking how it works. My friend, who's no fool, gets a bit vague. If he explains it properly, they might just go build it themselves. And some do. About a year later, a good number call back asking for help. So there's still money in knowing how to make something work. But AI has made the gap between a clever demo and a defensible company uncomfortably visible. The tools that let your team build sophisticated software cheaply also let a competitor rebuild it cheaply. Your customers can take a crack at it over a long weekend. The development bill has dropped for everyone—including the people trying to put you out of business. ### Your supplier has a product team too In a previous article, I asked what would happen to a startup if its model disappeared tomorrow. There's a quieter version of that dependency: the supplier keeps answering your API calls and starts selling what you sell. On February 24, Anthropic released finance plugins for Claude covering equity research, investment banking, private equity, and wealth management, with workflows that run across Excel and PowerPoint. If you were selling an AI equity research assistant on February 23, you had a new slide to write for your next board meeting. Figma had it worse. On February 17, it announced an integration with Claude Code, letting interfaces built in Claude drop straight onto the Figma canvas. On April 17, Anthropic launched Claude Design, which produces interface mockups and interactive prototypes. Three days earlier, Anthropic's chief product officer had stepped down from Figma's board—a hint in hindsight. Figma's shares fell 7% on launch day. Presumably, the next partnership meeting had a slightly different atmosphere. You may also be using that provider's tools to build the product it's about to replace. I wouldn't hold that against anyone. I'd just keep it in mind. ### Somebody else's high street In February 2025, Chegg, which sells homework help to students, reported that its non-subscriber traffic for January was down 49%, against a decline of 8% in the second quarter of 2024. It blamed Google's AI Overviews for answering the questions that used to send students to its site, and sued Google that same week. That's Chegg's account, and Google disputes it. But the shape of the problem reaches well beyond homework. The platform that sends customers to your door can start answering their questions on the doorstep. You still have a website. Fewer people have a reason to visit it. Before anyone talks about a moat, it's worth checking how much of the surrounding land you actually own. ### Six months used to be a moat A feature that once took six months of engineering may now take a fraction of that. Marvellous—until you realize those six months were most of what kept the competition out. Customers do the same math. Some will decide their own developers can rebuild enough of your product in-house. They'll underestimate the maintenance and the awkward exceptions, as my friend's returning clients did. Their attempt still costs him a year of sales, and he doesn't get the year back when they ring. So where is the moat? It starts with knowing how to get a better result. It deepens with the things you learn that a competitor can't pick up by watching your demo. Take my own industry. Getting an AI to produce a plausible trade recommendation is easy to show on stage. Getting software to behave inside a broker's real trading infrastructure is another matter. Permissions have to hold when an instruction is ambiguous; someone has to reconcile the books when a transaction fails halfway through. None of this appears in the sales presentation. It turns up in the third week of production, when the edge cases bite and the demo gloss wears off. > "The moat isn't the code you write; it's the scars you earn in production." So if you're building a startup, don't bank on your product alone. Bank on the operational depth, the domain expertise, and the hard-won lessons that don't fit on a slide. That's what keeps customers coming back—and competitors guessing.