Tag Archives: idea

“I could have built that in 2 weeks!”

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Yes but did you? That’s the point. You’ll often hear an over zealous programmer or engineer exclaim that they could have built [insert hot startup] in no time so what was the fuss about?

The key that they’re missing out on is that it’s simple to clone, but extremely difficult to innovate.

It’s a decision tree. Every node represents a set of decisions available to you with all the possible permutations as below.

decision tree

What is visible to everyone is the path travelled, not the paths forgone. Once you know your destination, tracing the tree back to the root is relatively simple. However, starting from the root without knowledge of your destination is where true innovation happens. That is a process filled with trial, error, failure, and course-correction over and over again till you reach your final destination.

Conceptually speaking there are several startups that are in the same space – most fail but some do better than others, with one becoming a market leader. Path, Instagram, Oink, etc are all relatively similar, but you’ve heard of some and not the others. Why? They’ve all taken different paths in the tree which has enabled some greater success than the others.

First mover advantage is real. Reaching first on the scene with a product that scales gives you a distinct advantage to becoming the market leader no matter who you’re competing against. Take the case for Facebook, a company with near infinite resources and the top destination for the web. They were late to the ephemeral photo space behind Snapchat. Facebook released a Snapchat clone called Slingshot in an attempt to beat them. Despite Facebook’s resources behind Slingshot, which one do you have on your phone? They also released a Flipboard clone with Facebook News (yes they had/have a separate news app), an Instagram clone with Facebook Camera (before acquiring the former), and a Foursquare clone with Facebook places (now defunct) amongst others. They failed in every one of those cases for the exact same reason that they succeeded in out-competing Google+: they were there first.

Switching costs in networks ensure that network effects are always in play. If a user is on a hot app with his friends, he’s not going to switch to a clone that does the same thing and also convince his friends to switch, even if the second one is slightly better. The only way to convince the user to overcome the switching cost is to offer something that is 10x or an  order of magnitude better than what he is using.

Success always looks easy from a distance. That’s because it’s only the path travelled that is visible, not the entirety of the tree. The next time someone says “I could have built that in 2 weeks” simply ask “then why didn’t you get there first?”.

 

 

 

Disruptive Strategies for Crowded Markets

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Markets that deal in essential or everyday goods are typically described as being ‘cut-throat’, ‘plagued with rivalry’ and ‘being hard to innovate in’ just given the sheer number of competitors present. A company in the business of food, clothing, real-estate, jewelry or any other commodity is typically going to be a price taker- where the prices set are dependent on the market. In this scenario, growth is typically slow and limited – simply because it is hard to differentiate yourself from the crowd. As a result, startups like these are not too attractive to venture capital.

However, despite common convention, there is still scope for massive innovation in crowded markets, where startups can choose to be price setters – i.e. dictate prices for their products even in the midst of several competitors. Using technology, startups in these markets can experience phases of rapid growth, comparable to hot silicon valley startups. This is especially true given that incumbents in commodity markets are laggards when it comes to adopting technology as opposed to other industries – leaving the space ripe for disruption.

Permutations and combinations of business models are becoming more innovative with technology, specifically with the rise and adoption of mobile, social, local, and e-commerce. There are several opportunities where you can splice and re-apply innovative business models to traditional industries:

1) Printer-ink cartridge– Nespresso is a classic example of a product where Nestle used the printer-ink cartridge business model and applied it successfully to coffee. Nespresso is basically a form of premium coffee, where they sell the coffee machine for a very low markup/almost at a loss and then sell coffee pods at a lot higher markup. With several patents, they ensure that only their coffee pods are compatible with the machines. With this, they are able to tap into the home markets at almost a 5-10x markup compared to competitors.

2) Group Buying– With the rise of Groupon, group buying has become mainstream. Using the same principle of group buying, companies like Kickstarter are taking the concept and applying it to investments in creative projects. Plukka is doing the same for jewelry manufacturing – and we should still just be scratching the surface.

3) Social News – Reddit and Hacker News use their users to rank their articles/posts based on what is most popular to the community. The same concept can be applied to e-commerce, manufacturing etc. Not sure of what to produce and sell? Why not let your users create and organize it for you! A great example is Chloe+Isabel for jewelry. C+I lets people sign up as ‘merchandisers’ and then it helps them organize ‘trunk shows’, encouraging hosts to invite their friends, family and colleagues attend their shows to buy jewelry.

4) Discovery – There are several startups trying to do discovery. Discovery of apps, music, videos, news, and movies. Now, the issue in crowded markets is that it is hard to identify the true ‘hidden gems’ that would be perfect for you – specifically. How about  taking hints from the business models of Pandora, Spotify, Netflix and the various other innovations like geo-fencing to re-apply them to discovery in crowded markets – for buying homes, groceries, jewelry, medicines, cultural arts and crafts etc. The process of ‘discovering’ what is right just for you – is among the big trends already catching on.

5) Personalized/Made to order – With access to better software, manufacturers are able to individually personalize products on a mass scale. Diamondere is a great example where a manufacturer is able to completely personalize each piece of jewelry. Users can change individual gemstones on any design, change the gold color and quality and even get their purchases engraved. Using software that virtually renders each permutation, the site is able to give a ‘futuristic’ experience of personalizing jewelry. There are already several companies that personalize t-shirts, business cards etc. on a mass scale for individual consumers, but this concept is still in its nascent stages.

Business models are becoming creative – ‘I have x and you give me $ to buy it’ is getting old. How about ‘We will make and sell you either x, y or z depending on what you and your friends want’ or ‘You bought x and y, here’s z’ – but that said, try not to be too creepy about it!

‘Obvious ideas’ are never obvious in the beginning

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Guess what.. The obvious ideas are always taken – this applies to any industry – tech or outside it. Big companies don’t get big by going after obvious ideas. The founders initially have ideas that are completely ‘ridiculous’, ‘insane’, ‘crazy’, ‘that will never work’ – and go after them to make them work. By the time people realize the sheer potential of that ‘odd-brained idea by that weird guy’ – the company is already well entrenched in that space.

The obvious ideas are never obvious in the beginning. When they are thought of, they are almost always dismissed as being completely worthless.

Case in points:

1) When Google started back in the day, it was not the first search engine. Larry Page and Sergey Brin were rejected 3 times to sell Google for under $1million. In fact, Vinod Khosla was thrown out of Bell’s office at Excite for going back to pitch Google for a second time.

2) In 2004, imagine a kid who comes up to you and says, “I’m working on an online people’s directory.” With that phrasing, initially you think of something like a phonebook put online, and are left thinking – ‘why would that have any value?’. Then he builds it, calls it thefacebook and you use it for the first time, you’re left wondering, “this is actually addicting!”. (Describing Facebook as a ‘People’s Directory’ is how Mark Zuckerberg referred to it in the IPO in their investors proposal – the link to which has been taken down.)

3) Twitter was spun out of a failed company called Odeo. Even then there were several people wondering would they want to use twitter? By the time the ‘obvious’ functions of real-time conversations, trends and giving voices to people became apparent, Twitter was already well entrenched in the space.

4) IKEA was founded by 17 year old Ingvar Kamprad. The self-assembly concept was born 13 years later, more as a consequence of having competitors pressure suppliers boycott IKEA. Having the customer assemble furniture himself now seems like a great idea, but back in the day when every furniture shop available was assembling it for you – not so much!

5) Google bought a company called Dodgeball, a location-based social service back in 2005 and had the founders join it. However, given Google’s neglect of the service, one of the founders, Dennis Crowley, soon quit and restarted with a company called Foursquare. If Foursquare was the obvious idea, Google would have paid a lot more attention to it rather than trying to play catch-up several years later.

Paul Graham’s post talks about several other examples where “best ideas initially look like bad ideas”.

So, when you are working on your startup and people tell you ‘no one is going to use it’, ‘you are insane’, ‘this will never work’, ‘this seems like a terrible idea’ – you just might be onto something ginormously big!

When your ideas are unpopular

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I came across this article by William Deresiewicz – Solitude & Leadership <http://theamericanscholar.org/solitude-and-leadership/>

I couldn’t agree more with the following paragraphs in it:

“No, what makes him a thinker—and a leader—is precisely that he is able to think things through for himself. And because he can, he has the confidence, the courage, to argue for his ideas even when they aren’t popular. Even when they don’t please his superiors. Courage: there is physical courage, which you all possess in abundance, and then there is another kind of courage, moral courage, the courage to stand up for what you believe.”

and

“The position of the leader is ultimately an intensely solitary, even intensely lonely one. However many people you may consult, you are the one who has to make the hard decisions. And at such moments, all you really have is yourself.”

When your ideas are popular, you don’t need to do anything, since someone else can come along and implement them for you. It’s when your ideas are unpopular – that’s when you are especially needed to see them through implementation because no one else is going to do it – and this can be a terribly lonely process.

Thomas Edison – “I didn’t fail. I just found 2,000 ways that did not work”

When your idea is unpopular, you will be told of 2,000 ways where your idea will not work, but with enough persistence, you should be able to find one way where it does work – and that is all you need.