đŠ3-2-1 Traction â disengaged customers, creative destruction, and the competition we ignore
Thereâs no real theme today, but I hope you enjoy. When youâre done, Iâd love it if you took 60 seconds to click âreplyâ and let me know what you think.
three ideas from me
one: competitors â competition.
There are few things more cringeworthy than a founder telling a potential investor they have no competition.
Because youâre confessing one of three things:
That you havenât researched the market well enough to understand who else is trying to solve this problem;
That you havenât found a problem important or urgent enough for anyone to solve for money; or
That you donât understand the problem in the context of your customers.
Letâs zero in on that third one.
If youâre solving a problem worth solving â one of those problems that causes pain severe and urgent enough to solve â then the customer must be doing something to try to address it.
If the customer is doing nothing to even try, then how could it possibly be important enough to spend time and money to have you solve it for them?
So letâs assume they are doing something. Whatever that is is competition â even if itâs not a competitor.
Founders often define âcompetitorâ so narrowly as to remove any value: theyâre only the competition if theyâre a product that is just as good as ours.
If theyâre neither a product nor even in the same quality ballpark, itâs still competition.
two: we learn more by talking to our least engaged users.
Every startup will eventually wrestle with retention â itâs always cheaper to keep a customer than to buy a new one.
When a product starts losing customers, founders wisely dive in not only to the analytics but also into conversations with customers to discover why.
But Iâve noticed that they tend to look to their most engaged users.
The theory is something like this: if we discover what makes users stay, then we can convince the users who are leaving of the value theyâre giving up.
To protect Allied fighters in WWII, the military wanted to beef up their armor. As planes have weight limits (particularly if theyâre going to dogfight), they had to decide where it was most effective to put armor plating.
So they plotted all the bullet holes on all returning aircraft:
There is a clear distribution. Seems reasonable!
Except itâs not:
Their sample only included the planes that got shot and made it back. Itâs called the survivorship bias.
Next time you want to learn more about how customers experience your product, try talking to your least engaged users first.
More data bang for the research buck.
three: I hope AI isnât coming for your job.
If youâre worried AI is coming for your job, you may be confessing your lack of value.
Albert Einstein once quipped that if he had an hour to solve the worldâs most difficult problem, and his life depended on the solution, that he would spend the first 55 minutes determining the proper question to ask â for once he knew the proper question, he could answer it in five minutes.
He might as well have been talking about ChatGPT:
AI will only answer a question you ask it, and the strength of its response is directly proportional to the strength of your question.
Generative AI doesnât do the valuable work of asking the question.
AI can save you tons of time and money by taking on the grunt work. And if your job is grunt work⊠well⊠yeah⊠it will replace you.
This is a theme of innovation: âwhatâ is a more important than âhowâ. If you can define and validate where youâre going, getting there is easy.
Or, as Schumpeter put it:
Entrepreneurial profit is the expression of the value of what the entrepreneur contributes to production.
In other words: your job as a founder is to create value where none exists.
Entrepreneurs are the A team. Managers are the B team.
And the single most valuable skill of entrepreneurship is learning to ask good questions, and AI can help you master that skill just by answering your questions.
Because the strength of its answer is proportional to the strength of your question.
Iâll have a lot to say on this in future emails, but, for now:
How do you think AI will affect your life in 2024?
two ideas from others
Form follows function â. Those whoâve spent time in product design understand the perennial trap of aesthetics taking over the design process. Creating something âprettyâ becomes more important than creating something functional.
Instead of figuring out what we want to say or what we want the user to do and designing for it, we instead design for prettiness, and then figure out how to fill the empty spaces with content.
Design thinking â thinking about design.
But the lesson is much broader: âwhatâ is always more important than âhowâ.
Innovation vs creative destruction â. The popular discourse treats Apple like an untouchable behemoth: competition is nowhere close, and antitrust focuses on Google and Facebook.
Itâs a myth.
But it may not matter one key to the business model innovation that drove them to the top is now the riskiest part of their enterprise: Sino-American supply chains.
Given time, Schumpeter comes for us all.
one question for you
Whatâs the biggest risk to your startup that youâre not thinking about?
In the early stages, youâre likely thinking about desirability or distribution. Then maybe competition, IP, and defensibility.
But dig deeper: in thinking about the next three years, what are the potential societal, technological, economic, environmental, and regulatory/political changes that will kill you?
Reply and let me know!