Swimming in shark infested waters is great
Last week I posted a short clip with successful founder Terry O'Dwyer talking about how he launched his business only to discover that instead of swimming in clear blue oceans he found himself in shark infested red water. Obviously the natural hope is that when you launch your startup and accompanying first product, you have spotted both a gap in the market and a market in the gap and you have no competitors and are therefore swimming in clear blue oceans but is that actually the better option? I would argue perhaps not and here’s why.
Paul Graham, one of the founders of Y Combinator and therefore an incredibly experienced and successful player in the startup world, suggests founders look around at where a company meets a well established need but ‘ sucks at it’. Dick Smith, the self made Australian billionaire, started his business because he got so frustrated with his local electronics store and its terrible customer service that he opened a store a few doors down selling exactly the same things but with a focus on providing a great customer experience. Now he has over 200 stores nationwide and is a billionaire. The AI revolution only helps fuel this cocnept. Across all industries there are hundreds upon hundreds if not thousands of businesses and business processes that are now outdated and slow. Simply creating AI native versions of established processes will give any founder the ability to offer faster, cheaper better product. It’s incredibly hard for any incumbent to defend itself when confronted with this from a challenger startup- loyalty from clients will only last so long.
If you look at fintechs and banks then this is exactly what the fintechs did with digital. Banks moved from providing an in branch experience to a phone experience to an online experience to eventually a mobile experience. They didn’t recreate the experience but simply just moved from one form of channel to the next failing to solve customer pain and rethink the model as they did so. Fintechs realised this and bet that by totally recreating the digital experience they could provide a vastly superior CX. As a result Revolut is on its way to becoming more valuable than most banks and Monzo still has the fastest customer on boarding of any bank by some margin taking less than 90 seconds. Elon Musk did this with Space X. Space rocket design had moved from V2s to Sputnik to Gemini to Apollo and to the space shuttle. Each iteration just used new technology to improve on the existing design and process but it didn’t think about reinventing the process. By revisiting the entire process with all the technology at his disposal and the power and alternative solutions that it provided and by using techniques such as digital printers he managed to reduce the cost of building a rocket by 95%.Ray Kroc the milmshake machine salesmen didn’t invent burgers and fast food. He met the MacDonald brothers and realised that they had developed a system that could do it better, faster, cheaper and consistently and took the golden arches to the world. So if it’s possible then as a founder you should just to look at someone being paid to do something that they suck at and work out a way doing it better. If swimming in red shark infested waters is so appealing then what are the disadvantages of swimming in clear blue oceans?
The issue with blue oceans is the double sell. Effectively if you’re providing something that no one had done before you have a double challenge. First you have to convince them that there is a need for the product and for the method of delivery that you have created. Then you need to convince them to buy it from you. This can take a huge amount of time and ultimately increases you chances of failure. On the flip side if it does work then you can own the space and this can be hugely profitable. James Dyson spent 5 years and 5000 prototypes getting the dual cyclone cleaner right and then almost 20 years getting it to market. He is rightly held up as a shining example of persistence in the face of failure and is a great example of creatin the marketplace and swimming in blue clear oceans but if you think about those timelines it might give you pause for thought. Yes, its great if you can convince clients that you have identified a need or problem that they didn’t know they had and that you have the perfect solution and that they should buy it from you. If you can do this you will be in the happy land of swimming in blue oceans with no competitors but it is extraordinarily hard and difficult.
It is hard enough to build a successful startup anyway and the failure rate is extraordinarily high. So instead of looking for the aha moment, the genius concept on the back of a beermat or any of the other startup myths, simply look at someone who;s has a product that people want, need and buy but who in some way sucks at what they do and simply build a better one. Dive into the red shark infested waters 😊
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