Building a Monopoly
The challenge with entrepreneurship is that a formula for success cannot exist. Innovation, by definition, is new and unique. Brand, network effects, technology and market selection are key components to a truly disruptive idea. If you have these, you could be on your way to building the next monopoly. There are typically many paths to achieve your goal. You only need to find one that works. If you work hard and creatively, you can have just about anything you want but not everything you want. However, you will need to prioritize. Choosing a goal often means rejecting attractive opportunities. Most teams fail at this point before they’ve even really started. Afraid to reject a good alternative for a better one, they try to pursue too many goals at once, achieving few or none of them.
Build your organization from the top down. An organization is the opposite of a building. Its foundation is at the top, so make sure you hire managers before their reports. Create an organizational chart that looks like a pyramid, with straight lines down that do not cross. Everyone should be overseen by a believable person with high standards. Make sure everyone has someone they report to.
Getting the right people in the rights roles in support of your goal is the key to succeeding. Organizing people to complement their strengths and compensate for their weaknesses is like conducting an orchestra. It can be magnificent if done well and terrible if done poorly. Manage yourself and orchestrate others to achieve your goals. Remember that the who is more important than the what. Recognize that it is far better to find a few smart people and give them the best technology than to have a great number of people who are less well equipped.
Think of your teams as sports managers do. No one person possess everything required to produce success, yet everyone must excel. Make finding the right people systematic and scientific. Think through which values, abilities, and skills you are looking for (in that order). Look for people who sparkle, not just any one of those. Look for people who have lots of great questions. They should have previously demonstrated themselves to be extraordinary in some way.
Distinguish between you as the designer of your machine and you as the worker on your machine. Keep in mind both the rates of change and the levels of things, and the relationship between both. Don’t worry about looking good, worry instead about achieving your goals. For this, teamwork and team spirit are essential, including tolerance of substandard performance. If someone is doing their job poorly, consider whether it is due to inadequate training or inadequate ability. To distinguish between a capacity issue and a capability issues, imagine how that person would perform at the particular function if they had ample capacity.
Everyone makes mistakes. The main difference is that successful people learn from them and unsuccessful people don’t. Observe the patterns of mistakes to see if they are products of weaknesses. Distinguish between a failure in which someone broke their contract vs. a failure in which there was no contract to begin with. If you didn’t make an expectation clear, you can’t hold people accountable for it not being fulfilled. Don’t worry about looking good. Worry about achieving your goals and objectives.
Goal orientated people can step back from day-to-day and reflect on what and how they’re doing. They are most suitable for creating new things (organizations, projects etc.) and managing organizations that have lots of change. They typically make the most visionary leaders because of their ability to take a broad view and see the whole picture. Task-orientated people tend to make incremental changes that reference what already exists. They are slower to depart for the status quo and more likely to be blindsided by sudden events. On the other hand, they are typically more reliable.
1. Breakthrough technology
Breakthrough technology should be 10 times better than its closest substitute in some important dimension to lead to a real advantage. Anything less will be perceived as marginal improvement. The easiest way to achieve this is to develop new technology.
2. Timing
The most important things are singular with a power law distribution. One market will be better than others. One distribution strategy usually dominates. With a rapidly expanding market and lots of ambiguity, a bad plan is better than no plan.
3. Company Culture
Every company is a culture. A startup is a team of people on a mission. Everyone should be different in the same way - a tribe of like-minded people fiercely devoted to a shared vision. Everyone should be distinguished by their work and responsible for one thing.
Strive to be excellent, radically open minded and embrace reality. Radical open-mindedness and radical transparency are invaluable for rapid learning and growth. Study what happened to other companies that went through similar efforts. This will allow you to better prepare to face a similar situation in the future, potentially avoiding it altogether.
4. Unit Economics
Customer Lifetime Value must exceed Customer Acquisitions Costs. Superior sales and distribution can create a monopoly, even without product differentiation. The converse is not true. Software startups enjoy dramatic economies of scale because marginal cost to produce another copy is close to zero.
5. Unique opportunity
Do you understand an important truth that very few people agree with you on? Network effects start with especially small markets. The ideal target is a concentrated group of customers not served by competition. Create and dominant a niche before gradually expanding into broader markets. This take takes discipline.
6. Defensible market position
Strong brands are powerful. However, no technology company can be built on branding alone – it needs underlying substance. Looking to expand a market not disrupt. Avoid competition as much as possible.
