Information and Communication Technology has been the primary driver of innovation and engineering advances during the last four decades. The dominance is to such an extent that the term technology today refers to these fields, though there are several other engineering disciplines that continue to exist! I am fortunate to have started my professional career in information technology and am enjoying being part of it for more than twenty years. Unlike any other technology domain that emerged as new hotspot since the industrial revolution 200 years back, the entry barrier for information technology is extremely low that allowed passionate technologists to launch their enterprises from garages. And combine this with the success of venture capital industry from 1970s, start-ups have been the primary source of innovation in the technology industry since the advent of personal computing with Intel 8080 processor.
While I have not worked for start-ups so far, I strongly believe that start-up lessons can help enterprises improve their ability to succeed while creating new products. In this blog, I will share my notes from “Zero to One”, one of the best books on start-up philosophy written by Peter Thiel, a successful entrepreneur himself.
“Zero to One” has an explanation for most of the new technology trends during the last twenty years coming from start-ups. From the Founding Fathers in politics to the Royal Society in science to Fairchild Semiconductor’s “traitorous eight” in business, small groups of people bound together by a sense of mission have changed the world for the better. The easiest explanation for this is negative: it’s hard to develop new things in big organizations, and it’s even harder to do it by yourself. Bureaucratic hierarchies move slowly, and entrenched interests shy away from risk. In the most dysfunctional organizations, signaling that work is being done becomes a better strategy for career advancement than actually doing work. At the other extreme, a lone genius might create a classic work of art or literature, but could never create an entire industry. Startups operate on the principle that you need to work with other people to get stuff done, but you also need to stay small enough so that you actually can. Clayton Christensen has provided similar explanation in his book “The Innovator’s Dilemma” through the concept of “disruptive innovation” and how most companies miss out on new waves of innovation. Does it mean big companies cannot develop new things? They can, as long as they enable the teams focused on building new things to operate like a start-up without burdening them with bureaucracy and creativity sapping processes.
Peter Thiel suggests that we must abandon the following four dogmas created after dot-com crash that still guide start-up business thinking today:
- Make incremental advances: Small increments using agile methods has far better chances of success today than waterfall world.
- Stay lean and flexible: Avoid massive plan and execute model. Instead, iterative development helps stay nimble and deliver through meaningful experimentation.
- Improve on competition: New things are invariably improvements on recognizable products already offered by successful competitors.
- Focus on product, not sales: Technology is primarily about product development, not distribution.
But having seen a number of projects in large enterprises, I would say that sticking to these principles by default and making exceptions only for compelling reasons is better.
When it comes to creating new software products for a market, don’t build an undifferentiated commodity business but one that’s so good at what it does that no other product can offer a close substitute. Google is a good example of a company that went from zero to one, after distancing from Microsoft and Yahoo almost 20 years back and became a monopoly. While monopolies sound draconian, the companies that get to the top create monopoly based on a unique value proposition they offer in their markets. So, don’t build new things unless there is a desire and plan to capture significant market share, if not monopoly. Every monopoly is unique, but they usually share some combination of the following characteristics:
- Proprietary technology
- Network effects
- Economies of scale
- Branding
Another interesting observation is around secrets: most people act as if there were no secrets left behind. With advances in Maths, Science and Technology, we know a lot more about the universe than previous generations but there are still numerous unknowns yet to be conquered. It helps to be conscious of the four social trends that have conspired to root out beliefs in secrets:
- Incrementalism: From an early age, we are taught that the right way to do things is to proceed one very small step at a time, day by day, grade by grade. However, unlocking secrets requires us to be brutally focused on the ultimate goal rather than staying satisfied with interim milestones.
- Risk Aversion: People are scared of secrets because they are scared of being wrong. If your goal is to never make a mistake in life, you shouldn’t look for secrets. And remember, you can’t create something new and impactful without making mistakes.
- Complacency: Getting into a top institute or corporation is viewed as an achievement in itself with nothing more to worry and you are set for life. This leads to complacency and no more fire to unlock secrets.
- Flatness: As globalization advances, people perceive the world as one homogenous, highly competitive marketplace and an assumption that someone else would have already found out secrets.
To summarise, when a start-up or an enterprise decides to create a new product, it should resist the temptation to go for a commodity one. It should be a product with clear differentiation that will help create a monopoly or significant market share at a minimum. This can happen only through hard work and dedication to unlock some secrets.
There is a lot more learnings from the book but I have only mentioned the key ones that can help us introspect and stay focused on our goals to create new products.