Musings & Meanderings

Who remembers this one?

“Sell to the classes, eat with the masses. Sell to the masses, eat with the classes”
(the words live or sleep are sometimes substituted for eat)

The population size and overall wealth of our modern western society has made it possible to be very successful (and modestly rich) through specialization. Today, buzz words like niche and focus and user-centric are delegating the masses/classes concept to the conversational sidelines, yet it still holds true.

In his essay, The Hacker’s Guide to Investors, Paul Graham says,
“Ten years ago investors were looking for the next Bill Gates. This was a mistake, because Microsoft was a very anomalous startup. They started almost as a contract programming operation, and the reason they became huge was that IBM happened to drop the PC standard in their lap. Now all the VCs are looking for the next Larry and Sergey.”

I agree with this in that the ‘Microsoft formula’ is not going to be repeated exactly, and also in that the ‘Google strategy’ is the most popular one around at the moment. Even Microsoft is pursuing it, not to mention Rupert Murdoch, Barry Diller, Mark Cuban, etc. What I disagree with is that looking for a Bill Gates is a bad idea. The exact confluence of events that led to the creation and growth of Microsoft may not recur, but other opportunities will, and it will take the same sort of person to see and develop them.

Whether inside or outside of the context of such specific opportunities, however, the central tenet to building a business empire is still to develop or sell a product that becomes ubiquitous, or, alternatively, to acquire a dominant market share in one that already is. This is not the job description of an inventor.

McDonalds didn’t invent food. Starbucks didn’t invent coffee. Walmart didn’t invent economies of scale. Rupert Murdoch didn’t invent newspapers or television. Likewise, Bill Gates didn’t invent the computer, nor Larry and Sergey search.

Developing a ‘best of breed’ product or service, as a differentiation strategy in a crowded marketplace, is being interpreted by budding entrepreneurs as targeting high-end or power users with a superior offering. As a strategy for expert specialists carving out a real niche, it is solid and valuable. However, this interpretation/strategy has served just a handful of bootstrapping young start ups well, and many poorly.

What the most successful empire builders have all had in common was a point of view both wide enough to encompass mass markets and deep enough to execute their ideas. The scope (width) of view requires both stepping back to see beyond the limits of one’s personal peer group and stepping forward into the wider marketplace to find the common need/desire. The depth of view is where specialization and ‘best of breed’ concepts apply, and where execution becomes critical. This dual view is the province not of businessmen, but of true entrepreneurs, and in this definition I include the angels.

While the web grows population wise, there are opportunities for bootstrapping new apps to add to the collection. Those boom time opportunities will not be sustained through growth slowdowns and market shakeouts. The field for empire builders, however, remains wide open, and those opportunities are the ones that can survive long term.

This entry was posted on Thursday, July 26th, 2007 at 11:38 pm and is filed under Web Development, Entrepreneurship. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.