Consider Post-PMF before PMF
In the previous article above, I wrote about avoiding ideas which don’t work. There is another angle which is worth considering; Post-PMF strategy.
The key factor is that the post-PMF strategy can’t be easily implemented once we start expanding the business. Therefore, it’s better to consider in the ideation phase.
Two factors: PMF + Business Sustainability
Most of the cases if the PMF is proven, sooner or later, competitors emerge and fight with each other. In this war, we need to build strong defensibility against others so that we can run the business more safely.
In the chart above, the majority of the businesses can be like a red curve. There can be several reasons.
- Evolution of technologies is very fast to be commoditized, especially in IT or software industries including AI, IoT, and Blockchain.
- The market will become red oceans because many providers can do the same things.
- If the competition happens, prices cannot be maintained.
Four rules by Peter Thiel
Peter Thiel’s 4 rules are one of the best summaries.
#1 Proprietary Technology
Peter Thiel’s original statement on the “proprietary technology” is 10x performance improvement over the closest substitute.
Especially in the IT or software industry, I feel it’s almost impossible for most of the entrepreneurs or even genius top-tier Ph.D… See Here
Even if currently your technology is 10x, maybe in the next half year, everybody will catch up and defensibility will go away very soon.
There’re two alternative ways to go.
- Crazy amount
Amazon could offer at least ten times more books than a traditional book store. If the technology itself cannot stand out, it’s a good alternative to think about the 10x improvement in UX. - Embedding
It would be a great alternative if the companies can embed the technology to a deep level of a users’ lives, or business operations. For example, in B2C, if my life has already been optimized with Evernote, it’s hard to switch over.
Another example is on B2B software/SaaS. If the technology or the platform is already embedded in clients’ daily business operations, it is difficult for them to replace it with some new solutions which only have minor advantages.
#2 Network Effects
A network effect is the effect described in economics and business that an additional user of a good or service has on the value of that product to others. When a network effect is present, the value of a product or service increases according to the number of others using it. (Wikipedia)
A good reference is here.
#3 Economies of Scale
Economies of Scale is one of the best-known strategies with a long history.
It is still very valid. Below is a good example in SaaS business.
#4 Build a strong brand
A Brand is a promise. Even in the early stage, we should think about how to identify the brand we would like to build.
Even in the SaaS model, the following article also pointed out the importance of brandings.
Conclusion
It’s so difficult to find the right idea to work on. Practically, we can only be 70% confident to kickstart, because we may find the rest 30% while running the business. Otherwise, we will be too late.
