What founders, investors and authors say works — summarised in plain words, linked to
the source, and tried on the businesses we run. When enough of them have tried it, we say whether it worked.
121 classics · all free0 being tested0 with a verdict5 businesses before a verdict
Paul Graham: Co-founded Y Combinator, the startup program behind Airbnb, Dropbox, Stripe and Reddit.
“It's to look for problems, preferably problems you have yourself.”
Good ideas are noticed rather than invented: start from a real problem, ideally one you have, and prefer a small group who need the thing badly over a big group who would find it mildly nice. A useful test is who wants it so much they would use a rough first version from an unknown maker.
When it applies: You are choosing what business to start, or which of several ideas to pursue.
Not tried yet
None of our businesses has tried it yet.
Schlep blindness: take on the tedious problems others avoid
Paul Graham: Co-founded Y Combinator, the startup program behind Airbnb, Dropbox, Stripe and Reddit.
“Instead of asking "what problem should I solve?" ask "what problem do I wish someone else would solve for me?"”
Founders unconsciously steer away from ideas that involve tedious, unpleasant work, so valuable problems full of drudgery go unsolved and face little competition. Being willing to take on that drudgery can itself be the advantage.
When it applies: You are comparing ideas and find yourself favouring the easy, pleasant ones over ones with paperwork, integrations, compliance or messy operations.
Not tried yet
None of our businesses has tried it yet.
Start small and monopolize (competition is for losers)
Peter Thiel: Co-founded PayPal and Palantir; Facebook's first outside investor.
Fighting rivals head-on drains profit, so a new business should choose a market small and specific enough that it can quickly become the obvious leader there, then expand into neighbouring markets one step at a time.
When it applies: You are choosing where to launch and can name a small, reachable group of buyers whose needs nobody currently serves well.
Contested. Thiel openly argues that monopoly is the goal; at scale, dominant-position conduct draws antitrust scrutiny and public criticism. For a small business the practical risk is picking a niche too small to pay the bills, or mistaking an empty market for an unclaimed one when nobody actually needs the product (the CS183 notes cite PayPal's first idea, payments between Palm Pilots, as that mistake).
Clayton M. Christensen: Harvard professor whose theory of 'disruptive innovation' changed how companies see upstart rivals.
Well-run market leaders keep improving their products for their best, most demanding customers and ignore cheaper, simpler products that appeal only to small or overlooked groups. A newcomer can start there, improve steadily, and eventually take the leaders' mainstream customers.
When it applies: Existing products are more powerful and expensive than many buyers need, or some people buy nothing at all because the options are too costly or complicated.
Contested. The theory's record is disputed: Jill Lepore's 2014 New Yorker critique argued its cases were selectively chosen, and Christensen and co-authors (HBR, 2015) themselves warned that the 'disruptive' label is widely misapplied. A cheap, simple product may also just remain a small niche product if it never gets good enough for mainstream buyers.
Michael E. Porter: Harvard Business School professor whose ideas on competition shaped modern business strategy.
How much profit a market allows is set by five pressures: rivalry among existing players, the threat of new entrants, the bargaining power of buyers, the bargaining power of suppliers, and the threat of substitutes. Good strategy finds a position where those pressures are weak, or shifts them in your favour.
When it applies: You are choosing between candidate markets or niches, or trying to work out why the niche you are in has thin margins.
W. Chan Kim: INSEAD strategy professor; co-wrote Blue Ocean Strategy, a multi-million-copy bestseller.
Renée Mauborgne: INSEAD strategy professor; co-wrote Blue Ocean Strategy, a multi-million-copy bestseller.
“the simultaneous pursuit of differentiation and low cost to open up a new market space and create new demand”
Instead of fighting rivals over existing demand, create new market space by changing what is offered: drop or cut what the industry over-delivers, add what it has never offered, and so reach people who were not buying at all, aiming for lower cost and distinctiveness at the same time.
When it applies: Your category is crowded, prices are being competed down, and many potential buyers stay out of the market entirely.
Chris Dixon: Andreessen Horowitz partner leading its crypto funds; sold his startup Hunch to eBay.
“The reason big new things sneak by incumbents is that the next big thing always starts out being dismissed as a “toy.””
Important new products are often dismissed at first because they do less than what people already use. If a product is built to ride steady improvements in the technology underneath it, it can become good enough for mainstream users surprisingly fast, by which time incumbents have ignored it too long.
When it applies: You are weighing an idea that experts call trivial or underpowered, but the technology it depends on is improving quickly.
Can't test here
The payoff depends on outside technology improving the product over years; being dismissed early proves nothing on its own.
All markets are not created equal: Gurley's 10 marketplace factors
Bill Gurley: Benchmark venture capitalist who backed Uber, Zillow and OpenTable early.
“A true marketplace needs natural pull on both the consumer and supplier side of the market.”
Some marketplace ideas are structurally much stronger than others. Before committing, score the idea on ten things: a better experience than today, a better price than today, room for technology to help, fragmented suppliers, easy supplier sign-up, market size, room to grow the market, how often people buy, whether payment flows through you, and network effects.
When it applies: Choosing which marketplace to build, or deciding whether an existing one deserves more investment.
Not tried yet
None of our businesses has tried it yet.