Mediocristan(non-scalable) vs. Exremistan (scalable) - https://kmci.org/alllifeisproblemsolving/archives/black-swan...
This assertion just assumes there's no room for optimization and / or improvement on already commercialized products and that the originating company got everything right in the first place.
A product can be sold a ton of ways. Slights tweaks to the strategy and / or to the product itself can sometimes be game changing.
That's not because a product is successful at huge scale that it can't be successful at smaller scale.
It's not saying the improvement isn't an improvement, it's just saying that the improvement is useless until you reach sufficient scale.
Commoditization of your complements stops your complements from competing with you, but also opens you up to other competitors.
I might be misunderstanding something, but it seems that Square becoming profitable required reaching a certain scale.
idk like in my head building a personalized black car service vs. building a bus-service fundamentally requires different conversations around scale b/c of the different domains
"I'd rather build something with 1000 paying customers instead of 1,000,000 free users"
(... who I'd eventually have to try and monetise in uncomfortable ways)
income from the 1000, worldly impact from the 1000000.
In my experience, 'free' users can often be far more demanding (and draining) to deal with. While this is obviously some value to garnered from them, they can rapidly suck the life and passion out of a system or network, to the detriment of those who have paid, which can then create dissent from actual 'customers'.
> You can do things that don't scale to accelerate a good idea, but by definition you actually can't do that if the idea itself requires scale. The idea has to work on day 1, for customer 1.
He's talking about ideas that only work if the company has scaled to some non-trivial size of users or some other relevant factor. Uber would be an example. How could Uber work if there was only 1 customer? There would be no drivers.
If you need to "do things that don't scale" to launch your idea, your idea probably also needs to work with low scale of users/revenue/investment or you will be dead in the water.
I thought scale meant you could run your service for 1 million users just as easily as you can run it for 1,000 users.
> Third, how synchronous and mission critical is it? Be skeptical if it going down would cause interruption to workflows that couldn't be worked around or deferred. Be incredibly skeptical if this is true round the clock and on weekends. That kind of service level implies significant and robust automation and support, which require scale.
> Fourth, how much does the business model depend on volume? Losing a bit of money on first customers as you bootstrap and learn is not an issue. Be skeptical, though, if this would need to be sustained to bootstrap your way to some required volume which is quite a way beyond those first few customers.
Generally I also think of technical scale first, but I think using it more generally here is valid.
No lemonade stand, unless you already have the lemons.
You'd think blogging on a free platform might fit the bill. But, making money depends on readers, which would need to scale to make ads worthwhile, so scratch that- it's scale-dependent. Don't do that.
Maybe if your family has a lot of money, you could pay someone to write your app for you. No- scratch that- it's dependent on the number of people paying for it, and you need to buy ads to reach them, so it must scale.
You could be an investor! Just hold out a carrot and watch people work themselves to death while having a small chance at success. Even if only 1 in 10 you end up actually giving money to for their work are successful, you come out on top. Wait, it turns out 1 in 10 isn't guaranteed. That won't scale, then.
Instead of investing yourself, have someone else invest it for you. Nevermind, no one would do that, because in order for it to be worth it for someone to invest for you without taking too much off the top for overhead, they'd have to scale.
Back to selling.. you could sell your existing possessions and evengelize, going from place to place to get food and lodging.
Sounds a lot like being a priest.
Every sale should make some money and the scale can determined by fixed costs divided by the net profits per sale - if your equipment lease costs $30 per day, and you sell a burger for a net $1, you must sell 30 burgers per day.
If you maximize profit margins, vertically integrate as much as possible ( hello family labor ) and really dig in to your customer base to find a great fit that they are willing to pay good margins for, then you don't have to sell a million burgers from a hundred trucks to take a weekend off.
The same with hardware. We had tiny machines comparable to Raspberry Pi 4 hooked in cluster. Today you can rent single server with 24TB DDR RAM and countless SSDs.
Last I heard, the argument was that the effect for social networking was closer to nlogn than n^2. If true, then quadrupling in size may increase the value by some number of percentage points instead of an order of magnitude.
Which means 'big enough' may not be that big.
Things that don't require scale require a VERY different line of business thinking, generally centered around profits vs growth.
- don't do anything that is based on user-generated content(email, social network, ...)
- it cannot be anything the customer can make himself on his own(e-commerce website with woocommerce, payments with stripe, data storage with s3 ...)
- a NEW idea must be monetizable from the get-go to avoid big players coming in and taking over in shorter time than it takes you to get up and running and building a customer base
- it must be a new idea that has no market yet or existing players have insufficient offering
- if you cannot draw the idea on one A4 paper, the idea is too complicated
- if the price of switching providers is too low, you will lose customers when new players come in and vice versa if you are entering existing market
- if you cannot put out MVP in three months, the idea is too complex
- if the MVP(or even production version) software product/service cannot run on one single VPS or bare-metal server, it is way too complex
- if implementing gdpr and alike are too complicated, the idea is too complicated
- you should avoid storage of any user-generated sensitive information(invoices, payment/transaction details, passwords, keys...), sooner or later it will bite you in the ass
I have recently talked about the world of startups being done for since many large companies offer services for free, even if it is not their core business, they prevent new players form entering the market and pump up their stock by adding value to their name. If you have something new, the big players can take over the entire market whenever they want. Doing something simple worked in 2000s but nowadays a single developer cannot do what was passible back then and you need a team, and as mentioned above, massive financing to be fast to market. So essentially the world belogns to large corporations these days :(
Well for any thing that you tell people to not do, you will have people who succeed by doing it, and vice versa.
List of advice are just random sentences that don't mean anything
This is not a change at all. Large companies buy smaller ones. Large companies buy markets. This is nothing new, and it creates a lot of startup opportunity. Feature purchases, mergers, roll-ups and even acquihires can create wealth for founders and investors. Not every company has the timing and resources to be a Facebook or Google, but their are so many other big success stories. Keep on trying, don't give up, and don't let arbitrary rule lists stop you.
Yes, indeed - free on its own isn't always impossible to compete with, you can often compete on features and quality.
But a combination of free and at scale is formidable, because of the bundling with other services, branding and marketing that scale allows.
I would like to add to this that our tooling has also seen massive improvements, which in turn greatly boosts the leverage of each individual contributor. For e.g. A single person can throw together a rudimentary web-browser in a week by leveraging existing components/tools/etc. Not to mention other benefits like easy access to experts via online forums, automated testing frameworks, etc, etc.
> if you cannot put out MVP in three months, the idea is too complex
> Doing something simple worked in 2000s but nowadays a single developer cannot do what was passible back then and you need a team