All posts in Mental Models

Entrepreneurs are always in a hurry. They want the product to be out so that they can get customer feedback sooner.

This hurry is understandable yet misguided because it prioritizes getting the idea out in front of customers over everything else. The initial excitement about an idea can easily lead to months of wasted development effort. Imagine discovering major flaws in pricing, distribution, design, or market after all that effort.

Isn’t it much better to flesh out ideas with a few weeks of research than to spend months developing them? ...  Read the entire post →

People have busy lives and they usually don’t think much about the products and services they use in their lives. It’s a myth that people are on a constant lookout to (marginally) improve their lives. The reality is that unless the value delivered by a new product or service is substantially higher, most people will not change how they live their life and by virtue of that, they won’t change what they buy or use.

It doesn’t mean that people don’t want to improve their lives at all. New products arrive in the market and replace the old ones all the time. But displacement of existing solutions happens only if people expect that the new product will have a material difference in their quality of life (at work or at home). The important keyword here is material. Slight improvements over existing solutions are usually not worth it for people to overcome inertia, change their habits and start using your solution. ...  Read the entire post →

Most markets are like the car market. Some people like bigger cars, others like efficient cars and then there are some who like premium cars. That is, markets aren’t homogeneous. They consist of different sets of people who value different aspects in a solution.

Because different segments value different aspects, an improvement in one aspect will only be appreciated by that segment and get ignored by everyone else in the market. For example, if the customers in a particular segment are price-insensitive, your discounts won’t work on them. In your mind, a discount should clearly work but for a certain segment of customers, it may actually decrease the appeal of your product for them. But, if a customer segment is price-sensitive, and you give them a clearly higher quality product at slightly higher prices, they may not care enough about the quality to make a switch from what they usually use. ...  Read the entire post →

There’s always a temptation to launch a fully built product with more features and capabilities than existing competitors. It’s exciting to build the next Google, the next iPhone or the next SpaceX, isn’t it?

This temptation is dangerous because even the most successful products in a market had simple beginnings. No product arrives in the market fully fleshed out. The company behind a successful product has developed its internal capabilities and know-how about various tiny but important details over a long period of time. On day 1, a startup simply cannot match such capabilities.  ...  Read the entire post →

There’s an inherent tension between how an engineer sees the product under development and how a potential user sees it. Engineers get excited by the technological advances and the number of options exposed in the gadget. A user sees all such complexity as overwhelming and off-putting.

It’s easy for a creator to forget that the user has a life to live and using their product isn’t a highlight of her life. Rather, it’s likely a chore.

People want their desires to be fulfilled in the most convenient manner. So, if someone wants to go from point A to point B, the most perfect solution would be instant teleportation and not starting the car and driving on the road. People care about their problems, and your solution is only an incidental means to solving those problems. ...  Read the entire post →

It’s common for entrepreneurs to cast a wide net early on and imagine their market to be huge. The logic goes something like this: if the market is worth a hundred billion dollars, then even if 1% of it is captured, the company will be making a billion dollars.

All this sounds good in theory but in practice, it never works this way.

Why would the market leader – the big fish in the ocean – let you take even 1% of the market? In fact, as soon as your startup shows first signs of success, the big fish will do whatever it can to crush you and snatch whatever market share you may have won by that time.  ...  Read the entire post →

There are two ways an entrepreneur can fail: a) launch a product that nobody desires; b) launch a product that people desire but with no significant advantage over established competitors (hence give no strong reason for a customer to switch away).

These two failure modes have their analogous success modes: a) culture-led startup success where a new desire is discovered and fulfilled; b) technology-led startup success where new technology is used to fulfill an existing desire.

Let’s explore culture-led startups first.

They are the ones in which the entrepreneur is able to observe a pattern of new derivative desires that didn’t exist before. Such trends are very hard to spot because initially they can be mistaken either as fads or insignificant.  ...  Read the entire post →

Any one person or one company cannot create a new market. Markets are usually co-created by multiple competitors offering to satisfy a particular customer desire. Even the markets that seem to be dominated by one company usually have multiple credible competitors – Google has Bing and DuckDuckGo and Facebook has Twitter, TikTok and Snapchat.

Oligopolies exist because the first company to launch a product is rarely a home-run in terms of getting the market-product fit right. In fact, the innovative company ends up producing evidence for demand in the market for fast followers. ...  Read the entire post →

It’s near impossible for a product to create a new desire in customers all by itself. No single product creates a market. What usually happens is that multiple environmental, political, economic, social, and technological factors come together to delicately and gradually shape what customers desire, which then creates an opening for new products to address such evolved expectations.

The million dollar question is: how do you discover these evolving trends?

The best way to discover these unambiguous market trends is to look for instances where customers are innovating by themselves by modifying or re-imagining existing products. ...  Read the entire post →

It’s important to clearly distinguish between what people desire and how they fulfill them. Our desires usually remain the same, but methods of fulfillment keep changing. For example, the desire to have good oral hygiene can be fulfilled in multiple ways: toothbrushes, mouth wash, or even crunchy foods like carrots that help clean mouth as we chew on them.

What people care about is their desires and not how they’re currently fulfilling them. If a better way to fulfill their desire comes along, they’ll switch to it in a jiffy. This is why innovative startups take over entrenched incumbents. People really have no loyalty to solutions. ...  Read the entire post →