Launching a new product is hard — whether you're trying to launch a new startup, or you're working on a new product in the context of a larger company.
It’s tempting to think that new products are the result of straight-line innovation — that is, someone gets an idea, builds it, and then finds success (or failure). In practice, the vast majority of successful products are the result of a longer process of trial and error under conditions of uncertainty.
This is fancy way of saying that the people involved were often groping their way in the dark. Or, to use our core analogy: perhaps they were finding their way in a maze.
The original conception of this uncertainty as an ‘idea maze’ comes from Silicon Valley investor and entrepreneur Balaji Srinivasan. Much of his original framing is mistaken, but it’s worth examining. He writes:
Most of the time, end-users only see the solid path through the maze taken by one company. They don’t see the paths not taken by that company, and certainly don’t think much about all the dead companies that fell into various pits before reaching the customer. (emphasis added)
The maze is a reasonably good analogy. Sometimes there are pits you just can’t cross. Sometimes you can get past a particular minotaur/enter a new market, but only after you’ve gained treasure in another area of the maze (Google going after email after it made money in search). Sometimes the maze itself shifts over time, and new doors open as technologies arrive (Pandora on the iPhone). Sometimes there are pits that are uncrossable for you, but are crossable by another (Webvan failed, but Amazon, Walmart, and Safeway have the distribution muscle to succeed). And sometimes there are pitfalls that are only apparent when one company has reached scale, problems which require entering the maze at the very beginning with a new weapon (e.g. Google’s Pagerank was inspired in part by Alta Vista’s problems at scale, problems that were not apparent in 1991).
A good founder is thus capable of anticipating which turns lead to treasure and which lead to certain death. A bad founder is just running to the entrance of (say) the “movies/music/filesharing/P2P” maze or the “photosharing” maze without any sense for the history of the industry, the players in the maze, the casualties of the past, and the technologies that are likely to move walls and change assumptions.
Investor and entrepreneur Chris Dixon took Srinivasan’s original idea and extended it:
Good startup ideas are well developed, multi-year plans that contemplate many possible paths according to how the world changes. (...) Imagine, for example, that you were thinking of starting Netflix back when it was founded in 1997. How would content providers, distribution channels, and competitors respond? How soon would technology develop to open a hidden door and let you distribute online instead of by mail? Or consider Dropbox in 2007. Dozens of cloud storage companies had been started before. What mistakes had they made? How would incumbents like Amazon and Google respond? How would new platforms like mobile affect you?
Unfortunately, both takes are mistaken — the maze is a lot more random and a lot more idiosyncratic than you might imagine. There is no such thing as ‘intelligently navigating the Idea Maze’, nor is it true that good startup ideas are ‘well developed, multi-year plans that contemplate many possible paths according to how the world changes.’ If you actually study the stories of successful new businesses, the results are nearly completely random.
So how to make sense of this?
The only common feature across all of these stories is that a) the principals got lucky, and b) they worked forwards into uncertainty, improvising on their bets based on new information they generated from execution. This second thing is called ‘effectuation’, and was articulated by academic Saras Sarasvathy in a 2001 paper:
Entrepreneurs structure their lives to enable them to take reasonable risks, ensuring that their losses never take them out of the game. They then place many survivable bets over a multi-decade time horizon. Structuring their lives like this makes success more likely: eventually one works out.
Instead of doing competitive analysis, in the early stages of a venture they focus on building partnerships with customers or other stakeholders. They do this because market analysis is simply not very useful: a successful business must exploit something that isn’t yet known; if analysis could uncover that information, it is likely not unknown enough to be exploitable. Taking action in a market generates far better, more accurate information of the type that might actually be valuable to the entrepreneur: it teaches you what gaps are actually good.
Good entrepreneurs understand that the whole game of entrepreneurship is a game of improvisation. There is no knowledge to be had; no advice one can read. There’s simply no guaranteed answer to anything: you take lots of action to generate information and stay alive, and then roll with whatever comes your way. You are prepared to do this for years.
Two Commoncog essays go deep into these ideas:
The following series of cases should demonstrate what that looks like in practice.