Thursday, March 16, 2006

Focus on your value to each customer

Focus on your value to each customer
The kids actually let me watch a bit of Simon Cowell's new show, "American Inventor." In it, would-be inventors present their dreams to a panel of judges, who either shoot them down or encourage them to continue.

It actually makes for pretty good drama--the inventors are passionate, often funny, and sometimes crazy (like the guy trying to sell giant Cockroach Farms as the next generation of Ant Farms).

Many will fail, and the reason why is simple: They focus on the idea, rather than on delivering great value to each customer.

In this way, they're like a lot of Web 2.0 companies.

These days, the recipe for success seems to be:
1) Build something cool (optional, but let's not be too cynical!)
2) Come up with a goofy name that looks good in a sans serif logo with rounded edges
3) Pray that you get picked up by Slashdot, Digg, and TechCrunch
4) Sell to Google, Yahoo!, eBay, Microsoft, Fox, etc.

What's missing is the sense that you're creating enough value for an individual user to pay you for your product. The business model is, in Bill Burnham's felicitous phrase, "AJAX, AdSense, and arrogance."

Some people will get lucky. After all, you can make one million dollars with a goofy novelty page. And hey, don't forget that Mahir the Turkish Stud was an Internet celebrity once.

But the odds aren't that good. There are a lot of things that could be the next big thing. But very few of them ever become it.

It's hard to guess whether your "nice to have" will suddenly become a must.

Instead, I recommend stacking the deck in your favor. To paraphrase Clauswitz, buying decisions are still made by individual human beings.

If you can find a group of people who have a serious pain and are willing to pay to make it go away, you have a potential market. Maybe it's not as exciting as creating a Firefox plug-in that might be downloaded millions of times, but it is far more likely to make you money.

Let's not forget, in our Web 2.0-crazed world, that technology startups are only a tiny fraction of all businesses, and that Web 2.0 startups are only a tiny fraction of technology startups.

There's still a lot of money to be made in the boring old business of getting people to pay you for something that they really want or need.

Author's Note: I wrote this mini-essay because I realized that I hadn't written a pure business-oriented piece for quite some time. Do you want to see more like this? Would you rather see more philosophical pieces? I'm still going to write whatever I damn well please, but it would be nice to know what other people want.

3 comments:

TK said...

Chris:

Don't you think that the Web 2.0 businesses that are going to be truly successful are the ones that do fouce on things that people actually want or need?

I do not think that Web 2.0 and smart market delivery are mutually exclusive.

Chris said...

I agree that there is no reason for Web 2.0 and smart market delivery to be mutually exclusive.

However, many Web 2.0 entrepreneurs are caught up in building something that is cool to millions, rather than a must-have to a focused market.

That's not the fault of Web 2.0, it's the fault of the entrepreneurs.

BK said...

Chris,

Please write more business related posts. They are interesting to read.

BK