It’s been a wild ride last couple of months, launching Galileo and making our first investments. There are a bunch of super interesting founders, problems, and solutions we’re backing, all looking to make a big global impact (and I can’t wait to announce them soon).
I was recently reading Disrupting Class by the late Clayton Christensen and his research group (an overlooked but important book of his). I was reminded yet again of the impact of creating something of independent value. In particular an ‘independent value network’ where a new product prospers, outside the reach of incumbents and regulation, before becoming the default replacement of the ‘old value network’.
I mention this as one strategy for a startup to disrupt incumbent industries and traditional ways of doing things. It’s perhaps one fo the most important strategies, especially for marketplace businesses* where theres usually a traditional way of doing things thats pretty entrenched. In particular their insight is that almost all disruption in ‘regulated markets’ will happen through an independent value network first before being adopted widely.
You almost never win by doing a head-on attack to an entrenched competitor (and that strategy is extremely costly and most startups will never raise enough money to try it anyway).
Think about
- Airbnb → independent value through a network of people’s houses and rooms (unique stock) → becoming a viable replacement to just hotels (now getting regulated)
- Rideshare/Uber X → independent value through casual drivers (unique stock) → viable replacement for taxis due to more supply, price and other quirks (e.g. servicing under-serviced areas/perks etc. and now regulated)
- Canva → independent value through online design (unique tool) and templated design for common design needs of small teams (unique facilitated network) → slowly becoming viable replacement to professional graphic editing software
- Online short/long courses (facilitated and self-paced) → independent value through credentials and student-centric education → slowly augmenting monolithic courses^ in schools and universities? Will it become a viable replacement and thus regulated???**
How does this apply to your startup
Well, this could apply to your go to market strategy in many ways but the first question to ask is are there entrenched competitors? And, if so, what would an independent value network look like for the industry and problem I’m tackling? (thats not an easy answer ahead of time of course!).
The key for me is recognising that the strategy should be creating something of independent value first, rather than focusing on feature parity, price, head-on competition and of course regulation.
It’s almost like you start solving a different problem first but the end game stays the same, it’s just no one sees it coming until it happens.
I shared the pages below (to a founder in fact) from the book which summaries it pretty well.
Footnotes
*I have a blog post coming on bootstrapping marketplace businesses as they’re such impactful businesses when they work well but extremely difficult to get going
^The surge in online, especially expert-created courses, during COVID has been massive. What would taken another 5 years has happen in the last ~10 months and many schools will probably keep online-delivered teaching in some capacity
**I have a huge interest in ‘disrupting’ (more an evolution into learning and value) education and its a bit of life long mission for me. But it won’t come through the ways people imagine it in my opinion. I believe it will be a totally independent value network and learning pathway (but one that can scale too).
