Dave Concannon

Paul Graham’s recent article on generating startup ideas got me thinking.  He splits startup ideas into two categories:

Those that grow organically out of your own life

Those that you decide, from afar, are going to be necessary to some class of users other than you.

His article mainly focuses on the organic idea-generation process; finding something that bothers you and fixing it minimally before offering it to other people and incrementally improving upon it. A tried and trusted way to create something of value, and at worst you fix your own problem.

A Different Source of Inspiration

The other class of ideas is something I thought I’d focus on – Where building something for yourself and then offering it to others seems to be Problem Focused, the second approach would be more Market Focused. What I mean by ‘Market Focused’ is that you are hypothesizing that there are a group of people out there who are not you that:

1. Have a problem
2. Would pay money for a product or service that can fix it
3. Are sufficient in number to make it worth the effort

While Paul Graham warns:

The worst ideas we see at Y Combinator are from young founders making things they think other people will want.

It’s an idea I’d like to explore a little more.

Market-Focused Ideas

Where the first type of idea generation is more introspective, the second may involve more exploration.  Instead of starting with a problem in need of a solution, you’re looking for the problem. There’s plenty of opportunity to find a sufficiently large niche market that has a problem that has either not been solved, has been solved inefficiently, or has been solved a by a dominant market force (a ‘Gorilla’ in Geoffrey Moore’s lingo) that has grown lazy.  The first two cases case may be a problems that were not economically viable to solve, resulting in no solution or a solution that creates a weak business. Applying a customer development process to customers in these areas will help determine whether it’s worth spending more time on. I think the ‘Gorilla’ situation is the most interesting.

Kicking Gorillas

In this third case, a market where the dominant player is sitting back to milk the customers, you can find outdated technology, poor customer service, and/or exorbitant pricing structures. Any of these are possible chinks in the Gorilla’s armor for an agile startup to position against. If you can bring updated concepts (and associated value addition) to the customer at a lower price,  a lesser implementation and training cost, or bundled with better service you can create a very interesting business. Just because the problem has been “solved” doesn’t mean there isn’t a great opportunity – Google launched well after the search problem had been ’solved’ by it’s now practically redundant competitors.

Caveats

There are obvious caveats that will fall out during analysis of the opportunity, here are a few:

1. You may need very specific domain knowledge and credibility to access some markets e.g. Medicine or Law.
2. Double sided markets may require time and capitalization to gain mass (e.g. An advertising network needs both publishers and advertisers in volume before anything interesting happens).
3. Despite the gorilla sitting on it’s laurels, it may have a certain amount of lock-in by creating a high switching cost for it’s customers.

Update: Jason Calacanis’ latest email has a great section on capitalizing on ideas, see the section marked “How to be an Angel Investor and Business Creator“.

An interesting quote from “Tribal Leadership” on how industrialization changed the school system:

The solution was to train a new generation of workers by teaching them inside a system that looked a lot like a factory. In school, bell rings, go to class; bell rings, recess; bell rings, go back to class; bell rings, eat lunch; bell rings, go home. At school, children with the “right” answer get a gold star, then an A. A star pupil is one who does the homework and has the right answers. This new system undid the classic liberal education which said that value was in the well-designed question.

As data becomes more and more accessible and available, how valuable are these sorts of skills? Ubiquitous access to information means memorization of things like specific dates or formulae is an over-rated skill. The real skill is in understanding the underlying series of systems and actions that formed that memorable date. It is in knowing that a formula exists in the abstract, and can be applied specifically in different and possibly unrelated areas.

Creativity

Sir Ken Robinson had a fantastic talk at TED on why applying a system across the board marginalizes certain creative personality types, and why he believes that nurturing creativity should be held in equal regard to skills like writing and numerical literacy. Paul Graham briefly mentions why apprenticeships make sense for some people. How will technology advances influence teaching?

Finally, here’s a great video on the importance of a good teacher from one of Seth Godin’s recent posts.

Firstly – my sincerest apologies for the long delay in posting to anyone reading this weblog. In a lottery of several jobs, myriad miscellaneous projects, and various other responsiblities writing articles drew a losing ticket. My next review from Joel’s MBA software reading list is Paul Graham’s “Hackers and painters”.

Paul Graham co-created an early web application with Robert Morris, and reaped a very lucrative buyout as the economy (or Yahoo in this case) threw money at every startup in town. As their next collaboration, they started Y-Combinator, an incubator which helps young entrepreneurs turn their ideas into salient products.

Hackers and Painters is a collection of Graham’s writings from his website. Although available for free, I always find it easier to read printed material. Also, having a stack of books next to my desk allows me to pretend I’m smart (until I open my mouth and ruin it all). There is no central theme to these essays although they generally stay within the “tech” umbrella and furtively dart into dark and murky industry corners.

The book is enjoyable although the essays can occasionally slip into subjective and emotive thought. Graham loves LISP, certainly understandable as his original fortune-making application was written in the language. For some reason though, this keeps cropping up. While I may be exaggerating the frequency of his soliloquies to this programming language the overwhelming impression I was left with after reading this book was “Man, this guy really digs LISP.”.

Occasionally the crux of his argument is a little tentative, for example in the article which gives the book it’s name Graham argues for the similarities between Hackers and Painters. While reasonably convincing, I think it wouldn’t be too much of a stretch to compare Hackers to several other creative disciplines, though the fact that the author has studied classical art would seem to have influenced his opinion. In another he argues that companies who use proprietry software such as Oracle databases aren’t worth worrying about, as they’ll be “too slow” and populated by mediocre drones. It’s perfectly acceptable to love technology for personal reasons, but dismissing any company out of hand for chosing a particular technology could be considered myopic.

Minor gripes aside, some of these articles are required reading and will certainly inspire lateral thought. This is a collection of opinion pieces though, so any reader looking for hard fact and step-by-step instructions should look elsewhere. Here are some links to articles I feel stand out:

• Why Nerds are unpopular – An interesting explanation for why Nerds don’t get along with the “popular” kids.
• How to make wealth – The difference between working hard and working smart.
• What you wish you’d known – All the things you wish someone had told you back in school.

To be objective, I wouldn’t put this book at the top of your reading list as Graham’s articles are available online. He certainly doesn’t pull any punches on his opinions, and if you sit on the wrong side of the technology fence some of his comments might smart.  I would definitely recommend that you check out his online essays; there’s gold in them thar hills.