OnStartups

Startup Success: The Market Rewards Specialists

Posted by Dharmesh Shah on October 31, 2006 in startups startup startegy 20 Comments


I’ve been meaning to write this article for a while, but a recent post from Matt at Xobni titled “Do One Thing And Do It Well” reminded me about this topic, so felt this was as a good a time as any.  By the way, I’ve met Adam Smith and Matt Brezina both founders of Xobni a few times when they were based out of Cambridge.  They’re great guys. 

You’ve probably heard of the mantra, “focus, focus, FOCUS!” at least a few times.  I’m hoping not to belabor that particular point, but look at the issue from a slightly different perspective.

The Market Rewards Specialists.  If you think about your personal behavior and buying experience, you’ll likely agree with me.  As an overall society, we are digging deeper and deeper into most problem domains and we tend to reward those that have dug deeper than others.  We are now seeking experts on everything from the life-critical (the medical industry) to the not-so-critical (landscape designers that focus on small urban gardens).  This particular movement applies to startups as much as anything else.

Understanding The Problem Is More Important:  Personally, I think there is a lot of value in digging deep into a problem and really, really understanding it.  Lots of good things come out of this particular specialization.  First, you figure out whether the problem itself and the way you’re thinking about it is shared by a sufficient number of people.  You also start to get a sense of where you draw the lines around the problem when crafting your particular solution.  One of the biggest makes startups make is drawing the line wrong.  By not understanding the problem well enough, they either end up solving parts of the problem that nobody cares about, or not solving parts of the problem that everyone cares about.  The reason is usually quite basic.  Founders assume that if the problem is hard to solve, then lots of people will care about the solution.  Unfortunately, the complexity of a problem is not that highly correlated with the perceived value to a customer.  Said differently, just because something is hard to solve, doesn’t mean people will pay you to solve it.  Just because something is easy, doesn’t mean that there is no market.

Compete On Depth:  This piece of advice is probably the best I’ve received and that I can pass along to you.  And, I mean “pass along” in the literal sense.  It’s advice that I personally have a really hard time taking myself – even though I know it’s right.   This is despite the fact that my first startup was highly focused (and to date, the most successful venture I’ve had).   It is much, much more important to solve a seemingly small problem really, really well than it is to solve a large problem (or set of problems) in a mediocre way.  Once again, the market rewards specialists.

I’ve struggled with this whole issue of specialization in my current startup – but have gotten much, much better.  I’ve now figured out that it is hard for me to focus in the very early stages of creating a startup strategy.  So, what I’ve arrived on is to “start big and broad” – and then narrow quickly.  What works for me is to “cast a wide net” for a little while, and then find a problem that I find particularly interesting and then lock in on that.  At HubSpot, one of the early strategies was to create a company that would deliver “enterprise apps for small businesses”.  We thought of ourselves as “Oracle of the small business world”.  This was an ambitious (read:  foolish) notion.  The strategy was simply too broad for a startup to pursue.  But, Brian (my co-founder) and I had enough sense to figure this out pretty quickly.  Hence, we’ve narrowed our focus – a lot.   

How about you?  Do you find it difficult to get dig deep into a particular problem?  Are you trying to be a generalist because you think the market is bigger?  Are there particular techniques that you’ve found helpful in drawing a circle around the problem to be solved?  Leave a comment and share your wisdom and experience.