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In technology, the low end always eats the high end. It’s easier to make an inexpensive product more powerful than to make a powerful product cheaper.[…] It’s very dangerous to let anyone fly under you. If you have the cheapest, easiest product, you’ll own the low end. And if you don’t, you’re in the crosshairs of whoever does. – Paul Graham
A lot of business is boring – for me anyway. I’m not very good at buying stuff in the first place so trying to figure out how to sell it is even less fun. But economics and value is mostly comes down to selling something to someone else. So it makes sense to try and get better at it – but where do you start?
At one end you have commodities. Things that are the same whoever you get them from. More and more things are commodities these days. Buying commodities comes down to getting them at the lowest price and that’s where markets come in. Traditionally, commodities used to be things like copper or coffee but these days they’ve started to include much of the stuff you buy on markets like Amazon or Ebay.
Let’s say you want to buy a webcam, for instance, there will be lots of options of things that seem mostly the same and it will come down to price. Sellers can improve their sales by optimising their listings, following the suggestions by the platform on best practice. Marketing these products comes down to making sure that information and images are clear enough so that a customer goes ahead with a transaction.
This “transactional” approach to buying a product is what marks it out as a commodity. Information and price are the two things that matter. Buyers use information to reassure themselves that they are getting what they need and use price to pick the particular item that they buy. And the better marketers get at pulling together the information that customers are looking for the more likely they are to make sales.
At the other end of the range you don’t really have products. You have customer needs, possibly ones that they don’t even understand themselves. People often think that the starting point is solving problems for customers. In fact, the starting point is more often problem finding – figuring out what the problem is in the first place.
This is the space for what Neal Rackham, one of the few researchers into sales, calls consultative selling. It’s working with users to figure out what the problems are in the first place and then working on solutions to them. The solutions we come up with these days are often a combination of process changes and software tools. At the same time many of these solutions don’t work – software solutions often run into trouble. For example, why do we see reports like this: “The key battleground will be the tech behind the passports. As the disastrous, and expensive, NHS Test and Trace app showed, the infrastructure is not easy to build.”
If you want to build something that works then you’re best off keeping it simple. This is hard to do because we’re trained to think that new is better, novel is good. And new and novel is good if you’re doing research and trying to push the boundaries of knowledge. But useful things are often simple and utilitarian – they get the job done with a minimum of fuss. And because they’re good you use them more and make them more powerful – eventually overtaking the more complex pieces of software that try and do everything.
This is one of the reasons why free software is so popular – the code often starts with someone writing something for themselves. The popular art program MyPaint started off because Martin Renold wanted a simple digital canvas with brushes. It’s simple but amazingly good for artists who just want to get on and make stuff. And there isn’t a commercial product out there that has the same feel and efficiency for the task that Martin and others need to do.
Paul Graham, the founder of YCombinator, knows a thing or two about startups, and what he has to say resonates with Neal Rackham’s research. It’s hard to go from big to small, from high end to low end, from complex to simple. It’s much easier to go the other way. So, if you’re not keeping things as simple and cheap as you can, there’s a good chance there’s someone else doing something that’s going to make your product and business irrelevant. After all, as Andy Grove, Intel’s CEO used to say, “Only the paranoid survive.”
Cheers,
Karthik Suresh
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