Ariel Diaz
I am an entrepreneur who occasionally runs marathons and ultra-marathons, always pops the collar, and loves all things orange.
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Strengths and Weaknesses: Two Sides of the Same Coin
We often think about strengths and weaknesses in a vacuum, as if they were completely unrelated to each other. We think about building up strengths and eliminating weaknesses. That's a bit disingenuous and logically impossible because you end up stuck in the middle, with no real strengths or weaknesses. You end up averaging out strengths and weaknesses, resulting in an unidentifiable and uninteresting mediocre mix of traits.
Instead, we should be thinking about both the strengths and weaknesses tied to a given trait or characteristic. Every strength has a corresponding weakness, inherent to the underpinnings of that strength.
Company size as both a strength and weakness
If you're a large company, like Google, you can throw dozens of engineers and other resources to try to a problem. That's a lot of momentum moving in one direction, but that also means it's harder to get going, harder to change directions, and harder to react to uncertainties or changing environments. On the flip side, if you're a small company, you may not have a lot of resources, but you can be nimble, make faster decisions, and out-maneuver larger competitors.
Personal strengths and weaknesses
Personal traits also inherently have strengths and weaknesses. Most of the time, we get feedback throughout our lives about the weaknesses or limitations, and end up focusing on reducing or eliminating those. We don't realize that we're also weakening the complementary strength. We end up settling for the lowest common denominator.
Competitiveness
I compete in everything I do, big and small, creating competitions out of non-competitive things, keeping score in every game where score is kept. That competitive outlook has helped me in almost everything I've done, from succeeding in sports my whole life, to my academic career, to the current startup world I'm in. But it does have a complementary weakness. Über-competitiveness can be off-putting in certain social situations. But the reality is that it's not something I can just turn it on and off. I'm willing to manage and deal with the social awkwardness that may come with being über-competitive.
Confidence
The power of confidence can create a positive feedback loop of increasing confidence, increasing ambition, and increasing achievement. But there are also inherent weaknesses of confidence. The classic is hubris, a self-defeating pride that can lead people to forget their limitations and pursue unattainable and ultimately fatal goals. Another more benign one is that extreme confidence can also occasionally seem arrogant and egotistical, especially in a crowd of non-confident people.
Perseverance
I don't give up very easily, will fight to achieve long term goals, and will work hard and summon other strengths (like confidence and competitiveness) to get things done. Like the two traits above, perseverance is so entrenched in my world outlook, that I don't doubt it will get me through the darkest and most challenging times. But it also comes with a cost, the complement of perseverance is stubbornness. Even the word stubbornness has both positive and negative connotations. It's important to be aware of both, and to understand the balance, but to realize they go hand in hand.
Managing strengths and weaknesses
Given that strengths and weaknesses are different ways of looking at a particular characteristic, the next step is to think about how to manage or deal with weaknesses. The goal is not to eliminate or mitigate weaknesses, because that would inherently eliminate or mitigate the corresponding strength.
Understanding the tradeoffs of each trait is a sign of maturity. Being able to acknowledge weaknesses that are the flip side of a strength is important. Next time you're thinking about a weakness, think about it's corresponding strength - somewhere in that weakness is an inherent strength. Then think about whether it's worth tempering that strength in order to temper the weakness. Or even better, how to be aware of both and use it to your advantage.
This is also highly relevant when building a team for a startup or other endeavor. Don't worry about mitigating weaknesses, instead focus on finding a team whose strengths work well together, and whose inherent weaknesses balance each other out.
The Secret Power of Confidence and How to Build It
Confidence is one of the most important traits in life. It is imperative for everything from dating and relationships, to startups and business. Most of the conventional wisdom around confidence and self-esteem is trying to find a short cut. But the reality is that you can't create real confidence by reading a WikiHow article about how to be confident. You can't create confidence by simply telling yourself that you are special, smart, interesting, or appealing to others, as some confidence "experts" will tell you. All of that is simply addressing the symptoms not the underlying issue.
Real Confidence
The only way to create real confidence is to succeed in something challenging. Everything else is as empty as a participation trophy in elementary school. Real confidence is built upon a solid foundation of achievement, that you can look back on and know is real when things get tough. True confidence is so humble it's arrogant, and so arrogant it's humble.
The Confidence Cycle
Confidence creates a virtuous cycle. It raises ambition, which in turn means you seek out higher goals, which also motivates you to achieve them, which brings you success, which then gives you more confidence that fuels the cycle.
Building Confidence - Seek out challenges
Since the only way to build true confidence is to succeed in something challenging, you need to seek out challenges, and be motivated enough to complete them. This process can start with small goals, to help build the cycle. The challenges do not have to be related to a core strength or long term goal, and are often more challenging and rewarding when they're outside your core competency. For instance, if you're an English-major, all-star athlete, learn to build a website. Conversely, if you're a techy non-athlete, run a marathon. If you've already run a marathon, run an ultra-marathon. If you're a social butterfly, read the longest book you've ever read. It's not about over-optimizing for the specific challenge, just find one, get started, and continue until you succeed.
The risk of a single source of confidence
Too often a person's confidence is tied to a specific source, whether it's their job, their marriage, their alma matter, or their prowess in a particular skill. There are two risks with this single source. First off, it may not imply ability or confidence in other areas. And secondly, if that single source disappears (getting fired from a job, divorce, etc.), you lose all of your confidence and go into a downward spiral. This is one of the biggest challenges of chronic unemployment. People's confidence is tied to their job, so when they lose it, they are left exposed.
The Confidence Portfolio
Real, robust confidence is only attained with a diversified and well balanced confidence portfolio. In order to create that, you need to continue pushing yourself with a diverse set of challenges. Make them diverse, then build on successes and let that fuel your rising ambition. The more diverse your sources of confidence, the more stable it is, because you're creating balance through excellence in multiple things. Psychological research has shown that increased self-complexity, i.e. the different ways of perceiving oneself and one's strengths, leads to lower levels of depression, stress, and illnesses:
"Subjects higher in self-complexity were less prone to depression, perceived stress, physical symptoms, and occurrence of the flu and other illnesses following high levels of stressful events. These results suggest that vulnerability to stress-related depression and illness is due, in part, to differences in cognitive representations of the self.""Self-complexity as a cognitive buffer against stress-related illness and depression."Patricia Linville, Yale Psychology Professor, http://www.ncbi.nlm.nih.gov/pubmed/3572732
Get out there and challenge yourself. In a follow up post I'll share some examples of my own diverse set of confidence.
Losing 20 pounds in 3 months
Towards the end of this past summer, I had gotten past my comfortable weight, as a result of a fun summer, not working out enough, and enjoying the food and beverage. I was up to 194 pounds, and though I carry it well (on my massive thighs primarily), it's still pretty robust for my 5'10" frame.
It really pissed me off. And since I don't believe in moderation, I decided to do something extreme about it, and on August 23, I tweeted the following:
Here I am, 3 months later, having achieved that goal. Looking back, here's the simple plan and how it worked.
Step 1 - State goal publicly
I'm a big believer in using any means possible to motivate yourself, and committing to something publicly is a great motivator. So I tweeted and posted to Facebook about my goal, told all of my friends, and committed to myself. Not only did this motivate, but it's also a great way to get other people's support, especially when you're turning down food and drink.
Step 2 - Decrease food consumption
I don't believe in fad diets. Losing weight is all about a simple equation:
Weight Loss = Calories IN - Calories BURNED (divided by about 3,500, which is the approx number of calories per pound).
So if you're running a 500 calorie deficit per day, you'll lose about a pound a week. Since I was trying to go faster than that, I needed to make sure both factors changed. Reducing food consumption takes discipline, and it reminded me of my days as a lightweight rower. I didn't skip meals (occasionally breakfast), just reduced what I ate, and ate extremely healthy foods.
Step 3 - Dramatically increase mileage
The second part of the equation is the calories burned. Once I made the goal, I went from running occasionally (5-10 miles a week) to regularly running 30-40 miles per week, every single week. Running 30 miles burns about 4,000-5,000 calories, which is about what I was targeting to lose.
Step 4 - Profit
Three months later, I'm back at a comfortable 174 pounds, and at a steady point that I can maintain pretty well with some basic working out and healthy eating. I feel great and look great (according to my girlfriend at least, which is all that counts). Just in time for Costa Rica ;)
Next Goal - Qualifying for Boston Marathon
Now I have to pick a big audacious goal to train for again, so I'll announce that here. My goal is to qualify for the 2012 Boston Marathon. For those of you keeping score (and who isn't), that requires a 3:10 marathon, which is 26 miles at a brisk 7:15 per mile average pace. The gauntlet has been thrown.
Fuck Moderation - Balance through Extremes
This was originally written as a guest post on BostInnovation.
The Importance of Balance
The irony of the conventional wisdom is that it hides a truly important point, which is the need for balance in life. While moderation is insidious, balance is important and beneficial. Balance creates interesting cross-polination, a diversified interest base, and an ability to use one strength to compensate for another when you need to. Balance creates stability and strength. On an individual level, It’s very fulfilling to have a diverse lifestyle, in the spirit the Renaissance man, but moderation is not the way to achieve true balance.How Extremism Creates Stability
In physics, the moment of inertia quantifies the ability of an object to resist rotation. The more weight is out on the extreme of a given object, the higher the moment of inertia, and therefore the more stable it is. The best real world example is a long straight pole. With most of the weight way out on either side, it provides a very stable counter-balance that can be very useful when walking across, say, a tight-rope between the Twin Towers.Innovation is Extreme
On an entrepreneurial level, all real innovation happens at the edge. There is simply no better way to learn an industry and try to fix a problem than starting a company and devoting all your mental and physical energy to solving or improving some important issue. Startups are extreme by definition, and that’s one of the things that makes them so disruptive. Innovation is extreme. Leave the moderation to large companies looking for 5% annual growth. Even within a startup, balance through extremes is important. For early teams, it may mean finding complementary founders, both of whom are amazing and strong in very different areas, like technology and marketing, for instance.Extreme Abstinence
On the other side of the coin, there are many extremes that can be dangerous. In those cases, I think the best solution is to go extreme in the other direction, by abstaining completely. For example, I don’t gamble or watch TV because I don’t like those extremes. So I go to the other extreme, by eliminating them completely. It’s not worth watching a single episode of a TV show, and I certainly don’t want to get hooked. In business, what you choose not to do is just as important as what you choose to actually do. It’s much easier to not start a project, or a feature, or a new market, than to do it half-assed.Focus on 1-3 Extremes at a Time
By definition, being involved in something to the extreme is nearly all-consuming. Therefore, it’s important to focus on only 1-3 areas at a given time. When starting a company, especially in the early stages, it’s difficult to be extreme in much else. But it’s good to have at least 1 counter-balanace. For me, it was training for an ultra-marathon (50 miles), which I used as an excuse to get me back in shape after 6 months of not working out due to injury. I ramped up my running to 30-40 miles per week, finished the ultra-marathon in just over 10 hours, and had a great time doing it.Vary the Extremes for Diversity
While I enjoy living in extremes, I’ve found it important to vary my involvements over time to create a diverse perspective. I love staying physically fit and active, traveling, understanding different cultures, cooking, starting companies, learning, and much more. But in order to gain real depth in each of those areas, I had to really focus on each for a period of time. By choosing to dive in on a few things at a time, you can afford to be extreme. As you rotate through your various potential interests and projects, you’ll find yourself with a much deeper knowledge base than if you had moderately pursued them all over a longer period.Choose what you want to do wisely, then do all of those things fully.
There is a general conventional wisdom that everything in moderation is good. As with a lot of conventional wisdom, that’s bullshit. Everything in moderation leads to a dull, boring, shapeless, unidentifiable mass. Moderation leads to complacency. Instead of moderation, pursue excellence.
The Importance of Balance
The irony of the conventional wisdom is that it hides a truly important point, which is the need for balance in life. While moderation is insidious, balance is important and beneficial. Balance creates interesting cross-polination, a diversified interest base, and an ability to use one strength to compensate for another when you need to. Balance creates stability and strength. On an individual level, It’s very fulfilling to have a diverse lifestyle, in the spirit the Renaissance man, but moderation is not the way to achieve true balance.How Extremism Creates Stability
In physics, the moment of inertia quantifies the ability of an object to resist rotation. The more weight is out on the extreme of a given object, the higher the moment of inertia, and therefore the more stable it is. The best real world example is a long straight pole. With most of the weight way out on either side, it provides a very stable counter-balance that can be very useful when walking across, say, a tight-rope between the Twin Towers.Innovation is Extreme
On an entrepreneurial level, all real innovation happens at the edge. There is simply no better way to learn an industry and try to fix a problem than starting a company and devoting all your mental and physical energy to solving or improving some important issue. Startups are extreme by definition, and that’s one of the things that makes them so disruptive. Innovation is extreme. Leave the moderation to large companies looking for 5% annual growth. Even within a startup, balance through extremes is important. For early teams, it may mean finding complementary founders, both of whom are amazing and strong in very different areas, like technology and marketing, for instance.Extreme Abstinence
On the other side of the coin, there are many extremes that can be dangerous. In those cases, I think the best solution is to go extreme in the other direction, by abstaining completely. For example, I don’t gamble or watch TV because I don’t like those extremes. So I go to the other extreme, by eliminating them completely. It’s not worth watching a single episode of a TV show, and I certainly don’t want to get hooked. In business, what you choose not to do is just as important as what you choose to actually do. It’s much easier to not start a project, or a feature, or a new market, than to do it half-assed.Focus on 1-3 Extremes at a Time
By definition, being involved in something to the extreme is nearly all-consuming. Therefore, it’s important to focus on only 1-3 areas at a given time. When starting a company, especially in the early stages, it’s difficult to be extreme in much else. But it’s good to have at least 1 counter-balanace. For me, it was training for an ultra-marathon (50 miles), which I used as an excuse to get me back in shape after 6 months of not working out due to injury. I ramped up my running to 30-40 miles per week, finished the ultra-marathon in just over 10 hours, and had a great time doing it.Vary the Extremes for Diversity
While I enjoy living in extremes, I’ve found it important to vary my involvements over time to create a diverse perspective. I love staying physically fit and active, traveling, understanding different cultures, cooking, starting companies, learning, and much more. But in order to gain real depth in each of those areas, I had to really focus on each for a period of time. By choosing to dive in on a few things at a time, you can afford to be extreme. As you rotate through your various potential interests and projects, you’ll find yourself with a much deeper knowledge base than if you had moderately pursued them all over a longer period.Choose what you want to do wisely, then do all of those things fully.
Static Friction > Kinetic Friction
I love analogies, especially analogies between life and physics. On a recent run, I was thinking about the parallel between static friction and the forces that keep us from starting things. We all remember the physics experiment from 8th grade, where we put a block of wood or plastic on a ramp, and see how high we can angle the ramp before the block starts moving. In order for the block to start moving, it has to overcome the static friction, which is the frictional force at work at rest, when the surfaces have time to settle and create a sort of frictional bond. Once the block got started, it only has to overcome kinetic friction, the friction against the object when it is motion. Kinetic frication is always lower than static friction. This point is reinforced by the experiment. You need to get to a much higher angle to overcome the static friction, but with a slight nudge at even a much lower ramp angle, the block will keep going.
Life is very similar. The hardest part of any project or activity is starting it. The status quo is comfortable, it's easy, it's known. Something new is uncomfortable, hard, unknown, risky. But everyone knows that. What's easier to forget is that once you start, the resistant forces, while still present, are actually much lower than what kept (or delayed) you from starting.
So whether you're lying in bed hating the run you said you'd go on, or hemming and hawing about a project you want to kick off, just start it. Trick yourself into starting it if you need. Start small. For example, if you're having trouble running regularly, just tell yourself you'll turn around after 5 minutes in the run if you don't feel like continuing. You'll likely never actually turn around after 5 minutes, because you'll be warmed up, and you'll feel good, but that trick will get you out of bed.
The Lower Right Quadrant
A few months ago I got together in the old YouCastr offices with a big whiteboard, a few pizzas, a few packs of beer, and some entrepreneurial product folks to chat about various concepts (or schemes) and think about web trends in general.
One of the concepts that emerged, admittedly following some mental lubricant, was the "Lower Right Quadrant". Being a former consultant, I love frameworks and 2x2 matrices. So as we were chatting about ridiculously profitable dating sites, and how hard we have all worked to create business that don't throw off nearly those levels of cash, something hit me. Here is that framework:
The framework looks at profitability vs. world impact. In the top right are profitable companies that impact the world for the better, like CleanTech (successful ones), and possibly Google (when they're not being evil). The upper left quadrant are necessary humanitarian efforts that might not be very profitable, either by design (e.g. non-profits, government), or by market conditions (e.g. healthcare). The lower left quadrant is where most companies end up, slightly profitable or unprofitable, with little impact on the world. And finally, the Lower Right Quadrant, is where silly and salacious companies make a ton of money without attracting competition from well-intentioned entrepreneurs looking to make the world a better place.
Interestingly, most startups think they're in the upper right quadrant, and have audacious goals to change the world and enrich themselves and their investors. But most startups are actually in the lower left quadrant, making incremental products that end up not being very profitable.
We continued our discussion, thinking about opportunities in the LRQ, ranging from a Swoopo model for dating, to social games, to online pawn shops. One challenge we faced was realizing we weren't really in the target market for any of the LRQ products we brainstormed, and had to continuously think outside of ourselves (or have a few more beers). Another challenge is to get excited about something that is not inherently beneficial. I do actually want to help the world, but there is probably some supply-demand type curve that relates profitability to world-changingness, i.e. the less utilitarian and world-changing the product / company is, the more profitable it has to be to motivate me to continue working on it.
So, before you get all starry eyed about your next big world changing money-printing concept, think LRQ. And get the shirt in the meantime.
Opportunities in The Mobile Internet
I wrote previously about the four phases of the Internet, and how we're approaching the Mobile (+ Location) Internet. As a follow up to that post, I wanted to explore some specific areas and opportunities with this new paradigm.
Solving "Local"
Many companies have tried to solve local, applying technological solutions to the problems facing local business promotion and discovery. Unfortunately, the local problem has proved to be extremely challenging. This is partly due to the businesses themselves, because they have enough day-to-day issues to worry about and aren't very tech savvy. But the bigger reason is that selling to local business is very expensive. Even the tech IPO darling OpenTable has spent years and millions of dollars to get to 15,000 restaurants, and still has to fight to make a meager $2.6 million per quarter. The difference in the mobile + location internet age is that there is a potential to crowdsource the local business data (e.g. Yelp and Foursquare), and also make the onboarding process for local businesses much more seamless, potentially as simple as a smartphone app. Results may end up being as simple as geo-coupons, but I think we'll see much more interesting things that that in this space.Education, Books and Information
We are in the midst of what I hope will prove to be the most transformative time in education since the advent of the classroom at the start of the industrial revolution. Various new models are emerging in education, but the mobile Internet opens new doors by making an essentially infinite amount of data and information readily available. As facts become increasingly available (just a quick google search away on your phone), education will shift to focus on concepts, methods, innovation, and synthesis, rather than the fact regurgitation so prevalent in today's educational models. And of course, the trend will also serve to blow up the concept of a "book", whether it merges with the Internet as O'Reilly predicts, or simply becomes disaggregated into more focused chapters or articles. Location in this case is less relevant, but mobile computing will permanently alter education and information sharing.
"Hard" Augmented Reality
One of the common threads with mobile based computing is augmented reality. This phrase usually conjures images of superimposed information or animations on the existing world, whether through the eyes and screen of a smartphone (e.g. Layar), or eventually in more integrated means like retina displays. Google Maps and Streetview are providing the scaffolding for this type of information in the physical world, so you'll be able to pull up information about a business or a building simply by pointing your phone at it. Additionally, face recognition technology (e.g. Apple's rumored acquisition of Polar Rose) will bring that type of functionality to people, perhaps pulling up their contact info and recent status posts when you greet them.
"Soft" Augmented Reality
But in addition to these map and 3D focused augmented reality, there are plenty of applications to improve day to day life that are really "augmented reality" but don't appear to be. A great example is Shazam, which lets you find out the name of a song you're listening to, solving the incredibly annoying problem of not knowing what a song is when you're listening to it. (I hate to admit it, but I recently tagged a Justin Bieber song.) Many other "soft augmented reality" applications will emerge to make daily life more interesting, fun, and pleasant, without being obtrusive.
Gaming
I myself and not a gamer (and I'm not personally addicted to the various game mechanics of today's location based services), but it would be silly to not talk about the Gaming component of the current internet age. An omnipresent, location aware computer (i.e. smartphone), provides an incredible device to integrate the real world with gaming. It's the core thesis of SCVNGR. I certainly see mobile + location internet enabling the "gamification" of life, and we'll see to what extent, hopefully we don't end up amusing ourselves to death.
These are just some of the trends and opportunities emerging with the mobile + location internet. And given that the stakes are higher, the user base bigger, and the technology easier than ever to adopt, there's little doubt that the winners in this age will be even bigger than those in ages past.
The Four Internet Ages
Now that I'm between startups, I've spent a lot of time thinking about what I want to work on next. I like thinking in frameworks, which makes it easier to evaluate new opportunities and create my own theses around where technology and business is heading. My previous analysis on the Product vs Distribution Framework focused on the core traits a company needs to ultimately succeed. This post looks instead at the macro trends of the Internet itself.
Each phase of the Internet's growth was enabled by key platforms, and had key successes that were able to level those platforms and other trends to create huge businesses. Each phase also built on the previous phases, and would not have been possible without the foundation created before it. And because of this improving foundation and growing user base, each phase enables bigger opportunities that can be reached faster than before.
The diagram below shows the four key phases of the Internet, as the platforms and successes in each, as well as the worldwide desktop and mobile Internet user base. Note that the timeline for each is a general approximation of that trait as the defining leading edge of the web, and there exists considerable overlap in the general use cases and impact of each.
The first Internet phase saw the early growth of users. This growth (and perceived future growth) was so explosive that it led to the great Dot-com boom and bust. It was built on the proliferation of the web browser (Netscape and later Internet Explorer), increasing penetration of desktop computers with Internet access, and standardization of web protocols. In the early days, there were not a lot of users or content, so the most logical way or organizing available content for a limited user base was simply an editorial listing of interesting content, thus the birth and proliferation of portals like Yahoo.
2 - The Searchable Web
The second phase of the Internet saw an explosion of content, which was built on the key enablers of the first age (desktops, browsers, web standards). Once the volume of content exploded beyond the early manageable levels, lists and portals were no longer sufficient to access this content. This led to search becoming the only feasible way to harness the incredibly expanding volume of content.
Google emerged in this era as the key platform because of it's simple, powerful, and fast search capabilities. This dominance led to a web that was organized through the principles of PageRank, and created the SEO and SEM industries. It also opened up a new world of long tail e-commerce, where small companies could have a much bigger footprint than ever before, and cheaply reach customers across the world.
3 - The Social Web
The third phase of the web was based on saturation of online penetration among the general population. A true social web can only existing once online penetration begins to saturate the population, reaching 70% adoption or more. Interestingly, most developed countries started reaching this penetration level around 2003-2005, coinciding with the birth and growth of social networks. This is in stark contrast to the Searchable Web, which is valuable to users even with low adoption rates as long as there is enough content to search.
In this phase, Facebook has emerged as the defacto social platform. This platform has facilitated the creation and growth of two of the fastest companies ever to reach a $1B revenue run rate: Zynga and Groupon. Both of them used the Facebook platform to grow faster and more cheaply than ever before due to the incredible low friction that social networks have to get new users. Zynga reached 100 million users faster than Facebook itself, mainly because most of the users were ALREADY on FAcebook, making them much easier to acquire.
4 - The Mobile Web
The fourth phase if the one we are just entering, which is being enabled by ubiquitous mobile computers (e.g. smartphones). Inherent to this phase is not just the mobile computer itself, but the fact that they are increasingly always with us, and are location aware (know where we are). The combination of ever-present mobile computing, plus a rich location layer, seamlessly integrated with the social graph and the searchable web creates enormous opportunities.
The key platforms in this space have are clearly iPhone and Android, but there is still room for winners on the customer side. Foursquare appears to be one of the early companies to succeed while specifically leveraging mobile + location, but there will certainly be more.
What does this mean?
What's interesting about these trends as I pointed out earlier is that each phase gets progressively bigger than the one before, and leads to faster growth for companies that are well positioned. You can bet that new companies will emerge will get to $1B in revenue faster than Groupon and Zynga.
The Product vs Distribution Framework
In the startup world there is an ongoing debate about the importance of having a very solid product versus having great distribution. A few weeks ago at a dinner hosted by David Skok and Antonio Rodriguez we had a very active and interesting debate about the merits of each. Antonio posed a question about which of the two we would prefer. Since then I've continued to think about this issue, and created a framework to help me think about it and evaluate the tradeoffs.
The Product-Distribution FrameworkGiven that the product vs distribution debate is not just an either or, I wanted to create a framework to help me think and evaluate the tradeoffs of each, and take into account the strength of each. So I created a simple 2x2 matrix comparing weak and strong product vs weak and strong distribution, using a fun theme of plants to characterize the various types of companies (trust me, it's much safer for work than the initial images).
The Oak Trees - Great distribution and product feed on each other to build great companies
At the top right are the truly great companies, that have created solid products and achieve successful distribution to reach enough people. These great companies are household names, including Facebook, Apple, and Google. There are various paths to get there, but most of these companies have a fanatical devotion to creating a solid product, coupled with a very smart, disciplined, and powerful distribution. Throughout the growth, these two strengths continually feed on each other creating a positive feedback loop.
Example: Apple in 2010 - Apple is firing on all cylinders, led by Steve Jobs' literally maniacal focus on creating a perfect product. But it's easy to forget how strong the Apple marketing engine is, creating hundreds of millions of dollars of free publicity with every product launch. They have also created one of the world's strongest brands, and use their huge profit margins to build a wildly successful retail distribution channel.
Example: Google - Google is the undisputed search leader with about 70% of the market (and holding strong). Early on they built a fundamentally superior search product, perfected it through continual execution and improvement, and leveraged the strength of the product to grow distribution. Now the two build on each other, with their market share in search enabling them to continue to improve their product through more data and more servers, and that continually improving product keeps people coming back to use their search engine.
The Weeds - Potentially profitable by eventually doomed
At the top left are companies that have created great distribution despite a weak product. Contrary to conventional wisdom, these companies can be very profitable despite the weak product because of various channels to reach customers and user habits.
Example: MySpace - MySpace leveraged huge email lists to spam users and build a large social network. They grew quickly and sold for $580 million, but continual lack of execution on the product led to their downfall and imminent irrelevance.
Example: Microsoft - A monopoly is about as strong a distribution strategy you can have, but even that is not enough to sustain a company that continues to make inferior products. Despite being wildly profitable, their stock has gone nowhere in 10 years, and their lack of product execution has put them in weak positions in the next computing wave (mobile and tablet).
Example: American auto makers - The analogy even applies outside consumer technology, as evident by the downfall of the American automotive industry, which for too long relied on patriotism, customer loyalty, and a saturated dealer network to distribute an inferior product. Eventually it caught up with them, and now even though they are building better products, decades of perception still linger with consumers and they face an uphill battle.
The Desert Flowers - Potentially great but need some breaks
At the bottom right are companies that have created a truly interesting and innovative product, but have struggled to get it out to the people that care about it. Many companies founded by techies have a strong risk to go down this path, continuing to focus on building the perfect product and not spending enough time getting it out there. And make no mistake, Facebook was not one of these companies in the early days, aggressively crawling online groups to get initial profile pictures and emailing whomever they could.
Example: original Mac-only iPod - Given the rapid success of the iPod franchise, it's easy to forget that it originally launched exclusively for the Mac as a way to drive Mac sales, and took almost 2 years to sell 1 millions units (vs. 74 days for the original iPad, 28 days for the iPad, and about 1 day for the iPhone 4). It was only when they began offering a PC version and leveraging their iTunes distribution platform that sales began really accelerating.
The Tumbleweeds - Also Rans - Lots of challenges, but could work in certain offline niches
In the lower left quadrant are the companies that don't have a particular strength in either product or distribution, and are thus left facing many challenges. In certain commodity local businesses with limited competition, this may not be an issue (for example the only dry-cleaner in a neighborhood), but for online businesses this can be a killer.
Examples: Most clones that lack distribution - Clones often try and replicate a successful product but lack many of the soft traits and methodologies that made those products successful in the first place, and thus often create weak imitations. If those are coupled with distribution advantages, they can be profitable, but often they are mired in the bottom left quadrant to hang on and pray.
What this means on a practical level
Coming back to Antonio's question from that dinner, if I had a choice of having either great distribution or great product, I would choose great distribution, turn that into profitability, and leverage that to build a great product. Practically speaking, however, those choices are rarely presented. Therefore, when starting a new company, the important point is to clearly understand the tradeoffs as well as the strengths of the early team and company. Then use that to built a great company, whether it means leveraging distribution to get to a great product, or building a great product and figuring out the distribution.
And the truly great companies are constantly focused on both, like an oak seed going deep into the ground for a solid foundation (the product), and reaching for the skies to get sun and spread the branches (the distribution).
I'd love to hear other thoughts about this framework as well as other good examples. I'm also planning a follow up post about how to move between areas in the quadrant, and specific industry dynamics.
Online Groups Suck - Email wins, with limits
I have written before about how email is still the killer app. There are lots of new dedicated applications to serve specific needs, but often I find myself reverting back to the trusty email. But one area that I have a love-hate relationship with is the massive email thread.
Email threads have their limitations
This annoyance has recently reached a new high as I have three of these massive email threads going at the same time, one for a local Boston/Cambridge tech geek pickup basketball and soccer, and two for soccer leagues I play on. We use the email thread to announce game times, check who's coming or not, coordinate rides, or make jokes. It's convenient and annoying at the same time.
Email threads are easy and comfortable
Email threads are great because they require no work or learning to use. It is an invisible "product" (use case really) that relies on a platform people are already using every day (email). You compose an email, fill out the addresses automatically, and hit send. And to reply, it's one click or keyboard shortcut. No new usernames and passwords, no new places to check out, no new service to learn.
Online groups have too much friction and are not the solution
One common solution to this problem is online groups, but they have continually disappointed me as a replacement for the massive email thread. Yahoo Groups and Google groups are great for lots of collaboration, forums, or development projects, but for a simple email thread, they are terrible.
First off, they require people to register for the group before accessing it. No matter how tech savvy the group is, there will never be 100% participation, and in many cases people have to create new accounts for a new service (and nobody wants to create yet another account that they will soon forget). Second, they require a motivated and dedicated admin to create the group, manage members, and eventually possibly pass the group on to someone else. Third, they require people to either continue receiving all emails (thereby not saving the inbox), or remember yet another website to check out on a regular basis. And finally, they are not stick: I have never participated in an online group discussion that endured past the initial excitement of the first few weeks.
What's the solution?
Is there room for a Posterous for online groups and email chain management? I hope so.
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