Scribbles From The Week: 24/10 - 28/10
Rough Notes on Complex Companies and Exponential Inflections
🌀Complex Companies
Key takeaways
As a product grows more complex, it gets better for their long-time, most demanding customers, but it gets worse for new users with simpler needs.
Why do business become more complex as they mature?
It is difficult to build a simple product. A trade-off is made between adding product features and honing on core business offering.
As the company’s initial customers mature, they grow more complex needs. It is imperative that platforms evolve with their customers by expanding their product range to avoid churn.
There is a higher upside in fulfilling complex needs for businesses. A wider product range provides multiple streams of income i.e. Adobe offers a video editing platform, graphic design platform, photoshop etc.
Complexity increases retention and lifetime valie of a customer. This because there tends to be a higher switching cost if customers want to leave a platform.If customers have already spent the time. “If your website has custom solutions like plug-ins, specific designs, and payment integration, you’re even less likely to want to switch platforms because you’ll have to re-create all of that on your new platform of choice.”
Sources:
Complexity Convection by Nathan Baschez
🌊Exponential Inflections
Key takeaways
When thinking about disruptive ideas, people tend to forecast. This isn't useful as we carry present issue and only look for incremental change. We need to look for exponential and unique ideas.
This can be done by back-casting. This is where we start from the future and working backwards is the second key to breakthrough.
How to back cast? Exponential inflections stimulate massive breakthroughs - similar to waves gathering force.
Technology inflection involves exponential improvements in the price or performance of technologies like bandwidth, sensor accuracy.
Adoption inflections are nonlinear changes in the adoption rate of technology
Regulatory inflections involves changes in regulations that open up massive new opportunities.
Belief inflections involves contradicting long held beliefs.Some ideas that are now considered heresy but might someday be viewed as reasonable.
Begin with market inflections rather that starting by identity pain points and market openings in an industry.
What is back casting from potential futures? This involves conducting scenario analysis segmented into three categories: Plausible, Possible and Preposterous
Plausible - is surprising but not too surprising once it happens. e.g. Okta.
Possible - unexpected breakthrough that begun as a hobbies. e.g. Netscape.
Preposterous - insane future to everybody.e.g. Tesla
Sources:
How to build a breakthrough by Mike Maples Jr
Mike Maples Jr - Invest Like The Best
If you would like to have a chat about anything above, send me a DM on LinkedIn.
Thanks for reading!
jjkol💫