Breaking Rules: Either Business Model or Product, But Not Both

I have a theory that you can only have one earth-shattering change at a time when it comes to building a business. What is the thing you a going to do that breaks the status quo?

Most technology businesses break on product. was a great example of this. No one had made CRM software available in the cloud before them. Nike was a break through in product, too.

But some companies are a break through in business model. Google, I would argue, was one of these as no one had proved that people would pay for that kind of ad placement before on the web, in an open market competition. There were hints it would work but no one had truly been successful with it before. Dell is another example, at least when the company started. At that time all computers were sold in retail stores. Dell went mail order, reducing costs and becoming a new, low cost provider in the industry.

The theory, though, is that you can only break one rule at a time when you start a company. You can either be a revolutionary product with a proven business model or you can be a revolutionary business model with a proven product. You can’t be both.

The Hierarchy of Innovation

Some interesting thoughts from Nicholas Carr in his post The Hierarchy of Innovation:

If progress is shaped by human needs, then general shifts in needs would also bring shifts in the nature of technological innovation. The tools we invent would move through the hierarchy of needs, from tools that help safeguard our bodies on up to tools that allow us to modify our internal states, from tools of survival to tools of the self.

He draws this pyramid of innovation, modeled after Maslow’s Hierarchy of Needs:

While I don’t agree with some of his conclusions (I believe Facebook is Technologies of Social Organization), I believe this is a truly interesting way to look at business opportunities. Each tier may have a set of pre-defined business models that work best. Leisure, for instance, seems predisposed to advertising.

Another thought: I can’t help but contemplate the shape, thinking it is upside down. Shouldn’t Technologies of the Self be the widest portion while Technologies of Survival be the smallest? For that matter, what does the width mean? Is it investment, revenues, customers, business size? Nicholas seems to see it as money and reputation, which backs up my earlier statement of Technologies of Self being the widest tier:

But the rewards, both monetary and reputational, are greatest at the highest level (Technologies of the Self), which has the effect of shunting investment, attention, and activity in that direction.

One final thought: are some of us predisposed to fill certain areas of this chart professionally? I don’t seem to relate well to Social Organizations and Leisure, favoring instead businesses focused on Prosperity and Self.

Solve A Problem, Not A Feature Set

Caterina Fake, founder of Pinwheel and Flickr, in an article talking about growing communities slowly also made this comment:

You shouldn’t get attached to a feature set. You should get attached to a problem you’re solving.

It took me a long time to make this differentiation. The last few years, as this distinction has become more obvious to me, has created a wealth of experimentation around this personal theme of working with numbers. Some experimentation was with products, others with partners. Most of the prototypes never saw the light of day, a few bombed and a few have succeeded.

The whole article is full of wonderful nuggets. Being the founder of one of the first great photo-sharing communities, Flickr, and a pioneer of the community-oriented Web 2.0 movement, Caterina would understand this better than most. She talks about how it takes time for a community to build “antibodies to spammers and trolls,” that it “takes time for the culture to grow,” and that the worse thing a start-up community can do is buy advertising to grow the community. It needs to grow organically as people find value in the site.

The Tension Between Simple and Obvious

There is some great conversation going on right now about the role of obviousness in product design. A few products have touched off this debate, including a drawing and writing app called Paper, a task list app called Clear, a create your how-to guide called Snapguide, and Apple’s very own photo editing software iPhoto.

The basis of the debate is that products like Paper and Clear use very few buttons, toolbars and other visual guides for how to use the software. Instead they rely on gestures almost exclusively. All you get is the thing you are interacting with. This has been typical of games for a long time but productivity apps have generally used buttons as a guide post. A few articles, most I found via Daring Fireball, worth checking out on the subject if interested:

The argument for is that it creates a beautiful experience that focuses you exclusively on the task at hand. By learning a few gestures you get an extremely simple and elegant application. The argument against is that no chrome and too much reliance on gestures means a steep learning curve that is easy to forget if not using the app all the time.

It’s a good argument to have, I believe, and is at the heart of my Single Box Theory of design. The beauty of a single box is its simplicity. The problem is that it removes much of the obviousness. This means the box itself has to be smart enough to decipher whatever the user intended. Look at Google’s own search box. We all know it can search but did you also know it can calculate, convert and graph? How about get you flight information, sports scores, and stock quotes? It can do hundreds of things to get you real time results if only you know how to structure your query. And that’s the blessing and the curse. Would it have been more obvious for Google to add a list to the screen and ask you what you are looking for? Maybe but it wouldn’t have been as simple.

There is a constant creative tension between these two: simplicity and obviousness. Frankly, it is that tension that makes product design so much fun.

Thinking About The Product Box Theory of Marketing

A few weeks ago I wrote abut the single box theory of software design. I have another one I’d like to add: the product box theory of marketing.

Here’s how I believe each customer’s mind works: I need to do “x” so I need to go to this service to do it. I need to share files across computers so I need to put them in Dropbox. I need to exercise so I will go over to 24 Hour Fitness. I need to buy a book so I will go to I need to buy soap so I will go to Target.

As humans we like to sort and categorize, we like to put things in little boxes. We know when we need to do “blah” we can go to that little box to get it done.

If your product doesn’t fit into a box then don’t ship until it does. And if your product doesn’t satisfy the entire box, don’t ship either.

We almost learned this the hard way. When developing powerOne calculator we realized that the customer says, “I need to do a calculation so I use powerOne.” But early on we considered leaving off the general-purpose calculator. It is a real pain to develop and maintain and the iPhone had one bundled. But after a couple of customer interviews it became clear quickly that the calculator needed to be there. The customer didn’t want to say when I need to calculate this I need powerOne but when I need to calculate this other thing I need the iPhone calculator. No, the customer wants to say I need to calculate and then grab powerOne.

This box is critical for success. Without it the customer will never really latch on to using your product or service.