Changing the game

 
I watched Moneyball last night and saw a lot of parallels to startup land, but tying them all together was the notion of competing effectively by changing the game. In the (true) story the Oakland A's competed against big money teams by leveraging undervalued players to achieve real world gains (focusing on runs instead of wins, though which of course correlate with wins).

The parallel is small startups competing with well-capitalized companies, especially ones with entrenched business and culture. The notion of where to find undervalued assets is where it gets interesting to me.


For example, one tactic is to look at customer acquisition channels too small for your competitors to care about. I did reddit ads when they first came out and since there was no one there you could get a huge ROI. 

The saturation point was so small that for any major competitor it is a complete waste of time (now that Reddit is bigger, that may have changed). Nevertheless, you as a small startup can capture that ROI to get a beachhead. I put startup micro-opportunities in the same category. 

However, neither of these tactics really change the game. They just get you into it.

The canonical way to change the game is famously outlined in The Innovators Dilemma where you focus on the future disruptive product line that the big business cannot focus on because it is so disruptive. Amazon Web Services is a great example of this strategy in the present.

Another way is to treat the bigger business(es) as commodities and layer on something valuable on-top. This is kind of like commoditizing the complement but you're treating your competitors as the complement. 

Like the disruptive innovation, this strategy can make you seem like a toy at first, but if you end up closer to the customer you can capture real value. This is potentially risky if there is only one major competitor (which makes it hard to commoditize!), but often there is more than one place to get the same thing. And you could eventually get big enough to replicate the underlying asset(s) yourself. I put DuckDuckGo in this category.

A third way is to reframe the same problem by changing the way the customer interacts with the product, while keeping the same end goal/result. In Internet startup world this is often re-thinking the UI/UX completely. Mint was in this category.

You could also change the metrics that matter (akin runs vs wins). Badoo is doing this in the dating space by making base interactions free and focusing on meeting new people as opposed to strictly dating.

Here's one more game-changing strategy that comes to mind: shrinking the market. Craigslist is a famous example. Take a huge market and then just totally gut it, but find a profitable businesses in there for you (in this case, jobs).

Some of these strategies can overlap, and I'm sure there are others as well. If you think of any more, please let me know.

The other thing that really popped out at me in the movie was Billy Beane not watching games. It reminded me of vanity metrics. Not only did he get better metrics but he didn't waste time watching them.

It's all related. If you're a startup competing against huge companies, by definition you need leverage on something to compete effectively. Wasting time playing the same game is well, wasting time.

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I'm the Founder & CEO of DuckDuckGo, the search engine that doesn't track you. I'm also the co-author of Traction, the book that helps you get traction. More about me.

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