Link: Dare to make your startup Legendary
At Floodgate, we use a framework called the “value stack” to orient our thinking around startup exceptionalism. We look at the value stack as a hierarchy of powers. Each of these is powerful on its own, but as these advantages are layered on top of each other they reinforce and amplify each other even further.
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Proprietry Power: avoids the need to compete
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Product Power: achieves product/market fit
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Business Model Power: translates innovations into profits
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Company Power: prepares for rapid scaling
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Category Power: captures the value from changing spend
Proprietary Power is at the base of the value stack. Proprietary power is necessary because it helps a startup avoid competition once the idea takes hold. This type of power often takes the form of technology depth (generally leveraging Moore’s Law as a proxy) or as a strong network effect (generally leveraging Metcalfe’s Law). Many startups make the mistake of trying to be better rather than different. Having a structural competitive advantage is critical for avoiding mindless competition.
Product Power is about achieving product/market fit. Product/market fit involves creating a “dance” between the product and the market rather than launching something and iterating. It also involves taking the most powerful and compelling aspects of the product and delivering them in the form of “WTF” level features that are not merely compelling — they rise to the level of changing people’s points of view about what’s even possible and create intense delight in customers.
Business Model Power involves translating a startup’s innovation into attractive profits that can improve rapidly. A product that is unique and delights customers should always have a set of attractive customers who value the advantages enough to yield increasingly attractive profits as the company reaches critical mass scale. Company power amplifies this by enabling the company to capture the opportunity to do this before larger competitors can co-opt them.
Company Power involves implementing the basic types of foundations that allow the company to avoid management and technical debt. These include the creation of hot teams, company culture, and the right meetings and lightweight processes that streamline the company and make everyone execute better and faster.
Category Power is the highest level opportunity to create massive value. A great company designs and owns a category, making itself the “Category King.” Category Kings don’t just make something to sell to people. They introduce the world to a new “category” of product or service. They replace our current point of view with a new point of view. And ultimately, they change how people and businesses decide to spend their money. Category Kings usually capture 70–80% of the profit pool in their markets.