A book for entrepreneurial minds who want to realize the future
Envisioning myself as a Thoughtful Creationeer, a person seeking to bring well-investigated and impactful ideas to life, this book has been truly inspirational. The book Zero to One: Notes on Startups or How to Build the Future, is as the name suggests, a book about how to start a tech-based company. It is written with a certain amount of authority as the main author Peter Thiel has taught courses on startups at Stanford University, he was the first outside investor of Facebook, and is part of the "Paypal Mafia." "Paypal Mafia" being the group of entrepreneurs who, after creating and selling PayPal, broke up into separate entities, each creating new companies such as Tesla, SpaceX, LinkedIn, Youtube, and Palantir.
The book's focus is on how to become an entrepreneur in tech, based on inventions that are fundamentally different from what else is on the market. Inventions that are disruptive. The next Steve Jobs won't create pocket-sized computers with touch screens, nor will the next Elon musk create self-driving electrical vehicles. This is what the name of the book refers to. Zero to One is not about going from 1 to n, as in having a product and redesigning it or updating it with better features. Zero to One is about getting an idea and realize the first thing of its kind.
In this book review, I will run through and explain the most important takeaways I got from the book. They are based on a list of questions, the authors believe a tech startup must be able to answer correctly, to be successful. For those of my readers looking for concrete and quick answers, these are the questions you're looking for:
My main takeaways
The Engineering Question Can you create breakthrough technology instead of incremental improvements?
The Monopoly Question Are you starting with a big share of a small market?
The Timing Question Is now the right time to start your particular business?
The People Question Do you have the right team?
The Distribution Question Do you have a way to not just create, but to deliver your product?
The Durability Question Will your market position be defensible 10 and 20 years into the future?
The Secret Question Have you identified a unique opportunity that others don't see?
The Engineering Question
If you can answer yes to the first question: "Can you create breakthrough technology instead of incremental improvements?" - then you believe you're capable of creating either one of two things:
Creating a product that is 10X (minimum 10 times better than the current best thing in your target market) or
Making a product targeting a latent problem no one else is trying to solve, thus making it the first of its kind and at least 10X of what was before.
The Authors argue that entrepreneurs trying to build a new technology must be ambitious when setting their goals for the technology they're trying to build. Trying to build a product that is less than 10X, one will run into a problem when launching onto the market as the consumers will not see the benefits of the product. An incremental improvement, of say 20%, will not be noticeable or stand out from the crowd of other products. The author further argues that when building the prototype and testing its effect, the entrepreneur often gets an inaccurate perspective of how their product is actually going to perform in the "real world" outside the testing lab. If you have 10X in mind when setting goals, you give yourself a buffer to underperform and still be viewed significantly superior to the competitors.
The Monopoly Question
The authors define monopoly as having a significantly big share of the market, being its leader, and making the competition irrelevant. Becoming a monopoly is a great thing to achieve! It implies new products will be made which will benefit the consumer, as well as the creator, getting sustainable profits to keep deliver more consumer beneficial products. Being in a competitive market, on the other hand, leads to no profits for anybody and struggling for company survival. Becoming a monopoly is a much simpler task to accomplish in small markets than in bigger ones, as the number of competitors are simply fewer. Thus The Monopoly Question is being raised as follows: "Are you starting with a big share of a small market?"
Creating a monopoly can be done in a multitude of ways, and there is no one method that is the right one. Thus, the following list of suggestions is not a checklist to create a monopoly. It is rather a list of methods that should be evaluated case by case, company by company, to find out which is the most suitable. You can consider the methods as inspiration:
Proprietary Technology
Network Effects
Economics of scale
Branding
Proprietary Technology
The most substantive method for getting a monopoly is getting a patent. If you get a patent you are legally the only one who may produce/utilize the thing your customers crave for. However, this only applies if you have a 10X technology, making the patent something of actual worth. The patent is worthless without a 10X technology. With a worthless patent, no one but you may use your technology but no one has any interest in using it either.
Network effects
Network effects is a method of strategically leveraging your product by making its value increase as more and more people use it. Facebook is a great example of this. Starting as a platform built for just Harvard students, Facebook became a must-have as a Harvard student because everybody else at Harvard used it. Now it's a must-have in the rest of the world! Why? - The same answer, now everybody else uses it! Can you also make your product the standard/norm in your market?
Economics of scale
A great startup should be designed for scalability making it robust to responding to an increase in sales. If you want your great market share, you must be ready for scale-up and increasing your company at the rate of market interest. Making a service-based company you're putting yourself in a spot hard for scaleability. In order to scale up a service company like for example a yoga studio, one must invest in educating new yoga instructors and find real estate, which is costly and time-consuming. Making a software-based startup, however, you're putting yourself in a spot easy for scalability. The cost and time consumption associated with making another copy of your product to sell in, a software-based company, is close to zero.
Branding
Your company has a monopoly on your own brand by definition. Strengthening your brand is a way to achieve a relationship with your customers, making your customers want to come back. One thing is to maximize customers onboarding your brand with the principle of the economics of scale, but you also want to make sure your customers stay once they are there. What actions can you take in order to strengthen your brand and customer relationship? - Start with the marketing mix! The marketing mix is an analysis method we're taught at my study program, to break down the marketing effort into resp. the "4 and 7 P's". Thus the marketing effort is evaluated on each of these various parameters one "P" at a time. Regardless of how at the end of the day branding comes down to inventing your identity as a company. Once the right identity is created branding is all about strengthening your customer relationship with that identity.
The Timing Question
In order, to be able to say yes to the question: "Is now the right time to start your particular business?" the entrepreneur must have a clear vision of how the market is going to develop, as well as the development of the customer's needs. Are your customers ready for that something you're building? Is the market moving slow or fast? What are the new trends and market regulations?
Once again there are multiple right answers to these questions, but here is one good strategy for timing:
Entering a small slow-moving market
If you have found your latent problem to solve, with your 10X technology in a slow-moving market, now is a great time to start your company! Monopoly-wise, you are at greater odds of dominating the market that you want. Opposite to this, if something is really trending, the timing may not be right. Your competitors will rush to market! If this is you, then ask yourself: "What are my odds of beating the competition?" - Are their technologies 10X mine, or are mine 10X theirs?
The People Question
Okay so far so good! In theory, you are now covered in terms of having a great business idea, a strategy of how you will become a monopoly in your market, and you feel like now is the right time to take action and execute! Now would be a good time to ask yourself: "Do you have the right team?"
Having the right team can be boiled down to the following criteria:
Team chemistry/work culture
Distinct but complimenting set of skills
Wearing your company t-shirts (Super LOL I know! - Don't worry, I will explain why 😂)
Team Chemistry/Work culture
The team must have the right chemistry and work culture. If the team wants to succeed they have to execute and that means putting an insane amount of effective hours into the startup. A startup cannot succeed if everyone involved is not aligned and willing to put in the required work. This means having a team that you can tolerate being around, as well as having a team that burns for achieving the vision and mission of the startup.
Distinct but complimenting set of skills
This one is kind of a no-brainer. In order to build what you want to build, you want a team that has the competencies needed. Ensure that the big areas of your startup are covered, so at least someone covers the role of a designer/engineer/hacker and sales/strategizing/user-insider. If you do not have someone on the team responsible for this, then you have to learn it.
Wearing their company t-shirts
Yes, the authors actually state this seriously! Remember their background; they are rockstars in the community of starting companies. The authors state the following genius quote as to why their investment fund has a rule of thumb to not invest in startups that do not wear identical company t-shirts: "There's nothing wrong with a CEO who can sell, but if he/she actually looks like a salesman, he/she is probably bad at sales and worse at tech." The point is, that salespeople need to be kind of tricky. Their job is to make the customers feel like their money is safe in the company's bank account. Thus they need to fit in with their customers and feel likable and not look like someone who will trick them. Opposite there is the stereotype that hackers and tech startups are nerds. if they look like salesmen, they might not be it.
The Distribution Question
The authors make a point as they state a common fallacy of tech-entrepreneurs: "If we built it, they will come." One startup might be able to build a 10X product and think to themselves that obviously, their product is so great that it will be a no-brainer for the consumers to choose it as they are significantly better than the competitors. Maybe the founders of the company have been in an environment of other techies who are just as number-oriented as themselves. They have been confirming, that their technology has those 10X specs. They feel like selling it will be an easy task to do. However, they forget that most people, and maybe their customers, are not as technical-focused as they might be. This is where the Distribution Question comes into play: "Do you have a way to not just create but to deliver your product?"
If you can answer yes to this question, then you understand that selling and delivering the product is at least as important as the product itself. You have made a marketing strategy of how, when, and where your customers will hear about your product and how you're going to communicate its magnificence so they buy it. Furthermore, you have made a distribution plan of how you're going to produce your product as well as how it will be delivered to the customers so that they can receive its value and experience its 10X benefits.
The Durability Question
As stated in the Monopoly Question; every entrepreneur should be considering how to maintain their leading position in the market over the years. One thing is to be a first-mover, but the real price comes with being a last-mover, which means being the last and only company making the thing sold to the market. Being a first-mover definitely has its benefits and will gain you a monopoly for a time, but after becoming first, you should be trying to become last as well. The authors write: “People often talk about ‘first-mover advantage". But focusing on that may be problematic; you might move first then fade away. More important than being the first mover is the last mover. You have to be durable.” Thus the following question is raised: "Will your market position be defensible 10 and 20 years into the future?" - Your company must be on its toes from start-up, to scale-up, to maturity and following with the market trends.
Are there any new technologies that could potentially get the best of you? - How are you going to respond if they appear?
Are there any reasons why someone would not produce your thing cheaper? - How would you respond to a cheaper Chinese copy?
The Secret Question
The Secret Question might be the most important one, at least this is the one which will get your company going: "Have you identified a unique opportunity that others don't see?" - If you want that juicy monopoly the authors and I have become so fond of, then you need to find your secret and keep it a secret until the moment you're ready to launch your business. The Secret Question is tricky because starting a company is a collaborative effort. You need to involve others, and the more you evolve others, the bigger is the risk you're taking, in terms of keeping your secret. From this, a new question naturally arises. Who do we share our company secret with? - luckily the answer to this is straightforward. You tell people you trust exactly what you need in order to find the answers to the previous six raised questions. No more people should be involved in your secret and no less.
This is the end of my book review of the book Zero to One. If you have a start-up company and can say yes to all the questions above, I will wish you the best of luck with your company. I believe you can do it!
If you have a startup company and could not answer yes to all the questions above, I want to encourage you to keep looking for the answers! Creating a company can be a costly affair in terms of money but most definitely in terms of invested time. You are responsible for evaluating whether the investments and the risks are worth it or not. However, I believe a startup is one of the most meaningful and fulfilling things one can do in their life! The learnings one gains in the process can never be taken away. If starting a company is your dream, then keep looking for the answers!
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