Don't Build Your Company to be a One Trick Pony
There’s an excellent Paul Simon song circa 1980 called “One Trick Pony.” It is the title song from a movie about the life of a rock musician (played by Simon), who scores a big hit with his anti-war anthem, “Parachutes,” but can’t repeat his previous success even though he still writes great songs and has a crackerjack band. He and his band continue to play relentlessly to small crowds, but the record companies who used to love him now don’t want produce his records. For movie’s star, the life dilemma is tough one: Does he give up music and find a new line of work? Does he cave and tour as a one hit wonder? Does he push on making new music that few people will ever hear and leave his one hit behind? There is no easy answer.
High tech CEOs face a similar “One Trick Pony” dilemma. After all, birthing that first product was incredibly difficult, and the customer response has been great. Your company is making enough money to stay in business, so why wouldn’t your company just do more of the same? Because becoming a one trick pony can happen overnight, and the impact can be catastrophic. Here is an incomplete list of how your company can turn into a one trick pony:
- The Ecosystem Changes – You built your product to serve the needs of an ecosystem driven by a big player – say Amazon sellers or a big cable company – and king of the ecosystem changes the rules. Your product becomes uneconomical to sell and implement and, therefore, unattractive to customers.
- The Big Feature vs. Real Product – So many new products are really just helpful features built to solve a specific problem as opposed to providing a broadly useful solution. Think about e-mail filtering or social network integration. Early adopters appreciate your tool and evangelize the product, but then an unfortunate thing happens: Larger competitors incorporate your product into their existing products as a new feature. And, while their implementation might not be as awesome as yours is, their version is free and included in a product that your customers already use. Why would customers pay for what you have built? And what new customer would buy your product?
- Hit Product, but No Follow On – It’s quite possible that your first product will be a big, moneymaking hit – like the GoPro, which has sold millions of units and has fanatical followers. Note that GoPro, as a one trick pony company, faces daunting challenges in evolving its business model. How else can GoPro sell its hi-res, ruggedized camera technology? Maybe by getting into drones or creating content delivery services for its band of adventuresome customers. The path is not clear, and the market gets more crowded daily. Smartphone makers are embedding video capture technologies for free that almost match GoPro’s clarity and ease of use, and cheaper imitators are creating “80 percent as good” cameras at a price point that’s half of the average GoPro camera.
I hope that, by now, you’re convinced that becoming a “one trick pony” has many downsides and few rewards. Here the four things you can do to avoid becoming a one trick pony company:
1. Think about what products two through five will be right out of the gate. If you’re building a point solution, think about what the related point applications would be and how you can leverage the technology used in product one to build them.
2. Figure out how integrate with and become necessary in a larger ecosystem. Earlier, I mentioned that a change by the lead company in an ecosystem can break your company. There’s also an upside to living in a complex ecosystem. Let’s say that you’ve built a healthcare analytics products for hospitals. The IT landscape is particularly complicated with business, patient management, billing, and analytics systems all playing a role in running a hospital system. To maximize the use of your product, it needs to integrate with all of the key systems of record to produce the best possible analytics. The more integrations you build to complementary products, the better your product becomes. The more integrations your customers implement, the stickier their relationship with your company becomes and the more money you will make. Integrating with the larger players in your ecosystem has one other major advantage: One of them is likely to become your future exit strategy.
3. Try for a platform play. Some ideas are tailor made for a platform play. Successful platform plays are the most valuable commodities high tech, because platform players become the masters of their own universe. Platform players can often direct all of the partners in the orbit. If your product one can become a platform, you should spend the time to create the roadmap to get there and then get to work raising money and building it out. If you need some inspiration, think back to how LinkedIn worked in 2008 and how it works today. There are many more capabilities, including LinkedIn produced content and easier ways for people and companies to post content and market to potential customers. Salesforce has transformed its offerings into platform for developers, and the Facebook platform has grown more product tentacles (both by building and buying companies) than a mutant octopus.
4. Lastly, if you build a feature company, make it an important feature that is easy to connect to other important features. Sometimes, entrepreneurs – and the market, in general – can’t tell the difference between a feature and product. Over time, things that look like revolutionary products can turn out to be nice-to-have capabilities. Think RSS readers. After the initial excitement, it became apparent that it would be hard to create a big RSS software company. RSS readers were just too easy to create. However, RSS technology became the basis for high value web content aggregation plays from Flipboard, Zyte, Google, Apple, and Facebook. The value didn’t turn out to be in the reader, but in the aggregation of many feeds into a visually attractive, packaged product that could generate significant advertising revenues – providing once again that “pioneers get the arrows and settlers get the land.”