It's all about distribution very soon and you better understand why.

When innovation and defending market shares become interchangable

Ah, “Innovation”. We all love it, we “Tech innovators”. We “thought leaders”.

Well, I’ve been thinking a lot these days during my 2nd episode of covid fever-dreams… about innovation and how tech is fundamentally changing. And I came to some answers for myself and what it means for me as an advisor in that space:

The game for humans like me and you will be in understanding discovery and distribution, not building, not measuring.

Let me explain.

Let’s say we want to figure out what it takes to be successful with an idea… an innovative idea that is verified (having commercial traction) then there’s a sequence of steps that have to be undertaken to validate it.

This goes for entire products, features expansions… whatever. These processes as sequential as they are can be described roughly in the:

1. Coming up with an Idea, driven by research, sense, or just pure luck

2. Building a sufficient representation of that Idea, commonly referred to as an MVP, prototype

3. The exposure of that representation to a big enough group of potential users and customers. This can happen through existing distribution, sales, or whatever your preference is.

4. Measurement and determination of whether everything is indeed successful and statistically significant and not just an accident. This usually happens by having (enough) money come into your banking account or other metrics. In the case of lifetime value, it’s not that straightforward but let’s just keep it at that.

Going through this cycle per Idea takes a specific amount of time and all technological advancements affected every one of these steps differently.

This is relevant because the total time of validating an idea to know whether it is the next big thing or a fart in a can determines how many of them you can possibly test in an overall timeframe and limited resources to enough certainty.

It’s all a numbers game. Obviously

This cadence in the end determines how likely you will be successful with whatever you do. If the average chance of your ideas to succeed is 2%, be ready to run 50 of them to have a realistic chance of seeing some of them succeed.

So this is about persistence.

When we talk about how long it takes to find product-market fit for anything, there’s usually the number of 2 years thrown around for startups. While it’s not linear I know from having built out 4 startups myself that the actual building of the product took a big part of that time.

You built something, you tested it. Realized you were wrong, and adjusted it, but again. It’s the classical build-ship-learn-build cycle

But something is fundamentally wrong with this picture. In this build - ship - learn cycle is the hardest part of idea validation missing. Reaching the customers and having enough insights from them to conclude “Yes this is real.”

It didn’t matter so far because we got into the habit of “let’s build something for 3 months, let’s have it run for 3 months”, and during that runtime, we build something else, when that’s finished we have the first thing validated.

We are solving “building”.

What if that build time starts to shrink dramatically?

We are getting incredibly close to this scenario: Give instructions have software built to specification. So the question is:

“What if you can ship something worth testing every 1-2 days?”

You now have suddenly dozens of ideas that wait for validation with the same amount of customers and users that you had access to before.

We have a critical limitation when it comes to product innovation. Just like the maximum speed is the speed of light, the amount of users you need to validate something is also not changing.

Statistical significance is not directly optimizable. Pattern recognition and prediction algorithms are getting better but the amount of events we need to detect a 95% likelihood does not change fundamentally.

But I’m creative, I have the best Ideas!

Even if you are the best idea haver in the entire world: The difference between you and an average Innovator is maybe 2% of your average Joe and 4% for an absolute genius if you consider getting to a unicorn to be a cornerstone of your life’s aspirations. You will still fail 90%+ of the time. And you only know whether you failed if you validated it. Built, distributed, and failed/succeeded

An Idea without distribution is worthless and that’s not a shocking statement but at the same time it starts to get clear that differentiation happens through hyper-niche solutions with whatever is happening with AI right now:

If everyone is building the same software then we start to build specialized types of that software solving a niche need.

If you lived under a rock and need a visualization then look at this incredible piece of evidence through the years made by Scott Brinker:

The Marketing Technology Landscape had over 5000 tools in 2020, quadrupling from only 3 years before, that was BEFORE the AI surge

Another effect of niche solutions is in the name itself. Niches don’t have that many users/prospects. Your total addressable market is starting to shrink.

If you paid attention to what we consider to have product-market fit then it’s a great product that users love in a big enough market.

The air is starting to get thin - Agile really IS kinda dead