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In a world of scarce resources, globalization without new technology is unsustainable.
Startups operate on the principle that you need to work with other people to get stuff done, but you also need to stay small enough so that you actually can. Positively defined, a startup is the largest group of people you can convince of a plan to build a different future.
If you can identify a delusional popular belief, you can find what lies hidden behind it: the contrarian truth.
The first step to thinking clearly is to question what we think we know about the past.
The most contrarian thing of all is not to oppose the crowd but to think for yourself.
Creating value is not enough—you also need to capture some of the value you create.
...if you want to create and capture lasting value, don’t build an undifferentiated commodity business...
All happy companies are different: each one earns a monopoly by solving a unique problem. All failed companies are the same: they failed to escape competition.
CREATIVE MONOPOLY means new products that benefit everybody and sustainable profits for the creator.
CHARACTERISTICS OF MONOPOLY What does a company with large cash flows far into the future look like? Every monopoly is unique, but they usually share some combination of the following characteristics: proprietary technology, network effects, economies of scale, and branding.
1. Proprietary Technology
As a good rule of thumb, proprietary technology must be at least 10 times better than its closest substitute in some important dimension to lead to a real monopolistic advantage.
The clearest way to make a 10x improvement is to invent something completely new.
2. Network Effects
Network effects make a product more useful as more people use it.
3. Economies of Scale
A monopoly business gets stronger as it gets bigger: the fixed costs of creating a product (engineering, management, office space) can be spread out over ever greater quantities of sales.
A good startup should have the potential for great scale built into its first design.
BUILDING A MONOPOLY Brand, scale, network effects, and technology in some combination define a monopoly; but to get them to work, you need to choose your market carefully and expand deliberately.
Start Small and Monopolize
The perfect target market for a startup is a small group of particular people concentrated together and served by few or no competitors.
Once you create and dominate a niche market, then you should gradually expand into related and slightly broader markets.
The most successful companies make the core progression—to first dominate a specific niche and then scale to adjacent markets—a part of their founding narrative.
As you craft a plan to expand to adjacent markets, don’t disrupt: avoid competition as much as possible.
THE LAST WILL BE FIRST
It’s much better to be the last mover—that is, to make the last great development in a specific market and enjoy years or even decades of monopoly profits. The way to do that is to dominate a small niche and scale up from there, toward your ambitious long-term vision.
MONEY MAKES MONEY
what valuable company is nobody building?
Every correct answer is necessarily a secret: something important and unknown, something hard to do but doable.
HOW TO FIND SECRETS There are two kinds of secrets: secrets of nature and secrets about people. Natural secrets exist all around us; to find them, one must study some undiscovered aspect of the physical world. Secrets about people are different: they are things that people don’t know about themselves or things they hide because they don’t want others to know. So when thinking about what kind of company to build, there are two distinct questions to ask: What secrets is nature not telling you? What secrets are people not telling you?
HOW TO SELL A PRODUCT
Superior sales and distribution by itself can create a monopoly, even with no product differentiation. The converse is not true. No matter how strong your product—even if it easily fits into already established habits and anybody who tries it likes it immediately—you must still support it with a strong distribution plan.
THE DURABILITY QUESTION Every entrepreneur should plan to be the last mover in her particular market. That starts with asking yourself: what will the world look like 10 and 20 years from now, and how will my business fit in?
...the challenge for the entrepreneurs who will create Energy 2.0 is to think small.
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