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3-2-1 Traction:Disengaged customers, creative destruction, and the competition we ignore

Hey friend 👋

There’s no real theme today, but I hope you enjoy. When you’re done, I’d love it if you took 60 seconds to click “reply” and let me know what you think.

Happy Monday!

Reading time: 3 minutes.

three ideas from me

Competitors aren’t your only source of competition.

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There are few things more cringeworthy than a founder telling a potential investor they have no competition.

Because you’re confessing one of three things:

  1. That you haven’t researched the market well enough to understand who else is trying to solve this problem;
  2. That you haven’t found a problem important or urgent enough for anyone to solve for money; or
  3. That you don’t understand the problem in the context of your customers.

Let’s zero in on that third one.

If you’re solving a problem worth solving — one of those problems that causes pain severe and urgent enough to solve — then the customer must be doing something to try to address it.

If the customer is doing nothing to even try, then how could it possibly be important enough to spend time and money to have you solve it for them?

So let’s assume they are doing something. Whatever that is is competition — even if it’s not a competitor.

Founders often define “competitor” so narrowly as to remove any value: they’re only the competition if they’re a product that is just as good as ours.

If they’re neither a product nor even in the same quality ballpark, it’s still competition.

We can often learn the most by talking to our least engaged users.

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Every startup will eventually wrestle with retention — it’s always cheaper to keep a customer than to buy a new one.

When a product starts losing customers, founders wisely dive in not only to the analytics but also into conversations with customers to discover why.

But I’ve noticed that they tend to look to their most engaged users.

The theory is something like this: if we discover what makes users stay, then we can convince the users who are leaving of the value they’re giving up.

To protect Allied fighters in WWII, the military wanted to beef up their armor. As planes have weight limits (particularly if they’re going to dogfight), they had to decide where it was most effective to put armor plating.

So they plotted all the bullet holes on all returning aircraft:

There is a clear distribution. Seems reasonable!

Except it’s not:

Their sample only included the planes that got shot and made it back. It’s called the survivorship bias.

Next time you want to learn more about how customers experience your product, try talking to your least engaged users first.

More data bang for the research buck.

“If you’re worried AI is coming for your job, you may be confessing your lack of value.”

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Albert Einstein once quipped that if he had an hour to solve the world’s most difficult problem, and his life depended on the solution, that he would spend the first 55 minutes determining the proper question to ask — for once he knew the proper question, he could answer it in five minutes.

He might as well have been talking about ChatGPT:

AI will only answer a question you ask it, and the strength of its response is directly proportional to the strength of your question.

Generative AI doesn’t do the valuable work of asking the question.

AI can save you tons of time and money by taking on the grunt work. And if your job is grunt work… well… yeah… it will replace you.

This is a theme of innovation: “what” is a more important than “how”. If you can define and validate where you’re going, getting there is easy.

Or, as Schumpeter put it:

Entrepreneurial profit is the expression of the value of what the entrepreneur contributes to production.

In other words: your job as a founder is to create value where none exists.

Entrepreneurs are the A team. Managers are the B team.

And the single most valuable skill of entrepreneurship is learning to ask good questions, and AI can help you master that skill just by answering your questions.

Because the strength of its answer is proportional to the strength of your question.

I’ll have a lot to say on this in future emails, but, for now:

How do you think AI will affect your life in 2024?

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two ideas from others

Form follows function ↗. Those who’ve spent time in product design understand the perennial trap of aesthetics taking over the design process. Creating something “pretty” becomes more important than creating something functional.

Instead of figuring out what we want to say or what we want the user to do and designing for it, we instead design for prettiness, and then figure out how to fill the empty spaces with content.

Design thinking → thinking about design.

But the lesson is much broader: “what” is always more important than “how”.

Innovation vs creative destruction ↗. The popular discourse treats Apple like an untouchable behemoth: competition is nowhere close, and antitrust focuses on Google and Facebook.

It’s a myth.

But it may not matter one key to the business model innovation that drove them to the top is now the riskiest part of their enterprise: Sino-American supply chains.

Given time, Schumpeter comes for us all.

one question for you

What’s the biggest risk to your startup that you’re not thinking about?

In the early stages, you’re likely thinking about desirability or distribution. Then maybe competition, IP, and defensibility.

But dig deeper: in thinking about the next three years, what are the potential societal, technological, economic, environmental, and regulatory/political changes that will kill you?

Reply this email and let me know!

Leave a comment and let me know!

Tag me on LinkedIn and let me know!

Whenever you're ready, there are 3 ways I can help you.

  1. If you’re still in the idea-to-seed stage, trying to get early traction, I’d recommend starting with some coaching:

    → Book a 1:1 coaching session to tackle one key challenge, from prototype to pitch.

    → Apply to my Traction Coaching program, and we’ll find traction together.

  1. If you already have early traction, I’d recommend running a Traction Sprint to find the traction you need to get from Seed to Series A.
  1. Of course, you can always ask me a question for my weekly office hours livestream.

3-2-1 Traction Newsletter

Every Monday morning, you’ll get three big ideas from me, two curated ideas from others, and one thought-provoking question for you — all to help you find traction for your startup, or fail fast trying.