Yesterday I took my niece out to a famous food joint. We were craving for some famous "Desi burger". Now since I was only visiting town for a few days and haven't been around for quite some time I forgot the exact store where you find them.
Now, according to Peter Theil's competition theory; there should just be one desi burger shop owning 100% market share. In real world, there were three different burger shops next to each other. All selling same burger, same price. [no differentiation].
But then we saw most folks visiting only one corner shop with no salesman outside trying to solicit buyers. Needless to say we went to the corner store and it was the real deal.
Now according to my MBA books these businesses should not be started in first place.They are commodities..
For those unfortunate souls who had to go through an MBA, I ask:
Do MBA metrics apply to a startup or to any businesses for that matter?
Would you start a company, after considering porter's five forces?
Would you rate Amazon in this way?
- Rivalry among existing firms [Intense: you compete with]
- Bargaining power of buyers [Flipkart is just one click away]
- Bargaining power of supplier [Genuine Suppliers where art thou]
- Threat of new entrants [Tata, Ambani]
- Threat of substitute [your retail store keeps same stuff]
If you think of it, all cards are decked against them, yet when I check my entire year's e-retail history, I see no other online retailer than amazon. Why so?
I thought about it, tried applying all "B school frameworks" to Uber too. I saw my ride history. Only for times when Uber wasn't around I used OLA.
In India's case we have Asian Paints. You can go to china,buy paint,private label and sell it in India. I'm sure people do it. Still Asian Paints is market leader.
When you compare them on any traditional metrics they'd probably not make any sense. They'd be labeled as a commodity. Something anyone can start with money in the bank.
Well, a large part of it is true. But we still have Amazon, surviving 20 years with Walmart. [ FYI, Waltons make one Amazon a year in revenue].
Next time you think of opening a business, don't worry about some folk with money taking your market share because that is going to happen anyway, businessmen are opportunist; if they see you making money, they'll jump right in.
To Excel Rule 1:Focus on product, make people love it and rely on it.
For Startups: Ask yourself:Am i making it cheaper and easier to use than present solution?
If yes, follow rule 1. Everything else is TED Talk gyan.