Taming the Tower of Babel
I mentioned in a recent INC. blog piece about Peanut Butter, a student loan repayment service for employers (www.getpeanutbutter.com), that one of the most compelling reasons I expect their startup to be successful was that they were creating a solution that virtually all of their future customers would eventually desire, and, at the same time, solving a problem which none of those prospective customers would or, for the most part, could solve for themselves and their own employees.
Interestingly enough, this dilemma wasn’t because the customers (large or small) lacked the technical abilities to take on the problem of documenting, servicing and helping to pay down millions of unique student loans for their employees all across the country. It was due to the fact that it wasn’t remotely worth the time or effort for any one of them individually to devote the necessary personnel, funding and other resources in an attempt to solve the problem. And yet, it was a very desirable competitive offering with obvious pent-up demand, a low-cost (and possibly pre-tax) incentive that they would love to offer to their employees, and it was clearly an attractive recruiting and retention tool as well. (See http://www.inc.com/howard-tullman/making-student-debt-less-sticky.html )
The most striking fact was that it was the very uniqueness of each loan and each employee’s situation which made it inefficient and uneconomical for any one business to take on the problem. But, at the same time, in the aggregate, this problem was a large source of growing concern for more than 40 million student and parent debtors (as well as their employers) and a wide-open and lucrative market for the entrepreneur(s) who could provide an effective remedy.
I like to say that a bunch of tiny little problems (seemingly nuisances not worth anyone’s time or trouble) can very often roll up into quite a substantial opportunity. And, believe me, there’s nary an industry out there where you won’t find similar aggregation opportunities if you take the time to look.
We see this kind of widely-distributed, but unaddressable pain in all kinds of political and community situations where the powers that be just can’t or won’t be bothered to try to build a solution and no individuals have enough of a stake (or enough at stake) to take on the larger problem for the good of all. Everyone suffers, but no one typically cares enough to step up and try to solve the problem.
Of course, at least in the area of tortious business conduct, and but for the fact that most class action lawyers are scumbags, this was exactly why the vehicle of class litigation came into being so that a few representative and committed plaintiffs could act on behalf of the interests of an entire class of injured parties. Unfortunately, the overwhelming outcome in 99% of all class action cases is that it turns out that the only parties whose interests are being served are the lawyers. The bad guys may sometimes be modestly punished, but the good guys who are the actual victims generally get squat. But I digress.
The real moral of this story is that there are a couple of underlying principles at work here which have universal application and value and, if you can identify how they present themselves in an industry that’s of interest to you, and you can quickly build a low-cost solution (at least at the outset) that can massively scale as demand grows, you can ultimately create a very large and profitable business. The principles and the patterns are there in every marketplace. At 1871, we have companies (in addition to Peanut Butter) dealing with similar issues in education (Learnmetrics), funds transfers (Pangea), social services (mRelief), etc.
More and more of these kinds of problem situations are being created every day as the flow and volume of mission-critical data accelerates and the complexity of all data-driven marketplaces grows exponentially. The confusion in formats, inconsistent language and terminologies, conflicting or competing vendors who refuse to adopt common conventions and methodologies, and similar problems which preclude straightforward and efficient communication and the rapid transmission of critical information have created Towers of Babel in dozens of industries. These present nothing but great opportunities for clever and ambitious entrepreneurs to build one-stop solutions. It’s their job to find and address the pain points in new marketplaces and to do it before someone else does.
What are the basic market characteristics that you need to look for?
(1) There are no industry standards, common measurements, or terminology, but effective normalized communication between the parties is increasingly critical.
(2) There are no central hubs, channels or clearing houses to locate and access the vast amounts of data being generated and the data exists in multiple, inconsistent forms and formats.
(3) Individual industry members aren’t incented or otherwise motivated to act on their own either independently or in concert and/or may be legally prohibited from doing so.
(4) The industry desperately needs consistent data and objective documentation to authentically and accurately measure and report its progress and performance to multiple regulatory and funding constituencies.
What are the components of the solution you need to build?
(1) You need to aggregate, translate and standardize the diverse data and different inputs so you can accommodate all the alternatives out there.
(2) You need to be the one-stop shop and the simple solution that all the players can share regardless of their levels of sophistication and technology.
(3) You need to invest in the infrastructure and build the broad and scalable backend that no one else has the bucks or the balls to build.
(4) You need to build it before any of the big guys finally figure it out so that you’re the benchmark for the business and their best bet is to buy you.
This is one of those rare environments and moments in time where the Field of Dreams isn’t a dream. If you build it right; if you’re just a little patient; they will come.
PS: “You Get What You Work for, Not What You Wish for”