Stop Innovating (On The Wrong Things)

Why is it crucial to avoid innovating on the wrong things?

A startup has a finite amount of what we can think of as innovation energy. This limited energy should be directed toward solving real customer problems, rather than being wasted on secondary aspects. Focusing on the core problem maximizes the chances of developing a successful product.

Innovating for the sake of it can spread your resources too thin. Instead of trying to reinvent the wheel on things like corporate structure or pricing models, it’s essential to adhere to best practices for startups. These established practices free up more energy to innovate where it truly matters—creating a solution that your customers love.

Consider the effort needed for product market fit. It's already a Herculean task to understand and meet customer needs. Adding unnecessary complications can dilute your focus and make an already challenging process even harder. By avoiding non-essential innovation, you ensure that every ounce of your energy is spent where it counts most.

What are some common anti-patterns in startup innovation?

• Corporate Governance: Many startups attempt to deviate from standard practices like forming a Delaware C-Corp, opting instead for unconventional corporate structures. These changes can add unnecessary complexity and risk.

• Business Models and Pricing: Some startups innovate with business models and pricing structures that confuse customers. For instance, if you're selling cloud compute, sticking to familiar pricing models like AWS can be beneficial.

• Technical Stacks: Founders sometimes choose idiosyncratic programming languages or tech stacks because they find it fun or interesting. However, this can divert focus from solving the actual customer problem.

• Location Choices: Insisting on a specific, often inconvenient, location for their startup even when it adds no value to the likelihood of success can be a frequent misstep.

• Rejecting Standard Advice: Some entrepreneurs aim to disprove widely accepted startup guidance and best practices, focusing instead on unique, but unproven, approaches.

Avoiding these anti-patterns helps concentrate your innovation energy where it truly matters: creating a product that solves real customer problems.

Why is corporate governance not the best place to innovate?

Deviating from standard practices like Delaware C-Corps can be a voluntary red flag for startups. These standard structures are designed to minimize complexity and risk, allowing founders to focus on their core mission. When startups opt for unconventional setups, such as incorporating as a Wyoming LLC, it often signals unnecessary experimentation.

Such choices can complicate investment documents, vesting schedules, and shares classification. Investors and stakeholders are familiar with Delaware C-Corps, making it easier for them to understand and engage with your business. Introducing a novel corporate structure may confuse them and create hurdles in securing funding.

Adding unnecessary complexity diverts limited innovation energy from solving real customer problems. Instead of reinventing the wheel in corporate governance, adhering to best practices allows startups to concentrate their efforts on achieving product-market fit. This approach ensures that the primary focus remains on creating a solution that customers genuinely need and love.

How can focusing on fun technical challenges be detrimental?

Some startups get sidetracked by the allure of fun technical challenges, neglecting their core mission. For instance, Asana initially chose to write their own programming language. While this may have seemed exciting, it detracted from focusing on creating a useful product for customers. Over time, they backed away from this decision to realign their focus.

Another example can be seen during the Reddit versus Digg era. Digg made various high-risk technical choices that ultimately didn't pan out. This innovation led to significant hurdles, including an inability to roll back changes during a crucial site update. Meanwhile, Reddit avoided such risks and maintained a simpler, more reliable approach.

Innovating just for the thrill can divert crucial resources and energy. Instead of focusing on idiosyncratic technical stacks, startups should prioritize solving real customer problems to achieve lasting success.

What are the risks of innovating on business models and pricing?

Unconventional business models and pricing can confuse customers, hindering their willingness to adopt your product. For instance, using a complex or unfamiliar pricing structure can lead customers to opt out simply because they don't understand it. When selling cloud compute services, mimicking familiar models like AWS pricing can provide comfort and clarity to prospective buyers.

Customers often seek simplicity and predictability. Complicated pricing methods involving credits or variable rates can create friction. Imagine a scenario where a customer must decipher a multi-step conversion process from "floozles" to real-world dollars. This could lead to frustration and abandonment.

Additionally, innovating on your business model might push boundaries that your audience isn’t ready to embrace. Traditional models are widely accepted because they are proven to work. Deviating significantly from them can introduce risk, whether through missed expectations or outright rejection.

Therefore, ensuring your approach is straightforward and aligned with industry norms can foster trust and ease customer decision-making, ultimately driving your product's success.

How can founders balance innovation and best practices?

1. Focus on Core Product Development: Direct most of your innovation energy towards solving real customer problems. This laser focus helps in achieving product-market fit, which is crucial for startup success.

2. Adhere to Proven Structures: Use standard corporate governance structures for startups, like Delaware C-Corps, to reduce complexity. This frees up resources to innovate on more impactful areas.

3. Opt for Familiar Business Models: Stick to conventional business models and pricing strategies. Customers are more likely to adopt your product if the pricing is straightforward and understandable, like the model used by AWS.

4. Avoid Unnecessary Technical Risks: Refrain from using highly idiosyncratic programming languages or tech stacks. Focus on creating stable and effective solutions for customers rather than indulging in technical challenges for fun.

5. Validate vs. Overshadowing Advice: Whenever you come across widely-accepted startups best practices, validate them with your unique perspective but avoid entirely new paths that add risk.

6. Iterate Based on Customer Feedback: Keep your product development loop tight by incorporating regular customer feedback. This ensures your innovations are aligned with customer needs, avoiding the trap of innovating for novelty rather than utility.

7. Plan Future Innovations: Save radical innovations for later stages or potential future startups. This way, you can first build a solid foundation before taking bigger risks.

8. Leverage Industry Insights: Learn from industry veterans and successful startups. Understanding their journey can help navigate common pitfalls and keep your innovation energy concentrated on what truly matters. For example, insights from high-performing teams can offer valuable lessons on building efficient structures.

Following these steps ensures your startup remains focused on delivering the best possible product while adhering to established best practices, thereby balancing innovation with practical wisdom.