Thinking Beyond the Product
I read Paul Graham's Making Startups Powerful this morning. He asks a question that I think founders should spend more time considering: what would make this company more powerful?
It's a different question from how to increase revenue. Graham explores several ways a startup might transform its position, from owning the customer relationship and bringing transactions through its platform to creating network effects, moving upstream, and enabling other businesses to build upon it.
What I find compelling is that these aren't necessarily improvements to the original product. They can change the nature of the business entirely.
Consider the difference between software that manages transactions and a marketplace that makes those transactions possible. The first helps an existing activity operate more efficiently. The second can influence how the market itself develops.
The same distinction applies to platforms. A company can build software that thousands of businesses use independently. But if those businesses can begin interacting, transacting, and creating value with one another, the company occupies a different position. Its growth is no longer determined solely by the usefulness of its own product.
I've been thinking about this through my experience building COOLIQ.
Some of our most successful products emerged through collaborations with other businesses. We had invested in product development and manufacturing capabilities. Our partners brought complementary strengths in brand, audience, and distribution. Together, we created opportunities that would have been more difficult to pursue independently.
But the interesting part wasn't simply the collaboration. It was everything required to make it happen, from identifying the opportunity and establishing the relationship to developing the product, agreeing on the economics, and bringing it to market.
It made me question where the greatest value in that process actually resides.
Is it in helping businesses execute a collaboration once they've agreed to work together? Or is it in making those relationships and opportunities possible in the first place?
Graham's argument about moving upstream becomes particularly relevant here. The earlier a company becomes involved in the creation of value, the greater its potential influence over what happens afterward. But only if that earlier involvement makes the outcome better for the customer.
This is also where network effects become more than an attractive feature of a business model. If each participating company creates new opportunities for others, the system can become more useful as it grows. If it simply helps each company manage its own work, it may remain valuable software without becoming a network.
I think founders often underestimate how much the original framing of a product determines the company they eventually build.
We become occupied with making something work, improving the experience, and adding capabilities customers request. These are necessary activities, but they can obscure a more consequential question: are we improving the product, or are we changing what the company can become?
Graham's most important observation may be that startups are sometimes constrained less by the market than by their own conception of the opportunity.
The challenge is not to make every business into a platform or marketplace. It's to recognize when the problem you're solving is only one component of something larger.
A useful product solves a problem. A powerful company can change the conditions under which that problem exists.
Michael Macdonnell · 5:56am