Silicon Valley entrepreneurs get a lot of attention for producing very successful new companies. Most of these are technology companies. But the most fundamental thing these successful entrepreneurs have in common is not technical innovation.
Many books have been written on the habits of successful people, the elements of an effective leadership style and the development of new technologies. All of this can be useful, but it can also be somewhat misleading.
The danger is that you might start to think that successful entrepreneurs are people who are especially good at those things. But they don’t need to be.
The defining task of an entrepreneur is to create a product or service that customers will really go for and that larger companies will be reluctant to copy until it’s too late.
One promising way to develop something that customers care about and competitors initially don’t is to invent a whole new category of product or service. Many customers like to try out the new while prudent companies are reluctant to stray from their established lines of business. That gives entrepreneurs a market to learn in and time to build a brand.
Try something new
Creating new categories is the most fundamental thing that Silicon Valley entrepreneurs do frequently and to great effect.
Sometimes they do it knowingly. Sometimes they happen into it. But the reason they get lucky more often than other founders is that newly developed technology often moves them into a completely new category of business, as opposed to a come-from-behind position in an existing category.
Consider the history of Instagram. Instagram was launched as a check-in app designed to be better than Foursquare. The founder called it Burbn. But users didn’t care much for Burbn.
The modest number of users Burbn did have, however, used the photo-sharing feature of Burbn a lot. After noticing this, the company ditched everything but the photo-sharing feature and relaunched Burbn as Instagram, which quickly became a huge hit with users.
Instagram went nowhere when it used its photo-sharing technology to compete against an established company in an existing category, but took off when it used its photo-sharing technology to create a new category. But notice that the photo-sharing technology was part of Burbn from the beginning.
So it wasn’t the technology itself that made Instagram successful, it was the creation of a new category — in this case the photo-sharing category made possible by the new technology.
Success is much more likely when an entrepreneur creates a new category. There are many bases on which to found a new category. The very nature of new technologies often leads entrepreneurs to develop a product or service that defines a new category.
But it is the newness of the category and not the newness of the technology that is the key to most Silicon Valley successes. That’s the common denominator between such seemingly different entrepreneurial successes as Instagram and Chipotle. ●
Jerry McLaughlin is founder and CEO at Blow Birthday Cards.
