The Hole at the Bottom of the Pyramid

“Innovation ultimately winds up being, quite frequently… solving very, very hard problems”, Max Levchin, co-founder, Paypal

“Only small companies do impressive things”. Vinod Khosla, Managing Director, Khosla Ventures

A few years ago, I read a TechCrunch article that had one of the best Venn diagrams I’ve seen in years. It only had 3 circles: “Problems we can solve”, “Problems we are solving” and “Problems we should solve”. While the article focused on the intersection between “can solve” and “are solving”, I’ve found myself spending more and more time thinking about the intersection between “can solve” and “should solve”.

It’s pretty easy to rattle off the names of 5 social networking tech companies, or casual gaming, or even product marketplaces for that matter. Yet when we try to do the same for tech companies that provide better access to clean water, or democratize education we quickly draw a blank. Why?

Poor marketing prowess? Not sexy enough? Biased tech news media coverage? Perhaps.But the simple fact of the matter is that there’s just not that many of them out there. Companies in the first batch outnumber ones in the second batch by orders of magnitude.

The needs and wants that the first batch of companies addresses differ substantially from the ones addressed by the other batch. Though by no means a consensus in the academic world, it’s interesting to think about this problem through the lens of Maslow’s “Hierarchy of needs”. At its core, Maslow’s theory is based on an intuitive concept: human needs can be grouped based on their importance to human survival and development. Those groups are often illustrated as a pyramid, with the most basic, physiological needs (food, water, sleep, etc.) at its base, followed by safety needs (health, employment, resources), love/belonging (friends, family), esteem (self-esteem, confidence, achievement) and finally at the top, self-actualization (creativity, problem solving, etc.). As you move up the pyramid, needs transition into wants. Companies at the first group batch needs and wants at the love/belonging level and upwards in the pyramid, while companies that are part of the other batch address needs at the bottom two levels.

Sadly, it seems that the further you go down the pyramid, trying to address more basic needs, the number of startups and innovation seem to decline dramatically. This is a serious problem.

maslow2

Addressing needs at the bottom of the pyramid means solving really hard problems. Though not perfectly correlated, “hard” and “valuable” tend to go hand in hand, making this a worthwhile endeavor.

We should all be taking more problems from the “can solve”-“should solve” space, and move them to the “are solving” intersection. If software is eating the world, we can all help make sure that it’s eating the more important parts first.

 

 

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The Hole at the Bottom of the Pyramid

Dog Whistles and the Myth of R&D Slack

Stumbled upon this lovely post by Rich Mironov recently, and found myself nodding my head quite a bit, so figured it’s worth sharing:

Dog Whistles and the Myth of R&D Slack

Rich talks about some of the most challenging interactions between “tech folks” and “business folks”, primarily around prioritization and capacity. He argues that often times, they stem from fundamental differences in beliefs/perceptions  held by each “side” on how the other side works and, more broadly how the world/business works.

He suggests three techniques, for folks on the “tech side” to deal with the challenge:

  1. Relentlessly remind folks of what’s underway and next on the backlog – undercutting the false perception of “slack” and validating the existing plan
  2. When a new request comes in, compare it (respectfully) to the current list – making the trade-off tangible, and the misalignment more obvious (if you’ve done “i” well)
  3. Engage sales management and executives in the discussion – validating the existing plan and reminding that it’s not just your plan and it already received wide executive approval

 

 

Dog Whistles and the Myth of R&D Slack

The Unbundling of Scale

A more philosophical post this week, from Albert Wagner, Fred Wilson’s partner-in-crime at USV:

The Unbundling of Scale

It’s nearly impossible to summarize a 275 word post even further, so I’ll just say that Albert talks about the paradigm of “economies of scale” not holding true anymore in many aspects of the information age and some of the implications that this may have on a company’s business model; and I’ll add, on its organizational structure…

Short, thought-provoking read.

The Unbundling of Scale

Annual Planning Is Killing Your Growth

It’s annual planning season and I have budgeting on my mind.  Therefore, a thought provoking post from the folks at First Round Review discussing the unique approach to planning and budgeting that Dave Brussin implemented at Monetate:

Annual Planning is Killing Your Growth – Try This Plan Instead

The first part of the article is a lengthy rant on all that is broken in the annual planning cycle. Some of it is endemic to the annual cycle and some can be fixed regardless of the cadence, a fact that weakens the overall argument/pitch.

Nonetheless, the counter-plan is very interesting:

  1. Find a group of comparable companies that are viewed as successful
  2. Time-normalize their financials based on maturity (“year X after IPO” and/or “$80M-$100M in revenue year”)
  3. Look at key business metrics and identify best, poor and average performance (as well as spread) + analyze what moves/outcomes enabled companies to reach “best” performance
  4. Use those numbers as guidelines for a quarter-by-quarter 3-year plan (12 quarters) for your company adjusting them in places where you think you’re smarter than them. Where you don’t – if their numbers are different than what you’re planning – they probably know something you don’t…
  5. Treat every quarter like the end of a 12-month year (trailing 4-quarters). Compare and analyze the results
  6. Rinse and Repeat

The key benefits in this approach that resonate with are:

  • “Smoother” planning – rather than more aggressive course-correction every 12 months
  • Longer-term thinking – making decisions in the next quarter in the context of the next 12 quarters rather than the next 1-3 quarter
  • Quicker feedback loop – a “year” comparable every quarter
  • Better chances of identifying the unknown-unknowns by using other successful companies’ behaviors as guidelines (evens if you don’t fully understand them yet) – rather than being trapped in your own paradigm and limited perspective.
Annual Planning Is Killing Your Growth