The Best Simple Business Models
Most CEOs are very smart. Which can be a problem. Smart often crowds out simple, because there’s a tendency to always reach for your strongest weapon.
Simplification is the most underrated trait in business. It draws your attention to basic questions like “Do people need this product?” in a way complex thinking can overlook.
No matter how complex your product is, a few simple business models tend to move the needle most.
Make intimidating things painless. The smartest person you know understands how 0.01% of the world works, tops. An 18-year-old applying for college is asked to determine on their own whether their lifetime earnings will justify five figures of non-dischargeable debt. What do you think that feels like? Build a service around the empathy of others’ intimidation and they will run towards you, arms wide open. We recently invested in NextGenVest for this very reason.
Make boring things exciting. Rule of thumb: Boring tasks will be ignored until their neglect hurts you. Which means boring products leave enormous potential on the table. Kahn Academy made learning fun. Long Game makes savings a game. Mint made personal finance easy. Bring joy to painful activities and you multiply your addressable market.
Make complicated things simple. Lyft and Uber made it easier to get a ride. That’s all they did. But when you consider the number of steps it took to get a cab – giving yourself enough time to find one, hailing one, telling the driver where you’re going, trusting him to figure out how to get there, making sure you have enough cash to pay him, saving your receipt – you realize how much potential there is in reducing a lengthy set of tasks.
Make obfuscation transparent. A surprisingly large percentage of consumers have finely tuned BS detectors. Brute-force honesty in an industry plagued with concealment is a great way to build trust. Even revealing your faults does wonders for trust. My colleague Sophie Bakalar recently wrote: “Honesty can be its own marketing strategy. That’s because authentic transparency is a proxy for a company’s values, which modern consumers increasingly care about.” Totally agree.
Make middlemen irrelevant. Someone told me most economic growth is just “the elimination of one middleman at a time.” Directionally true. Narrowing the gap between production and purchase, without sacrificing quality or distribution, will almost always be a winning formula. This is especially true when middlemen are gatekeepers of data. Empower customers to make better decisions and you’re indispensable.
Make things disappear. More value has been created taking stuff away from consumers than has by offering them more. That stuff includes: The need to farm, standalone cameras, cassette tapes, cable TV subscriptions, physical books, physical newspapers, filing cabinets, fax machines, mail, malls, a second car, and maybe soon, any car. All of these were replaced by something as good or better, but so invisible that you barely know it exists. Which can make customers happier than getting something new.