Gradient’s Principles

When I started Gradient I knew that eventually, I wanted it to be a principle-driven company. What does that mean, and why is it important? Well — here’s what I wrote our team (on July 29th):

Guys: one more thing. One thing that I have started to think about, and would like both of you to think about, is what principles should we develop to drive our company. I would like Gradient to be a principle-driven company. Why not a customer-driven, or technology-driven, or profit-driven company? Well of course we should always serve our customers, use the latest technologies, and make money. But customers change (and can sometimes turn on you), and technology and profit are means, not ends. Principles don’t change – they won’t reneg on a contract, they won’t turn on you, etc.

Having a core set of principles will help guide our behavior, especially in difficult circumstances. What happens when a customer doesn’t like our analysis? What happens when a customer renegs on a contract? How should we behave?

When we hire new people, what should we be looking for, other than technical competency? When we have a difficult decision, what should we be considering, other than our respective opinions?

This may seem fluffy, but at the best companies it’s anything but. Specifically, I’m thinking about Amazon, whose twelve leadership principles are used all the time in the regular course of business there.

So I’d like everyone to start thinking about what they’d like to see in our set of principles, and when it’s right, get them down on paper. There’s no timeline to this (yet), as this is not a case where done is better than perfect.

At the end of the day, they have to do at least these four things:

  • reflect our personal values
  • be effective guides to decision making and action
  • serve as an effective rubric for character inside our company
  • be useful – they can’t just live on a shelf somewhere

I’m happy to say that just over a month later — after a collective process where the three of us came together, pooled our thoughts, and worked collectively to draft the same document — we’ve landed on the following eleven principles. I’m immensely proud of them, and can’t wait to use them all the time in day-to-day discussions. While some of them are especially important given our remote set-up, they all feel mostly timeless to me. Have a read and let me know what you think.

Gradient leaders… (and we’re all leaders)

  • Are honest and integral to a fault: if we say something will be done, then it will be done. We conform our words to reality (honesty) and reality to our words (integrity).
  • Do more with less: We are frugal and look for ways to avoid spending time and money when it is not needed.
  • Think win-win: Success is not zero-sum. Our clients, partners, and vendors’ success is our success. We build credible, reliable, and honest relationships with every client, partner, and ally.
  • Prove themselves wrong: We seek diverse perspectives, look for alternative hypotheses, investigate the details, and stress-test our analyses to ensure that we are right. We never assume we are right.
  • Are obsessed with constant improvement: Individually, we are always looking to learn new techniques and develop valuable skills sets. We proactively seek feedback to improve our collective performance.
  • Collaborate and communicate extremely well: We value team contribution over individual contribution. We are excellent team players that go the extra mile to make it easy to work with others.
  • Deliver results, not work: We don’t value work, we value results. We are always moving toward delivering value to our clients.
  • Take care of each other: We care for each other’s well-being and celebrate alternative perspectives.
  • Self-Manage: We take ownership of our work by prioritizing and organizing effectively with our colleagues while acting on behalf of the entire company.
  • Investigate deeply: We are never satisfied with the first layer of understanding, or fixing symptoms instead of underlying causes. We fix problems so they stay fixed.
  • Are ambitious risk takers: We push the definition of normal by moving fast and pursuing new, unconventional solutions.

Being your own customer

Recently I’ve been idly thinking about companies that have the good fortune of being their own customer. I think this is an extremely valuable place to be, because it gives you the best possible insight into your product, and insulates you from losing touch with your product’s market.

Some examples I think of:

  • Salesforce’s use of their own CRM product with a team of salespeople that sell their product. Not only do they get great feedback on their own product, but the fact that they have a best-in-breed sales team is great marketing itself, and they get to be a thought leader in their space.
  • I bet Dropbox and Box use their own file-sharing services internally. By doing this, they get great insight into how a corporate might use their product and what features they’d need. Same with Evernote and Google Apps.

I wonder though, if this is possible only for B2B (or even more narrowly, enterprise) products. Can consumer-product companies be their own customers. Of course their employees can; but is that enough?

My understanding of the product / business development sequence

Stage Product Goals Strategy Type Optimal Financing Tidbits from Clay Christensen
Problem / Solution Fit  Listen to market. Initial prototypes.  Emergent. Iterate quickly and find what works.  Seed. Want patient investors. Don't want investors that will demand growth.  Find a customer “job” that is either not served, or overserved by existing products (and that can be adequately served at much lower price point).
Product / Market Fit  Release MVP. Iterate. Place “offers” in front of customers and validate both WTP and that necessary margins can be met.  Emergent Seed  Be patient for growth, impatient for profit.
Scale  Capture market share.  Deliberate. Once what works has been found, memorialize it and develop process model around it.  Series A / Expansion capital. At this stage, taking larger sums of money from investors that will demand growth is in alignment with the business goals.  Pay attention to the weakest and strongest points in the value chain, as opportunity will migrate from strong to weak over time.


Shutting Down Building Hero

Or, the difference between Solar and Energy Efficiency Business Models

As sustainability buffs, it’s been hard not to notice the success of new solar business models in the US. Numerous large companies, like SolarCity, SunRun, SunEdison, Sungevity, Clean Power Finance – and others – have been formed to deliver solar energy in innovative ways. Third party financing is a central component, and has been huge to solar’s success in the US. In 2012, over 75% of California’s new solar systems were leased as opposed to owned outright [1].

We thought of this business model as Solar-as-a-Service; not only is there third-party financing, but maintenance and equipment replacement are also transferred from the homeowner to the solar distributor. It’s a powerful model because it “transforms a complex investment into a money-saving service” [1]. Boom. That’s an easy decision to make.

Our premise for Building Hero was that Energy Efficiency as a Service (EE-aaS) could be an even bigger opportunity. It was an easy idea to articulate: “SolarCity for Energy Efficiency”. As energy efficiency nerds and idea guys, we loved the concept and viewed it as a “no brainer” – no money down and energy savings from Day 1? How could customers possibly say no? All of our energy efficiency nerd friends agreed that it was an awesome idea and we were off to the races.

Predictably, with an approach like that, most of our target customers did in fact say no. Although we had some minor success with the model, we never attained product-market fit with our approach. Unfortunately, the reasons that Solar-aaS succeeds didn’t hold true as we dug deeper into the EE-aaS model.

We learned a ton of lessons along the way that are particular to the difficult to solve problem of EE-aaS that we wanted to share as future entrepreneurs approach this tough problem.

Want to chat? We’d be happy to. Feel free to email us geoffplewis [at] gmail or thomas [dot] vladeck [at] gmail

Inside v. Outside

The most important operational difference between Solar and EE that we encountered is what we dub “the inside v. outside problem”. Solar devices are “standalone” – not only are they on the outside of the building, but they are entirely new systems that are added to the building. They are not replacing anything. They are also invisible from the inside (where decision makers spend their day).

Considering adding something new is a different type of decision than considering replacing something you have with something different. Not only is the customer considering what they are getting, but they also must consider (and often dwell on) what they are losing. Making a core change to the aesthetic or functioning of the space is a more difficult decision to make, and that was a difficult barrier for us to overcome.

For many of our customers, the idea of having work done inside their space, no matter the benefits, immediately put a stop to the whole process.

Relative Advantage of Financing

Many energy efficiency investments produce better returns with less required financial engineering to make sense. So it follows that they should be better investments and even more financeable – right?

The mistake here is that – at least with LED lighting – financing has a lesser relative advantage over purchasing cf. solar. Solar investments have two features that make financing very valuable:

  • High capital cost relative to the assets of the decision maker

  • Complicated or inaccessible incentives that are required for the investment to make sense – tax credits chief among them

For LED lighting, the capital costs relative to the assets of the decision-maker are smaller. In addition, in the case of LED lighting, the investment can be done in stages, lowering the capital burden at any given time (something our would-be customers often proposed doing – and many have done).  Second, incentives are often not required for the investment to make sense, and they are usually made available as lump-sum cash rebates as opposed to tax credits.

The result is that the delta between investments in LED lighting (and we think this is a problem general to the energy efficiency space) that make sense without financing, and those that make sense only with financing, is much smaller than it is in solar.

Note that we are not mentioning the problems with energy efficiency investments from the perspective of the financier, namely the “negative cash flow” problem (returns come from money not spent) and the suitability of the physical investment as collateral. These have been discussed at length elsewhere, and frankly were not a factor in the success of our business.

Residential v. Commercial

Energy efficiency investments, by definition, only address part of the overall load in the building. Solar, on the other hand, is often net metered, meaning that the value of the investment is only loosely coupled with the existing energy consumption in the building. And even if the system is not net-metered, it can offset the entire building load as opposed to just the system being replaced. In residences, since people are typically out of the house during the day, many systems simply don’t get enough use to warrant an investment in more efficient equipment.

Energy efficiency investments in residences still often make sense! But take lighting, for example: lights in homes are often only on for a few hours a day. Lights in a retail store may be on for 12 hours or more every day. In a warehouse, it may be all day, every day.

The result is that energy efficiency investments make relatively more sense in commercial spaces than residences.

Residences and commercial buildings are very different from a business perspective: occupancy patterns, decision making, internal capabilities, buying patterns, etc., are all very different between the two.

Decision-making and Ingrained Buying Patterns

Solar is not only a “standalone” system that is an addition to the building, not a replacement of a system – it’s also a completely new product for most decision makers. For existing products, like lighting (or HVAC systems, or windows, etc.), a new business must disrupt existing vendor relationships.

In lighting, the barrier is especially strong. Until now, with LEDs, lighting has been a relatively “fast-moving” good. Especially in retail spaces, which use halogen lamps, lighting purchases are frequent. This has led to strong relationships between our targeted customers and their existing distributors.

Many of our customers “had a guy” that did their lighting. For this segment, the option of considering a new relationship for that portion of their space was dismissed off-the-bat. Many of these distributors offer LED lighting, but:

  • None of them offer financing (so far as we know!)

  • LED lighting options are not “what they know”, and it is much easier to keep selling the same products that have been sold for the last thirty years; and finally,

  • Distributors rely on frequent ongoing business from their relationships. Once a distributor sells their contact LED lights, they will most likely not hear from that contact for a number of years. So there is an incentive not to sell LED lighting.

From our perspective, the problem was simply that the customers wouldn’t consider our alternative. From a policy or market-structure perspective, there is the further problem that decision makers are not seeing all the available options that may convince them to switch to LEDs. In some cases not even knowing about all the LED options, and in nearly all cases not considering financing options for an investment in LEDs.


We both strongly believe that there are better business models out there for energy efficiency than those that exist today. We caution, though, to look beyond financing. Building energy efficiency is a huge resource and we encourage other entrepreneurs to continue attacking this market with new technologies and business models.

Both of us are happy to speak further with anyone that would like to hear more about our experiences. Our emails are geoffplewis [at] gmail [dot] com and thomas [dot] vladeck [at] gmail [dot] com.




What follows is the central lesson I learned from two years of working on a startup and making a ton of mistakes. A few caveats: I’ve never had a successful startup, and this resonates with my experiences and view of the world.

It’s commonly said and written, at least in the Bay Area: “build something people want” (BSPW). Yet, for my startup (Building Hero), this was the central, original reason we did not succeed. We built things, but they were not things that enough people wanted badly enough.

Why can it be hard to BSPW? It’s really two problems that reinforce each other:

1. Building a product (BS) produces tangible results whereas validating a problem (the PW part) does not

2. It’s less clear how to validate a problem then it is to build a product

So the BS part is both more tangible and more fun. You can show it to your friends and feel good about the progress you’ve made. Not only that, if you’re an entrepreneur, it’s probably because you’re excited about technology and because you have fun building things. It’s also easier for you, probably, because you’re excited about it and it’s closer to what you normally do (i.e., writing code or designing mockups). And once you have a working product, it’s very easy to get excited about its capabilities. If you’re smart, you can probably convince yourself that it’s awesome.

The PW part is much less tangible. The result of validating a problem is a clear idea of what opportunity exists, an empathic connection with your potential market, and the beginnings of an understanding of how you might solve the problem. It’s a lot harder to show people; it’s harder to get excited about; by itself it’s unfulfilling both personally and socially.

Finally, because BS is so tangible, there is significantly less cognitive overhead in figuring out how to build the product then in validating the problem. It doesn’t take too long to put together a roadmap for how you’ll build something. PW is much less tangible; it’s not clear how to begin or even what you want to end up with.

So, when faced with the choice of finishing up a webapp, which you can show your friends and pitch to investors, or individually emailing 100 people in your target market (much tougher to show your friends), it’s easy to see why many would choose the former and not the latter.

Building Something Arbitrary

If you don’t PW before you BS, it’s likely that what you’re building is arbitrary. Through a commercial lens, it doesn’t have a reason for existence. It’s just one of the infinite things that could exist. Not one of the subset of things that needs to, or should, exist.

Sometimes entrepreneurs may get lucky and build something and find out that people want it too. Or some entrepreneurs may have such a strong creative vision that they can “see the future” and build into it. I guess I’m just not that way, so I need a more defined approach.

The other issue is that starting with BS before PW is that it doesn’t equip you to evaluate how well you are doing. Really validating a problem should leave with you with an understanding of the assumptions that must be met before a product will succeed to the level you desire. Without this work below the tip of the iceberg, you’ll lack critical navigational ability: knowing what assumptions are being proven right and wrong.

In our case, we got fooled by “vanity metrics” – the number of projects we were doing and the amount of revenue we were bringing in. We didn’t have defined assumptions at the outset that we could prove right or wrong. So we made decisions based on the wrong things.

Find out what people want, then build it

Startups and Photography

My principle creative outlet is photography. I’m (slowly) getting my photos up on Flickr – but most of my photos are up at @tvladeck on Instagram, and on – my “media” domain.

I’ve noticed recently that there a number of philosophical parallels between running an early-stage startup and being a photographer:

Two things really matter.

A photo captures a moment in time through the view of a composition. A startup attacks a market with a product designed to solve a key problem. In both cases, there is a function of perception, and a function of action. You perceive the moment, and then compose the shot. You find the problem in a market, and design a product to solve it.

Category Photography Startups
Perception Moment Market
Action Composition Product

So what about the team? And marketing? And… everything else? Remember I’m talking about an early stage startup. You are the team. You haven’t achieved product/market fit yet. And until you do, nothing else matters.

There are lots of things to worry about.

And even though only two things really matter, there are so many things to worry about. Especially if you’re really interested in photography or business more generally. But remember, these things only matter if they help you do better in the two things that really matter. These are means to an end – not ends themselves.

Photography Startups
Lens Tech Stack
Aperture/shutter settings PR
White Balance Finance
ISO Settings Accounting

It is an art of exclusion

You define a photo by what you decide to leave out of the frame. You can’t create things in the frame, you can only eliminate all but a certain portion of the view in front of you. That portion becomes your shot.

A startup is in a similar place. Instead of a hemisphere of light to whittle down, there are endless problems and markets to choose from. But you can only choose one. You have to exclude.

Minimum Viable Decision

Every organization I’ve ever worked with has struggled at some point with decision-making. Decision-making is tough. But there are ways to do it better.

Here some common problems we encounter in decision-making:

  1. A decision is never made
  2. Decisions don’t get enacted
  3. Decisions get revisited at random

It’s clear why any of these three things can be majorly disruptive to an organization. A decision is a commitment to a certain course of action. If there are no decisions, it may be unclear what course of action is being pursued. If the commitment is not followed, the commitment was worthless in the first place. And finally, if the commitment is always up for questioning, it holds little value (it’s hardly a commitment at all).

Why can decisions be hard to make and maintain? Here are a few common reasons (among many more):

  1. There’s a lot riding on the decision
  2. The consequences are highly ambiguous
  3. Lack of buy-in across actors responsible for carrying out decision

The more that’s riding on the decision, the harder it may be to make. The more pressure there will be to “get things right”, and therefore to spend a lot of time preparing. When consequences are ambiguous, it is harder to evaluate the available options and therefore to choose amongst them. In both cases, there is a strong temptation to revisit decisions before they’re carried out. We have an innate tendency to abhor paths that may contain regret. And of course we’ve all seen people exercise personal “pocket vetoes” on decisions by simply ignoring them.

How do we address these issues in organizational decision-making? Many tangential arenas have codified practices that address similar concerns: agile software development, design thinking, and the validated-learning approach to product/startup development. Many areas of business fall outside these domains, but the approaches pioneered there can be applied more widely.

Inspired by them, I’ve toyed in my head with the concept of a “minimum viable decision” (MVD).  A minimum viable decision is the smallest decision of any consequence that can be taken as early as possible in any process. Instead of waiting to make the “right” decision, see if an MVD is available. Your team might never agree on what the “right” decision might be, but an MVD will help you chart a path forward and gain critical information about your problem domain.

More broadly, it’s about applying the concept of rapid iteration, feedback, and agility to decision making across all aspects of an organization, rather than just the areas where these concepts have gained the most traction.

What are some examples of an MVD?

Instead of making a big decision You make a small one
Promoting a junior developer to a management role Have a junior developer manage a small project
Commit to a direct marketing strategy Try direct marketing in one neighborhood
Get an accountant Talk to an accountant
Hire a telesales role Make 100 cold calls yourself

What are the advantages of a minimum viable decision?

  1. MVDs require less organizational capital to take
  2. It is easier to come to an agreement to an MVD than a Big Decision
  3. Often MVDs are almost always reversible
  4. MVDs are not “bet the ____” moments (e.g., the company, my career, this product, etc.)
  5. By reducing the impact of the decision, it’s easier to implement
  6. Smaller decisions are easier to measure

I’m not advocating that you don’t make big decisions. I am advocating that you arrive at them through a series of smaller, micro-decisions. As Jeff Bezos puts this whole concept brilliantly:

When you look at something like, go back in time when we started working on Kindle almost seven years ago…. There you just have to place a bet. If you place enough of those bets, and if you place them early enough, none of them are ever betting the company. By the time you are betting the company, it means you haven’t invented for too long

Concluding thoughts: 

  • Make smaller decisions
  • Use smaller decisions to get information to feed into future decisions
  • Start making commitments early on in any deliberative process.
  • If you get to a point of deep divergence in your team, you have waited too long

Get to Yes.

I recently listened to* Getting to Yes: Negotiating Agreement Without Giving In, by Roger Fisher, Bruce Patton, and William Ury. (Amazon Link)

A negotiation is a process by which multiple parties with shared and diverging interests come to an agreement. This could be two nations at war, or it could be two friends figuring out where to eat for dinner. At an abstract level, both situations involve multiple parties figuring out how to meet their needs. The skills the authors discuss apply widely.

This is why I think this book is a must-read for everyone. Everyone. Most people, I think, will casually dismiss the domain of negotiation as belonging exclusively to the legal and business communities. But as the authors argue convincingly (but also somewhat briefly – I wish they’d gone further), everything done with more than one person involves negotiation in some sense.

As communications technologies and the zeitgeist is drive organizations to a flatter, more loosely-coupled network of individual agents, effective negotiation becomes ever more important as a personal skill.

I’m so glad I came across the book. Here is my interpretation of the lessons they teach:

The Bogey.

The enemy of the book is “positional bargaining” – the form of negotiation that most of us are familiar with. You want ten, I want twenty, we settle at fifteen. You and I start with a position (a statement of the outcome we desire), and we move along a linear path between the two positions until we find a point somewhere in the middle that is acceptable to both parties. Or – nothing on that “line”** is acceptable and either the two parties give up, or one “wins”.

Because of the narrow range of outcomes, positional bargaining tends to create win/lose scenarios, which in turn breeds those expectations at the outset of a negotiation. Negotiators may go into a discussion really wanting to “win”; others may accept “losing” to preserve the relationship. The authors rightly reject win/lose or lose/win mentalities; if one party walks away from a negotiation feeling like they “lost”, it’s likely the agreement won’t produce a “win” for either party.

The People and the Problem.

The authors repeat, as a mantra “separate the people from the problem”, but I think this is actually fairly inaccurate relative to the substance of their arguments. I would say it’s more accurate to describe their conclusions as “treat the people as an entirely separate problem”.

There are essentially two problems on the table during a negotiation: the central problem of how to satisfy the interests of both parties, and the emotional health of the people and relationships of the negotiating parties. There’s the “problem” and then there’s the “people problem”. The authors do not advocate ignoring the people problem – in fact they argue that it’s critical to spend real time and effort strengthening relationships between the two parties.

Positions and Interests. 

Positions are statements that outline one possible way of meeting the interests of a negotiating party. What’s not important is the specific mix of things in the position; what’s important is that the mix is acceptable.

Positions are usually expressed as a single point in a space of interests – but often they don’t hint at the dimensions in the negotiator’s interest-space (i.e., the things they care about). So look past the expressed positions to get to the underlying interests behind the position.

Understand their interests better than they do. This should be your goal. Not only will you gain serious “people points” by showing that you care about solving their problem, but you will be better equipped to find a mutually advantageous solution.


For example, if you’re dealing with a landlord that wants you to move in quickly, understand why exactly that is – is it because there is a mortgage payment looming, or is it because she’s going away on vacation in a month and won’t be available to handle things while she’s away? The different underlying interests permit different ways of meeting those interests. Get past the positions and understand interests.

The interest space.

It’s likely that both negotiating parties have a very high dimensional interest space, although from the stated positions it may not appear so. After understanding the dimensions of the space you’re working in, “probe” the space by inventing options (“positions” pulled out of thin air) as a way of determining which regions of the interest space are acceptable (i.e. move in in a month and pay more rent vs. move in today and pay less). Make it clear that there are not commitments at this stage.

This is the natural consequence of getting off the “line” of positional bargaining. Once you open up space by looking at the interests behind the stated positions, explore it.


The Best Alternative To a Negotiated Agreement. Every negotiator should go into a negotiation knowing both their own BATNA and the other side’s. Because a negotiator will only accept an agreement that improves on her BATNA, BATNAs are the source of relative strength in a negotiation – not “power” or resources per se. A very powerful company has little leverage over an employee that has received a competitive job offer from someone else.

So understand your own BATNA, and work to improve it, before going in. Also understand their BATNA, and work to worsen it, if you can and need to. Filing suit against the other side is a common way of lowering their BATNA; now their BATNA includes defending themselves against a lawsuit. Improving your own BATNA and impairing the other sides changes the landscape of the negotiation in your favor – perhaps even before it begins.


I hope you will read the book. For me, it was an instant classic. Negotiation is such a common thing in life, it’s shame it’s not taught more widely. 

*yes, I’m a shameless audiobook fan. 

**In my head, I converted pretty much all of their discussion about positional bargaining, issues, etc., into a discussion about the benefits of operating in n-dimensional space as opposed to operating on a line (2d space).

A “Third Way” in Entrepreneurship

Entrepreneurship is often portrayed as an endeavor in which the entrepreneur has to essentially go crazy to succeed. Extreme dedication, total distortion of the work/life balance, and very high risk are some of the hallmarks of our conception of starting a new business (or even more risky, starting a new business with a new business model or product).

Moreover, entrepreneurs are pressured to maintain a totally positive face to the outside world about the state of their company. In San Francisco, “we’re killing it” is almost now an inside joke because of the ubiquity of that response when someone asks an entrepreneur how their company is faring. Most of these companies are not “killing it”, and the entrepreneurs probably know that.

It’s actually almost folk-wisdom that this quality (believing your company is “killing it” at all times) is a necessary mental quality for an entrepreneur. If they could be completely honest with themselves, the thinking goes, they would never be able to face the consistent stream of failures and setbacks without giving up. But maintaining this facade is hard, and it only makes the risks higher; a less than satisfactory end result now means abrogating promises and not meeting expectations that you yourself helped create. 

One has to think that there is a way to run a company that doesn’t exact such a toll. Leaders in the field of startup management, especially Eric Reis, have outlined new ways of thinking about starting a new business that permit new ways of behaving. Instead of being deterministic (i.e., the entrepreneur is in control of what the company will be and do, and effort will determine success) and linear (i.e., there is constant progress towards success), most startups are nondeterministic (you may succeed but you will not control how) and nonlinear (you will experience small failures constantly until you succeed, perhaps wildly). Deterministic/linear thinkers (or those who perceive that others think that way) are under more pressure to maintain this facade relative to nondeterministic/nonlinear thinkers.

In all, I think there’s a different way to be an entrepreneur. One that encourages work/life balance. One that doesn’t demand a stark dissonance between your public face and private reality. One that recognizes and embraces the nonlinear nature of startups – i.e., that it’s ok not to be “killing it” all the time.  

Products need three things

  1. To solve a pain point
  2. To be defensible
  3. To be scalable

Solving a pain point

A product must create value – but creating value is a subset of this criterion. Good products solve real problems – problems that people must solve one way or the other. OK products are “nice to haves”.

You only get paid if you solve a problem. Solving someone’s problem is why people would ever buy your product in the first place.

What about Facebook, the iPhone, Instagram? People got on just fine before these things – what pain point did they solve? Well, great products create new problems that can only be solved by the product itself.

When Facebook became popular and everyone got on it, you had a new problem: your friends were all sharing things on Facebook and you weren’t.


Ok, so you’ve ID’d a pain point. What’s stopping your product from becoming a commodity? Is it the technology – i.e., is no one able to replicate your product because of IP or trade secrets? Is it network effects? Is it economies of scale?

Without defensibility, you may still make money, but you’re going to be competing for scraps with the rest of the market. 

If solving a pain point is why people would buy this product at all, defensibility is why people would continue to buy your product.


Scalability, in my mind, is the confluence of two factors: a large potential market and a viable growth model. Consider this: you are the sole owner of wedding photos for a recent wedding. Your potential customers really want to see the photos (pain point) and you’re the only provider (defensibility). So – you’ve got the makings of a great product. But, there were 100 people at the wedding, 50 more that didn’t know but care enough to see the photos, each willing to pay $50 for it. Too bad.

You fell over because the market was too small.  

Well what about a big potential market? You can still fall over if you don’t have a viable growth model to eat up the market. The growth model essentially means that your cost of user acquisition is lower than your customer lifetime value. I’m sure there are other nuances, but that’s pretty much it. Even if you solve a problem for someone, if you’re paying more to deliver the product to them (with “deliver” meaning everything from the averaged costs of developing the product to creating it to marketing it to supporting it and beyond) than you can receive for it, you don’t have a viable growth model. 

So if solving a pain point is why people would by this product, and defensibility is why people would buy your product, scalability is why you’ll be able to create a business around your product.

Concluding thoughts

So solving a pain point, defensibility, and scalability are all necessary. But are they together sufficient? I haven’t thought that through, but my hunch is that they are.