Death by thousand cuts (startups).

 In The Innovator Blog

Investopedia explain the death by thousand cuts term as follows “failure that occurs as a result of many small problems.”

Can that happen in the corporate world?

First of all, let’s have a look at what I call “swarm effect”. There is about 4 million startups founded yearly. All over the world, in garages and barn, somebody tries to fire up a business and hits home run. Competition is remorseless. Pressure is enormous. Swarm of startups is trying to get a chunk of every market you can think of. Market of cars, ice creams, shoes, digital disks, cloud etc. They are like mosquitos, they try to sip every drop of blood to get them going.

How do startup decode their market spot, how do they find their niche? Best startups look into mature markets and try to find unhappy customers or customers with squared heads. It is obvious what unhappy customer is but what is squared head customer.

Figure 1: Two types of customers.

Customers with square heads are people who experience the same pain across different groups and they don’t express it because don’t want to or are not aware of their squared heads.

They are harder to find because they expect the solution but don’t communicate what type of the solution. The only way you can satisfy their needs is to give them the solution, put it in front of their eyes. Think about smartphones. Before they came to this world, we hadn’t thought about touch screens and being connected 24/7. Suddenly somebody (Apple, Samsung, HTC) showed us the smartphone and squared head people started to pick smartphones up. Regardless of age, sex or geo location.

 

The squared head customers is a group of people with squared heads who are looking for square hats. Regardless of their age, geo location, sex, income, wealth (traditional demographics) these people experience a discomfort or are happy to test new ways of doing things. Classic demographics is dead.

So how the death by thousands cuts happen?

Startups are fast in searching for squared head people. They run thousands of pilots, start with prototyping instead of real product. Startups want to quickly show their solution to the market and hope that it will lure squared heads people. This is startups world advantage over large companies. Corporations walk to customer, startups run to them. Corporations walk with polished product, startups run with imperfect solution. Most of corporates products are created based on customer feedback (expressed pains) while most of the startups products are created based on discovering the customer (more proactive, based on searching and discovering the customers unexpressed needs). Think about Uber or Lyft, or Amazon. Those companies created markets, discovered customers, shaped something which was not shaped before because they had started with looking for squared heads customers.

Suddenly Uber, Lyft, Dropbox, Slack started to reshape markets. Unicorns club is cuts maker. They cuts markets chunk by chunk forcing large companies to change behavior. Suddenly large players needs to start their own startups (Shell, UPS, Target) or partner with startups (Coca Cola, Disney, Shell, GM).

Death by thousands cuts already happened to Mattress Firm, Nine West, Block Buster, Nokia and will happen to Swatch, Rolex, Nordstrom and +100 more. It is a fact.

 

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