The Innovation Stack

Right feels early. If the timing feels right, you are probably too late. - Jim McKelvy

INTRODUCTION

TAKEAWAYS

GENERAL

• “I would love to hand you a map, but maps are for tourists and not explorers.”
• “Venture capital is for expansion, not exploration.”
• “There is always a reason no one has done it, and the reason is rarely that they aren’t as smart as you.”
• “Sometimes the key to an explanation is being quiet long enough for the audience to catch up.”
• “It is impossible to prove something is impossible.”
• “Artists and mathematicians have a clever trick for capturing the essence of a complex object or idea: focus on its opposite. What mathematicians refer to as an indirect proof artists call negative space, but the idea is the same: focusing on the opposite...”
• “The second type of motivation, however, applies only to entrepreneurs and artists and is rarely discussed - let’s call this audacity. [..] Audacity is generally frowned upon, or at best respected in hindsight if and when you succeed.”
• “Luck never feels like luck if you were working hard when you happened to get lucky.”
• “Even if we try to think about it, we cannot appreciate the complexity of anything with which we are intimately familiar. Intimate familiarity can be bad if you are trying to teach a customer something new...”
• “We spend our lives mostly limited to the solutions that have been created by others. We often consider unsolved problems unsolvable. But this is wrong.”
• “Once you realize that the world’s greatest innovators were people who, just like you, had no formal qualifications to do what they did, your universe of perfect problems blossoms. Innovation has no experts.”

ON COPYING & INNOVATION

• “Either the invention is mistaken for what people are already familiar with so they ignore it, or it’s so alien that people can’t understand it so they also ignore it.”
• “Most people who start a business in a market they don’t understand just copy what works. But if copying is impossible, then you are outside the proverbial city wall and the game changes.”
• “[...] living outside the wall gave us two primary advantages. The first was that non of the problems we faced could be solved with strategies that existed elsewhere - that is we couldn’t copy our way out of trouble.”
• “The second benefit is that we were able to try anything we wanted to. Whatever was possible was permissible.”
• “If your survival is threatened, creativity dominates conservatism. New ideas were quickly tried and tested. It was a combination of invention and iteration. These two elements complement each other beautifully.”
• “The problem-solution-problem chain continues until [..] either you fail to solve a problem and die, or you succeed in solving all the problems with a collection of both interlocking and independent innovation. This successful collection is what I call an Innovation Stack.”
• “We did the absolute minimum amount of invention that we could do to survive and, in the process of doing that, ended up with over a dozen things that nobody had done.”
• “Copying is almost always the best option because things that work are rare. [...] And so we copy, we copy instinctively, we copy consciously, we copy copiously. Copying is so wired into our brains and institutions that as soon as we stop copying we feel uncomfortable.”
• “Copy when you can; invent when you must.”
• “Copying is almost always the best way to counter a competitor, but it will never produce a situation where no competitors exist. [...] Copying is almost always the right answer, but it will never produce transformative change.”
• “If you create innovation first, economics tells us you can profit from it only until your competitors copy you.”
• “The copycats also forget that corporate culture is itself part of an Innovation Stack. A corporate culture that evolves along with the Innovation Stack naturally harmonizes with and helps create the innovation.”
• “A company that creates its own Innovation Stack does not do so by copying innovation. Innovation Stacks evolve from a focus on the custome, usually a customer new to the market.”
• “Qualification matters only in the world of copying, not in the world of entrepreneurship. If you are waiting for qualification, you can only ever be qualified to do something that has already been done.”
• “When it comes to doing something new, we are all even. Entrepreneurship starts at zero. One thing that differentiates entrepreneurs from the rest of us is their willingness to start.”
• “The critical moment when you become an entrepreneur is when you realize that you cannot copy the solution.”

ON PRODUCT & STRATEGY

• “we chose to lose money and take extra risk just to be sure that the user experience was correct. Getting the user experience right was a critical part of Square’s Innovation Stack. We were trusting that at some point in the future we would be able to fix the other problems.”
• “First, be willing to do what is right for the product, even if the industry is not ready for it yet. When we made the decision to circumvent Apple’s hardware rules, we did it to build a better product even at the cost of potential killing our company.”
• “From his perspective as the CEO of a company in an established market, these were all legitimate reasons that I might appear to be an idiot. But he overlooked one thing: we were not building in his market, we were building a completely new market for ourselves.”
• “Building an Innovation Stack that can successfully serve the smallest, poorest customers gives you exclusive access to a massive market.”
• “Learning when to do something is far more difficult than learning how to do that same thing, if only because we must always learn how first.”
• “Right feels early. If the timing feels right, you are probably too late.”
• “Invisible markets can be massive, but it is nearly impossible to prove beforehand because all the measurements are optimized for the current market.”
• “Entrepreneurial companies are focused not on their competitors, but their customers. Even when they do respond to a competitor, they do it with a focus on their customers...”
• “Customers who trust you are more valuable than customers who love you. Love can be won and lost, but you only get one shot at trust. It is a rarer emotion.”
• “The vast majority of entrepreneurial ventures did not steal their customers from any established business, but rather brought new people into a market.”
• Markets are infinite. If they appear finite, it is likely because we are incorporating the biases of the existing market. Within the confines of an established market the walls look solid and the market finite. Such thinking looks ridiculous in hindsight, but may appear real at the time.
• “If your goal is to incrementally improve an existing business, then expertise in that area of business is certainly valuable. Incremental improvements are far less likely to fail than audacious innovation. And expertise is fundable.”

SEE MORE POSTS

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The Uncertainty Mindset

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Strategic Intuition

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