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Scott Rafer on Dalton's letter: "Learning the wrong lesson"

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Re: Scott Rafer on Dalton's letter: "Learning the wrong lesson"

#21

Post by paulsutter »

petegrif wrote: post #19

Scott - you say "It’s incumbent on you (and certainly also me) to make sure that we’re starting businesses in segments that actually require a new entrant and can not be filled by aproduct line extension from an incumbent. Whether or not they fill holes as early as Twitter, large companies with developer programs all consolidate their segments — and do so a economically as possible. That means every third-party devel…

Read my response to salman89 below.

If you don't have a clear strategy that protects you from competitors big ans small, don't start a company.

Re: Scott Rafer on Dalton's letter: "Learning the wrong lesson"

#22

Post by paulsutter »

petegrif wrote: post #20
paulsutter wrote: post #11

Earlier quoted context omitted.

Quantcast's free audience reports couldn't be copied by the incumbents (Comscore and Nielsen), because selling similar reports was their core business. They hated us, but we never spent a moment worrying about them. In fact we were always open to working with them, but they were bound up in a knot over our model. Southwest undercut united and American by avoiding business and first class, flying only one model of pla…

These are indeed all great examples of a differentiated strategy. But I am at a loss to understand quite how they help us parse the OP's para re a cannabilistic cash flow.

In every single example I gave, entrenched competitors were unable to copy a strategy without eroding their cashflow. For example, United is afraid to fly all their flights out of Long Beach instead of LAX, because they fear that American will have the perceived higher ground and customers will switch over. The other examples should be more obvious.

Re: Scott Rafer on Dalton's letter: "Learning the wrong lesson"

#23

Post by rhizome »

scottrafer wrote: post #9
fusiongyro wrote: post #7

Earlier quoted context omitted.

I think the point is that Twitter can't afford to remove ads or broaden their terms of use. The idea seems to be that a for-pay Twitter with broad terms of use and no ads could become a valuable development platform. The gamble is, how valuable and will people pay. I think your cannibalization concept is brilliant, but I don't think app.net is completely vulnerable to it. Caldwell's made it clear that he's not trying…

I'm applying it differently, and to the business before his pivot. I'm talking about his conversation with Facebook and his accusation that Facebook was underhanded. He didn't do a proper job of disrupting FB's economics, distribution, or organizational limitations, so he's got no grounds to complain that they 'bullied' him. That should have been his expectation.

That should have been his expectation.

I mentioned elsewhere that, personal opinion only, of course, that this expectation is the sign of bad mindedness. Think of the logical implications of this point.

Re: Scott Rafer on Dalton's letter: "Learning the wrong lesson"

#24

Post by petegrif »

paulsutter wrote: post #21
petegrif wrote: post #19

Scott - you say "It’s incumbent on you (and certainly also me) to make sure that we’re starting businesses in segments that actually require a new entrant and can not be filled by aproduct line extension from an incumbent. Whether or not they fill holes as early as Twitter, large companies with developer programs all consolidate their segments — and do so a economically as possible. That means every third-party devel…

Read my response to salman89 below. If you don't have a clear strategy that protects you from competitors big ans small, don't start a company.

Excellent advice. I am not sure it is addressing my concerns with the OP. Perhaps you could clarify for me?

Re: Scott Rafer on Dalton's letter: "Learning the wrong lesson"

#25

Post by petegrif »

paulsutter wrote: post #18
salman89 wrote: post #15

Earlier quoted context omitted.

Great examples. How do you think this would apply in Dalton's case though, where the very mechanism of building on Facebook/Twitter's platform can be shut down by Facebook/Twitter?

I don't know. But unless you have a strategy, don't start a company. Without a strategy you're just picking up nickles in front of a steamroller. I'm sure that strategies exist on any platform. Zynga doesn't seem worried that Facebook will copy its games (even if they do hate paying the platform tax). Many products are pretty safe from Facebook. For example, build an app for dentists, or personal trainers, or pregnan…

There only is one sure strategy for avoiding the potential steamroller of the platform company. Don't build on the platform.

Re: Scott Rafer on Dalton's letter: "Learning the wrong lesson"

#26

Post by rhizome »

paulsutter wrote: post #21
petegrif wrote: post #19

Scott - you say "It’s incumbent on you (and certainly also me) to make sure that we’re starting businesses in segments that actually require a new entrant and can not be filled by aproduct line extension from an incumbent. Whether or not they fill holes as early as Twitter, large companies with developer programs all consolidate their segments — and do so a economically as possible. That means every third-party devel…

Read my response to salman89 below. If you don't have a clear strategy that protects you from competitors big ans small, don't start a company.

I think you're indulging in extremism. "The perfect is the enemy of the good," and all that.

Re: Scott Rafer on Dalton's letter: "Learning the wrong lesson"

#27

Post by paulsutter »

rhizome wrote: post #26
paulsutter wrote: post #21

Earlier quoted context omitted.

Read my response to salman89 below. If you don't have a clear strategy that protects you from competitors big ans small, don't start a company.

I think you're indulging in extremism. "The perfect is the enemy of the good," and all that.

Dude you can do whatever you want. If you want to start something that's readily copied, go ahead.

But if Godzilla steps on you, dont act surprised and dont expect a lot of sympathy.

Re: Scott Rafer on Dalton's letter: "Learning the wrong lesson"

#28

Post by petegrif »

scottrafer wrote: post #9
fusiongyro wrote: post #7

Earlier quoted context omitted.

I think the point is that Twitter can't afford to remove ads or broaden their terms of use. The idea seems to be that a for-pay Twitter with broad terms of use and no ads could become a valuable development platform. The gamble is, how valuable and will people pay. I think your cannibalization concept is brilliant, but I don't think app.net is completely vulnerable to it. Caldwell's made it clear that he's not trying…

I'm applying it differently, and to the business before his pivot. I'm talking about his conversation with Facebook and his accusation that Facebook was underhanded. He didn't do a proper job of disrupting FB's economics, distribution, or organizational limitations, so he's got no grounds to complain that they 'bullied' him. That should have been his expectation.

Scott if I read you correctly I think this is a profound misunderstanding of how to potentially build a viable business on a platform. Let's examine two extremes.

a) dev builds software on the platform that doesn't disrupt the platforms economics, distribution, or organizational limitations. b) dev builds software on the platform that does disrupt the platforms economics, distribution, or organizational limitations.

You seem to be saying that if he had done a 'proper job' he would have pursued strategy b. But surely that is precisely the case where you can expect to be bullied. It is strategy a. where you develop software that does none of those things, but adds value to the platform by adding value to the users of the platform where you are least likely to be bullied. In these circumstances you are no threat and you are complementing the platform.

Strategy a can only be pursued when you are not dependent on the platform and hence are much harder to bully.

Re: Scott Rafer on Dalton's letter: "Learning the wrong lesson"

#29

Post by petegrif »

paulsutter wrote: post #22
petegrif wrote: post #20

Earlier quoted context omitted.

These are indeed all great examples of a differentiated strategy. But I am at a loss to understand quite how they help us parse the OP's para re a cannabilistic cash flow.

In every single example I gave, entrenched competitors were unable to copy a strategy without eroding their cashflow. For example, United is afraid to fly all their flights out of Long Beach instead of LAX, because they fear that American will have the perceived higher ground and customers will switch over. The other examples should be more obvious.

I understand. My bad. On my original reading I thought he was suggesting the startup should have cannabilistic cash flow. Whereas he is indeed meaning that to competitively respond the incumbent will have to cannabilize his own cash flow.

Re: Scott Rafer on Dalton's letter: "Learning the wrong lesson"

#30

Post by fusiongyro »

petegrif wrote: post #28
scottrafer wrote: post #9

Earlier quoted context omitted.

I'm applying it differently, and to the business before his pivot. I'm talking about his conversation with Facebook and his accusation that Facebook was underhanded. He didn't do a proper job of disrupting FB's economics, distribution, or organizational limitations, so he's got no grounds to complain that they 'bullied' him. That should have been his expectation.

Scott if I read you correctly I think this is a profound misunderstanding of how to potentially build a viable business on a platform. Let's examine two extremes. a) dev builds software on the platform that doesn't disrupt the platforms economics, distribution, or organizational limitations. b) dev builds software on the platform that does disrupt the platforms economics, distribution, or organizational limitations.…

In case A, what's stopping the platform from re-doing themselves whatever it is you've done?
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