When I think about technology and startups, one reason I believe disruptive tech startups bring progress is because Technology can overcome seemingly impossible trade-offs.
Some parameters in a product or service cannot all be ideal. For example if you think about food, the cost of the food, the healthiness of the food, the taste of the food and time to get the food done cannot all be ideal. Improving the healthiness probably means the food ends up costing more. Reducing the time of preparation of food may mean the food tastes bad or is less healthy.
Let us call these such parameters as Holy Grail Parameters – parameters valued by customers but which all cannot be ideal at the same time. The trade-offs that you have to make in these parameters are what we can call Holy Grail Trade-offs. Some top-of-the-mind examples of such Holy-Grail Trade-offs.
Holy Grail Parameters that require trade-offs
|Manufacturing||· Price of the product
· Customization of the product
|Call center service||· Training and wage costs of employees
· Time to resolve customer complaints
· Customer service satisfaction scores
|Loans||· Time taken to disburse the loan
· Costs incurred in disbursing the loan
· Quality of the loan
· Rate of Interest
|Books||· Price of books
· Number of books
· Size of the bookshelf
|College||· Price of Education
· Quality of Education
· Access to Education
· Reputation of Education
· Time to complete Education
|Computing||· Size and Portability
· Computing Power
|News||· Cost of Acquiring News
· Access to News
· Time to produce News
|Recruitment||· Cost of recruiting process
· Time to recruit
· Quality of process
· Quality of talent
|Venture Capital||· %Equity startup gives to VC
· Advice and Network of VC
· Access to funds
· Time to raise funds
|Hospitals||· Cost of healthcare
· Quality of healthcare
· Access to healthcare
|Movies||· Cost of producing the movie
· Quality of the movie
· Access to funders of the movie
· Time to create the movie
|Consulting||· Cost of Consultant
· Price of Consulting
· Quality of Consulting
· Time to provide advice
Some iconic products have been built by challenging trade-offs like the above.
It is useful for an entrepreneur who is looking to startup to consider the trade-offs in the area she is starting up. Can she push these Holy Grail trade-offs? For example, can she drive the price of consulting down while maintaining comparable quality? Or can she reduce time to produce advice while maintaining comparable quality? Or if it is a recruitment startup, can she maintain quality of candidates hired while reducing the time to hire drastically?
An important note on disruption here. Disruption theory states that disruption starts by serving over-served or non-consumers and starts with by under-performing on parameters, not necessarily by overcoming trade-offs. I believe there is huge scope for relative trade-offs. For example, offering 80% of the performance at 10% of the cost. For example, if you are hypothetically starting a MBA education startup (if the Government allows you to, yes hence the word ‘hypothetically’), can you make sure 80% of the students who take your MBA course graduate with good jobs while only costing 10% of what the current MBA colleges charge and the average student will take only 50% of the time to get the education. Those are huge relative trade-offs and such a business is highly disruptive.
Opportunities to overcome such trade-offs exist in so many areas. And technology precisely overcomes these trade-offs. VCs rather than following a trend can look at new investments through the lens of such trade-offs. I hope venture investors in India don’t fund the millionth hyper-local startup or food delivery startup and find entrepreneurs who are willing to work on challenging these trade-offs and in the process build great businesses.