Every successful business has a monopoly—a monopoly on what it makes that someone else can’t make the way they make it.
That leaves out commodity businesses—people who bring coal out of the ground. I don’t think of those businesses as particularly successful. I think of them as useful. I’m glad if I need a bag of coal someone’s doing it, but it’s a really lousy way to make a living. Brilliant entrepreneurship is around figuring out that thing you can do in the marketplace that people are willing to cross the street to get. It’s so people understand, “This is the one and I need it.” And we’re going to keep coming back again, again, and again today to this idea of, “What is it you’re going to have a monopoly on?”
If you know about the company 37 Signals in Chicago, they are really killing Microsoft in a tiny segment of the market, which is project management on the web. They have a product called Basecamp, which cost $20 bucks a month to use. If four of your colleagues are managing a project on Basecamp and you want to participate in the project you can’t shop around. They have a monopoly on that project. You have to do it on Basecamp. And you don’t get to say, “Well, it costs too much money,” because they’re already using it. So you have to use it too.
That is a fundamental distinction from the way industrialist thought in 1930 and in 1940 when the board game came out. In those days the thought was, “We’re going to figure out how to make these machines work just a little better and we’re going to figure out to make this factory work just a little faster, and so we’ll be able to sell a car just a little cheaper.” The industrial mindset, the one we all grew up with, starts with this idea that you have to build a better mousetrap and make it cheaper.
That’s not the kind of entrepreneurship I’m here to propose to you today. I’m not talking about one that is based on the industrial economy, but on the connection economy. And one of the easiest ways to build a monopoly, a tiny profitable monopoly, is to be the center of connections. Because connections are so valuable to people compared to stuff.
When there is a line out the door at Grand Central Station to buy coffee, something is going on here. The coffee is $4. That’s expensive, if you live in Duluth. But if you’re in Grand Central Station and you need caffeine, $4 is a bargain; it’s worth $6. Basically there is someone behind the counter handing out $2 bills all day long. Because you’re getting something for $4 that you’d be willing to pay $6 for. How did they do that?
They have a monopoly on a brand name.
They have a monopoly on a story.
They have a monopoly on expectations.
And thanks to the MTA, they have a monopoly on that actual piece of real estate. There isn’t a place right next door that sells coffee for $3. If there were, there’d probably be more of a line in front of that one What they’ve done so brilliantly is they’ve carved out attention and a system so they get paid all day long giving value to people.Seth Godin – Startup School, Episode 1
I still think Startup school is one of the most helpful things Seth has done, and this idea of a generous monopoly – generous because you’re making something available that people choose to have – is one of his best.
Full .pdf transcript by Kev Evans here