Earlier this week, Amazon launched a service called Amazon Home Services, which is somewhat a competitor to a company I used to work at, Thumbtack. In this time I’ve received multiple text messages and phone calls from worried friends and family members about it. Around the same time I saw this quote in a Techcrunch article about Thumbtack as related to a smaller new potential competitor:
Thumbtack is only available in the U.S. for now. In other words, I hope that Thumbtack doesn’t expand to Europe any time soon, as the company has enough funding to crush the local competition.
Thumbtack shouldn’t worry about Amazon for the same reason this new startup shouldn’t worry about Thumbtack. When you are trying to fill a new niche or create a new service, size is not an advantage.
This isn’t just about doing things that don’t scale, though that helps. It is about the freedom to be crappy.
Freedom to be crappy
When Amazon launches a new product, it can’t be that crappy. They have huge, established businesses that make them a lot of money. If they make a crappy new product, the crappiness might spread to their brand, which might spread to their established businesses. They have worked really hard to make one more many great products (otherwise they wouldn’t be big in the first place!), and don’t want to risk hurting that. So they will have many internal processes to protect their brand.
This is entirely speculative, but I wouldn’t be surprised if the internal process for launching a new product at Amazon looks like this:
- Identify a new product they might want to create
- Have 100 internal meetings deciding if it is a good idea
- Lock a team of engineers in a room for 1 year to build it
- Executives look at the product and come up with suggestions to fix it
- Lock a team of engineers in a room for 6 months to update it
- Test it internally for 6 months
- Spend 3 months figuring out how to launch it
- Launch it
- Every 3 months look at metrics and decide if product should be cancelled or not
This process is incredibly restrictive. It is slow, it is highly predicated on the company guessing what kind of product people want, and it may not allow for the time necessary for a product to take off.
Compare this to a small startup’s product process:
- Create crappy product
- Launch it
- Every month try to improve and hopefully don’t go out of business
The product initially will be far crappier than that of a big company, but that doesn’t matter. What matters is being the first company to reach the level of quality to delight consumers, and that is based much more on perseverance and the trajectory of improvement than the initial quality.
The small company must iterate quickly to improve their crappy product, and they are free to do and try anything. They will have to learn what consumers actually want in the real world and figure out how to deliver that quickly. They will only give up when they go out of business. And often times they will do just that, if they do not improve quickly enough or the product doesn’t work for whatever reason. But a few companies might survive.
And these survivors are in a good sweet spot, because they can combine having a non-crappy product with the continued ability to iterate and improve it quickly. This is why companies like Uber, Dropbox and Airbnb accelerate in valuation so quickly. Eventually they will become so large that the disadvantages of size will accumulate, but by that point they will have already succeeded at their primary venture.
No need to worry
So to all my friends and family…
Thumbtack shouldn’t be worried about Amazon because it should believe it can iterate and improve more quickly than Amazon, and in the long term that advantage will be more valuable than Amazon’s distribution and resources. This is in addition to the fact that Thumbtack’s product is already pretty good .
And a small company trying to create a service marketplace internationally shouldn’t be worried about Thumbtack because Thumbtack’s US-only product is too high quality at this point. They can’t create a crappy product internationally, which restricts their ability to make a good one. This is why Groupon purchased international competitors instead of trying to beat them.
Embrace your crappiness
So to small startups out there, embrace your crappiness. Put your crappy product out into the real world, because your larger competitors can’t. Try a bunch of experiments that might flop horribly, because your larger competitors can’t. Improve and iterate quickly, because your larger competitiors can’t. And if things break your way, you might find yourself succeeding where your larger competitors can’t.
1: I’m basing this off their size and traction, not any personal quality determination. Though obviously I’m biased.