When a startup makes a product it becomes a decision-maker in their industry. Whether small or large - the startup becomes a contender to ideas spread within their niche.
At first, the conversations the startup is having are small, like a whisper. But as the startup learns more about the industry the noise gets louder and the disruption becomes unavoidable. At a certain point, the industry understands the disruption, albeit too late, and heeds to the conversation the startup initiated.
“The times they are a-changing” -Bob Dylan.
This portrayal of a TechCrunch startup is nice on paper and a possible career path for many to choose - yet like many famed careers - one of sorrow and despair for the majority. Many startups fail, and many claim to disrupt an industry they fail to understand.
With PowerPoint in hand and VC-backed pockets, founders march onto stages with visions of change. With so many startups and so many founders and so many VCs backing startups - how can we keep disrupting the disrupted industries?
The Problem With Startups Trying To Disrupt Industries
Instead of overthrowing the industry, startups should embrace the niche. Become an industry connoisseur and ally. Become an expert. And dare I say, become a consultant.
The principal agency problem is an age-old theory of one that usually leads to the understanding that consultants work for principals as their agents. Usually, many consultants vow to never return to the land of service without pondering the peculiar relationship the consultant has when removed from the consultant’s business.
From the principal's view, a consultant is an expert in a niche that is not particularly relevant to the skillset of the principal. A house owner might hire a landscaper due to the inability to push a lawnmower or a business might hire some people to argue how right their feelings are in court. The power of the consultant and the ability to provide services to the principal is one of power.
As the theory goes, the agent holds all the knowledge. The asymmetrical information the agency has allows price inflation to occur as the principal is not versed in the consultant’s operations to understand true costs.
Given this power, the agency promises a land of trust and partnership so that the price can be mutually agreed upon to perform the services. By the end of the agreement, if the services are completed, the parties are enthralled with the arrangement as the principal traded money for time.
What Startups Can Do
So how does this relate to startups? Well, any startup should be leading the conversation in their industry. They should be the EXPERT in their industry. Asking for money does not make someone an expert - it makes them an agent of growth. But, becoming a consultant in the industry the startup wishes to disrupt - that is a path towards expertise and trust.
If a startup is both a product and an agency the niche wins. The startup can build the same product for its customers as an agency would build for its clients. The benefit is that cash is paid upfront for the services and with proper legal counseling the IP can remain with the startup.
The advice here is to never shy away from being a consultant for customers. In our Digital Playbook, we advise young entrepreneurs to take a step back and become a consultant BEFORE the startup exists. This allows a consultant to meet the potential clients, partners, and seasoned veterans in the industry one wishes to disrupt. After providing services - the consultant can utilize their network to become the first customers of the product.
Who knows, if you get really good at this you can launch a few products and become a studio - this was the path we took at NineTwoThree, and would love to discuss further anyone seeking this path.