"This is just a toy."
The touch interface that powered the new generation of smartphones, started by iPhone was once ridiculed:
"That virtual keyboard will be about as useful for tapping out emails and text messages as a rotary phone.
TechCrunch about iPhone
"There’s no chance that the iPhone is going to get any significant market share. No chance. It’s a $500 subsidized item.
Steve Ballmer about iPhone
It’s a little bit like, is the Albanian army going to take over the world?
Time Warner about Netflix
He’ll never make a profit selling weed wacker replacement spools over the Internet.
I think the large majority of book sales will always continue to be in physical bookstores.
Wired and Motley Fool about Amazon
The potential market opportunity did not seem large enough for our required model.
This was true for the GUI as it was true for the first calculator. New technology usually start out so unusable and clunky that to the majority (the world), on average... it seems pretty useless.
In fact, they all seem very counter-intuitive.
When you're building products and companies, you often hear the phrases like:
"Oh that's neat, but is there a market for it?"
"That's just a toy."
What differentiates a toy that becomes a trillion dollar industry and ones that will continue to stay a toy?
Innovator's Dilemma
Thinking about this topic has made me reread Clayton Christensen's book (I would recommend, short read, great book!)
He talks about two concepts:
Sustaining Innovation: continuing to improve products based on customer's feedback and helps it improve step by step, e.g. reducing costs, increasing speed.
Disruptive Innovation: often times lower performance and much worse on many of the existing qualities that the market values.
As a result, disruptive innovation only works with niche markets where they care about a few axis that the average market might not. They have a unique set of problems.
Incumbent players can't justify sacrificing the majority of their existing customer base to bet on something that is: (a) unproven and (b) small niche market.
The optimization function of existing companies is often to continue improving the needs of existing customer needs bit by bit. This is because even 1% improvement there can increase revenue by an (a) defined and predictable amount and (b) higher revenue than exploring a new market.
Over time, you becoming really really good at this set of local maxima, for example: selection of books such that the shelf space at each bookstore matches the local audience to maximize revenue. (ie. Barnes & Noble)
However, you miss out on the larger opportunity that today... frankly speaking looks like a toy.
Curse of the Average
Imagine if you're the only restaurant in a town of people divided by those who likes meat and those who likes veggies. You make a combination of some meat mixed with a healthy dose of your greens. What kind of ratings would you get?
Your meat lover customers will give you 4 stars because they like some of your meat heavy dishes, while you'll get some veggie lovers rate it 2 star because there's too much ground beef. As a result, you'll get an average rating of 3. You want to improve, so you get feedback.
As a result, you gather the feedback and you add a bit more veggies into your food, improve customer service a little, add sparkling water to the menu. Only to realize next season that there's now not enough meat, so you add back some chicken wings onto the menu.
You'll swing back and forth a little to help balance the incoming requests, customer service is a constant request by both, so you'll improve that. So is decor and comfort of chairs and menu design. Those each lift your revenue by 2% here and 3% there.
Since you're the only restaurant in town, business is not too shabby. While nobody loves the dishes, on average everyone would say that your restaurant is pretty solid.
The one day... 2 new restaurants opens up: one's a vegan/vegetarian restaurant and the other is a meat heavy BBQ shop. You find yourself out of business a year later.
As the common saying goes: When you're pleasing to the average, it means that you are disappointing everyone by a little.
This is also true when it comes to products:
When you build a product for everyone, you build a product for nobody.
As a result, as you grow, you start to build for the mass market. You trade niche use cases for the best option for the group. You start optimizing for the average use case.
Over the last 2 decades, we've seen this happen over and over again in the world of software.
Wikipedia vs. Britannica's encyclopedia
Amazon with books vs. Barnes & Noble
Each of their predecessors was quite good for the average, no information was really missing or that necessary. But, while on average everyone was content. Many niches within were not satisfied.
Is it a compliment then?
So next time your product is called "just a toy", you should ask yourself: "is this a compliment? should you keep pushing ahead?"
Or... are they right and you don't have a good axis to compete on.
What axis are you optimizing on? Is that the local maxima or the global maxima?