Peter Thiel’s “Zero to One” and Key Principles in Monopolistic Innovation
Musings from a LinkedIn Article by Kenneth Huynh <Link>
Every once in a while, I write a bit about innovation with a skeptical eye, hopefully, to clarify the use of buzz terms and word salad speak.
If you’ve read Peter Thiel’s Zero to One, you would know he has a very strong framework on examining whether industry or startup has a good future. Now I have to note that Thiel is a bit of a controversial figure because he’s been very vocal about these personal stances on a variety of issues including politics.
Also, Palantir has been the subject of some criticism because of the type of work they’re doing for the government. But sometimes our personal views can cloud our openings to examine their thinking and thought process. To note, I personally don’t agree with many of his stances.
Nonetheless, we must examine other thought frameworks to allow us to sharpen our own thinking and frameworks. But that aside, let’s break down what Peter views in 7 key questions, which he says don’t neglect one:
1. The Engineering Question: Can you create breakthrough technology instead of incremental improvements? “Only when your product is 10x better can you offer the customer transparent superiority.”
His first criterion is are you going to be slightly better or 10x better? You need a technological breakthrough. This may not be a pure technological breakthrough, for example, Apple is at the intersection of science and design which can be a breakthrough. However, in combination, these attributes lead to breakthrough innovation.
2. The Timing Question — Is now the right time to start your particular business?
“ Entering a slow-moving market can be a good strategy, but only if you have a definite and realistic plan to take it over.”
The failed Cleantech companies had none. With the Cleantech (solar and renewal) they were entering a slow-moving market. The technological improvements in solar weren’t happening that fast. When you enter a slow-moving market, you really need a good strategy to compensate. The Cleantechs couldn’t.
3. The Monopoly Question — Are you starting with a big share of a small market? “Customers won’t care about any particular technology unless it solves a particular problem in a superior way. If you can’t monopolize a unique solution for a small market, you’ll be stuck in vicious competition.”
It’s not about engaging in an illegal means of monopoly, but more fundamentally you must avoid competition by tackling a niche or smaller market and dominate. Then grow in concentric circles from there.
4. The People Question — Do you have the right team? “CleanTech executives were running around wearing suits and ties. This was a huge red flag because real technologists wear t-shirts and jeans.”
If your priority is product and technology, are you going to put that much priority on looking good? It’s not a rule, but a signaler. But is your team product-focused? Or is your company too focused on prioritizing patents or looking a certain way? Are they really invested in the right thing?
5. The Distribution Question — Do you have a way to not just create but deliver your product?
“Selling and delivering a product is at least as important as the product itself. Selling and delivering your product is at least as important as the product itself.”
If you create products, many inventors are great at it, but they just have no ability to get it out.
6. Durability Question over 10–20 years — Will your market position be defensible 10 and 20 years into the future? “Every entrepreneur should plan to be the last mover in their particular market.”
This is self-explanatory. What will the world look like in 10 to 20 years and how will you fit in? If you cannot answer this, it’s time to take some deep reflection on why you’re starting this company.
7. Secret Question — Have you identified a unique opportunity that others don’t see? “Great companies have secrets and specific reasons for success that other people don’t see?”
This is your company’s “key insight”. Every company needs a secret angle or be looking at something that other people aren’t looking at it. Look for that secret insight to the customer, values, or approach to the customer that others simply don’t see. This may be the most underrated principle in startups, innovation, and investment.
There’s much more to the book that I found very insightful, but this is a solid overview of Peter Thiel’s lens or framework if you’re a founder or private and even public markets investor.
Stay tuned as I explore some quick case studies of some very high profile companies and how they stack up within this framework.
Watch this space.