In the previous story, I talked at length about finding the setting, and I thought it might be useful to try and write down a pattern I’ve seen when looking to complete that puzzle of a functional setting for a customer-vendor loop.
The approach that seems effective is by studying the stocks of adjacent loops. As you may remember, there are four of them: Customers, Interactions, Vendors, Products. Each stock has value. There’s something here about abundance and lacking that I haven’t quite figured out yet. For the sake of this narrative, let’s assume that we can tell if the stock is abundant or lacking. When the stock is abundant, there’s excess value that presents us with an opportunity to create our own stock. When the stock is lacking, our opportunities in relation to this stock are rare and unimpressive. It’s not always so clearcut. Sometimes lacking stocks present opportunities that were previously unavailable, and stocks gaining in abundance seep energy away from the opportunities that were there before. But to keep things simple, let’s go with the simple rule of thumb: adjacent abundance leads to more opportunities, and adjacent lack to fewer.
I’ll start with the Customers. As their numbers grow, we start recognizing that the customers themselves create value. Think of a lively market, a bazaar. People flock to a bazaar because there’s something they may need to purchase, but also because they might be surprised to find new things they haven’t seen before. Half the fun of going to a farmer’s market is in discovering a new kind of honey that I didn’t realize I definitely needed to buy. Customer growth spurs the engagement flow, and is often a common phenomenon that strategists spot. If I am near a bazaar, I will have opportunities for engagement, and many business venture ideas start here.
Moving clockwise, let’s look at the Interactions. Sometimes, there might not be a clearly distinguishable collection of Customers. Instead we notice a certain behavior that is hard to ignore as random. Cowpaths are a common buzzword, but they nicely describe the value in the Interaction stock. Being carefully observant of common behaviors alongside well-traveled paths and detecting unmet needs is another trick that strategists employ. Often, the cowpaths are opportunities that lie just outside established roads, and their value does not reside in having an audience. People can come and go as they please. The entrepreneurs are attracted to some emergent common need that these people start having as they do.
Looking at the Vendor stock, its value is in the breadth and depth of capabilities. Whether they are the knowhow and expertise, funding, or just plain raw brawn – capabilities accumulate in this stock. Many teams get their start by putting a group of passionate, experienced, and skilled individuals. By doing so, they amass capabilities – or put differently, value in the Vendor stock – to create new opportunities by building things. Areas like Silicon Valley are traditionally brimming with the Vendor stock, though I am very excited about new spaces that normalizing remote work is opening up.
The final stock in the customer-vendor loop is Products. This one is very familiar to the engineering teams. Every time we examine dependencies, which framework we will use or which platform we will pick, we are evaluating the abundance of the adjacent Products stock. I won’t spend much time here, since it’s fairly straightforward. However, there’s another set of opportunities hiding in the abundant Products stock. Sometimes we find new uses for things we already have. There’s a fancy term in biology: exaptation, or a shift in function of a trait during evolution. Products stock may hold value not only because they serve their intended purpose, but also because they may be repurposed to do something entirely different. Especially for well-established Products, there’s always some exaptation going on.
I am sure there are other ways to uncover a setting, but this seems like a decent starter kit. It probably won’t help you find the next big business idea, but it might produce an insight or two when considering your organization’s strategy.