⭐️ The channel/offer/unfair advantages framework for evaluating business ideas
I’ve argued before that founders are better off focusing on channel/offer fit instead of the much less tangible concept of product/market fit.
But both concepts are missing one essential piece of the puzzle: the founder’s experiences, circumstances, and interests.
The most common way to take this into account is by introducing the concept of Founder/Product/Market Fit.
However, just like the terms “market” and “product”, the term “founder” is rather vague in this context. As a result, there is no canonical understanding of what Founder/Product/Market Fit really means.
Sometimes the emphasis is on the fact that it really helps if founders are passionate about the space they’re entering. Founding a successful business is hard and the odds that you make it through the trough of sorrow are a lot higher if you genuinely care about the problem you’re solving.
Another element sometimes discussed is that founders are more likely to succeed if they have a deep understanding of the market they are entering.
These are definitely interesting observations. But they’re really only telling part of the whole story.
For example, what about a founder’s network? If you’re starting a health-related startup it definitely helps if you have lots of doctors among your friends, even if you know little about medicine yourself.
Or what about your personal circumstances?
A 20 year-old founder without kids can leverage his naivety and freedom to take on market risks, while for older founders opportunities with execution risk but little market risks are often better suited. Similarly, if you have millions in your personal bank account you can afford to play very different games than someone with zero dollars to their name.
So just as it makes sense to replace the world “market” with “channel” and the word “product” with “offer”, it’s helpful to replace the word “founder” with something less vague.
Here’s my suggestion: unfair advantages.
The term “unfair advantages” paints a much clearer picture of what to do and what to look out for.
Analogous to how we’re able to map out different customer-acquisition channels and the elements your offer consists off, we can classify the different kinds of unfair advantages:
- Money. Are you independently wealthy? Is your family rich?
- Insights. Do you have any kind of specific knowledge? Are you aware of any secrets that could give you a competitive advantage? What important truths very few people agree with you on do you know?
- Interests. Is there anything that feels like play to you but looks like work to others? Are there any niche topics you’re passionate about? Do you have any weekend activities with a chance that everyone else will do them during the week in ten years?
- Skills. Do you have any relevant skills that could help with the business? (Software development, copywriting, sales, public speaking, …)
- Location and Language. Where do you live? What languages do you speak fluently? What local markets do you have insider access do? If you speak German and live in Germany you’ll obviously have a much easier time building, say, a coworking franchise in Germany.
- Network. Are you able to directly connect with decision makers in a specific industry? Do you know people with expert knowledge that will happily agree to have their brain picked by you? Do you have access to talent in a way that other’s don’t? Are you friends with anyone with a big audience who would happily help you get your business off the ground? Do you already have existing customers who you can connect with?
- Status. Are you famous in some niche? Do you have an established audience? Has your name special weight in a certain industry (possibly through your family’s history or your own achievements)?
- Mentality, Mindset and Self-Image. Do you see yourself as a “people person” or a as a highly intelligent nerd? Have you become immune to rejections through your sales job as a teen?
Let’s consider a concrete example.
When Scott Harrison was 4 his mother fell victim to a carbon dioxide leak that made her ultra sensitive to chemicals. In the time afterward, he grew up in a caregiver role helping to do the cooking, the cleaning. As an adult he worked for 10 years as a party promoter in NYC.
He eventually got fed up with the lifestyle and tried to change his life. However, all charities he applied to rejected him. After some searching he found a position as a volunteer photographer and communication person for Mercy Ships, a hospital ship-focused charity that sails the seas of Africa to provide free surgeries. After 16 months he returned back to New York with the plan to start his own venture.
Now what are Scotts unfair advantages? And what does this tell us about type of project he should’ve focused on? Let’s take stock.
- Money. Nope.
- Insights. Scott understood two important truths. Firstly, through his research when he applied for different charities he noticed that many people have a deep mistrust of charities since they didn’t necessarily know where their money was going. Secondly, through his time as a party promoter and as part of Mercy Ships he understood the power of image-driven narratives. It were the photos that turned a club into the place to be and what motivated people to donate to Mercy Ships.
- Interests. Through his time with Mercy Ships he had witnessed people die from a lack of clean drinking water in third world countries and became passionate about the issue. This passion was further fueled by his previous experience as a club promoter where he sold rich Manhattan club kids $10 bottles of water (which they often didn’t even open).
- Skills. Scott knew how to organize a good party and had strong sales skills.
- Location and Language. Scott lived in NYC and speaks English as his mother tongue.
- Network. Thanks to his time as a party promoter, he had plenty of contacts to people with money but also to venue owners. As a result of his time in Africa he had also started to established a network with people there.
- Status. He was famous in the NYC party scene.
- Mentality, Mindset and Self-Image. He grew up in the role of a caregiver and had lots of confidence in his ability to influence people.
Obviously, Scott could’ve tried to build, say, a SaaS tool for tattoo artists. Maybe he even knew a few tattoo artists and tattoo lovers from his time in NYC’s party scene. But that’s about it.
The project he decided to focus on instead allowed him to leverage a much larger number of unfair advantages.
He started a non-profit called charity water. What makes it unique is that 100% of public donations go directly to fund clean water projects. To get it off the ground he organized a party where all profit went towards the charity. A few months after the party he sent photos to everyone who attended it that illustrated how exactly the money had been used.
This way he found a way to combine his passion with the tricks and skills he learned as a party promoter, and was able to leverage the fact that he was living in NYC and knew a lot of wealthy people, for a project that perfectly fit his self-image.
Now obviously your list of unfair advantages will be very different.
So here’s how we can turn everything we just talked about into an actionable strategy.
I argued that Channel/Offer Fit is a useful concept since it suggest a concrete path for finding traction. In a similar way, thinking in terms of Channel/Offer/Unfair Advantages Fit is useful since it makes it easier to evaluate different ideas and opportunities.
All we have to do is rephrase the three parts as questions:
- Channel: How confident are you in your plan to acquire customers? (Scott was very confident in his ability to organize a good party and raise money for his charity this way.)
- Offer: How confident are you that people want this? (Through his research and work with Mercy Ships Scott knew that people wanted to donate for charities, especially if he could figure out the transparency problem and use photos to tell compelling stories.)
- Unfair Advantages: How confident are you in your ability to actually pull this off? (If Scott had used the list of unfair advantages above he would have undoubtedly concluded that he was perfectly suited to start and run charity water.)
So if you have a list of business ideas, you can use these questions to rank them. Simply write down the answer them for each of your ideas as a confidence rating from 0 to 10. Then start executing starting with the idea at the top of your list.
There are dozens of methods and questions that have been proposed to evaluate business ideas. But ultimately the three questions listed above are what it all boils down to.
Business will to some extent always remain a game of chance. But if you start with a strong offer, a realistic customer-acquisition strategy, and are able to leverage your unfair advantages, you’ve done everything you can to stack the odds in your favor.