Do you want to create a startup but are lacking an idea? Have you noticed a trend but don’t know how to capitalize on it? Maybe you wonder why are so many new billion-dollar tech companies popping up every year?
I’m an experienced self-funded software entrepreneur and today I’d like to share my thoughts on riding the wave/hype-train, i.e. how to jump into a new trend, and what are the advantages/disadvantages of this approach.
If you want to create a startup one day, this market research technique could be of value to you. In particular, this article will discuss the following
- The hype-train, and noticing trends
- Finding new business ideas for an aftermarket
- Building for a platform, rather than a standalone product.
- What are the risks of platforms/aftermarkets?
- A real case study from my own experience: Power BI version control
The hype-train will not wait for you
Every now and then, a new hot trend starts gathering momentum, sometimes this phenomenon is referred to as the hype-train. It happens when a new technology/product/methodology grows in popularity.
Smartphones are a great example. In 2007, Steve Jobs unveiled the iPhone to the world. This created a massive new ecosystem for software developers to launch apps for the iPhone app store.
I know a guy, who knows a guy, that launched a flashlight app for the iPhone back in the day. This was a free app with a single button that turned the lights on/off in your phone. It took 1 hour to code this app.
The app had a little banner ad on the bottom of the screen…
You know what’s coming. This guy was able to quit his job thanks to the income of his ridiculously simple flashlight app. He essentially created a cash machine, pumping out money with no work for several years.
This is a simple example of what can happen when you capitalize on a new trend. This flashlight app worked because the iPhone was new and didn’t have a native flashlight widget yet.
If you launched the same idea now in 2021 it wouldn’t work, this train has already departed.
To capitalize in a new hot trend, you need to jump into the hype-train before it departs. You must ride the wave. Chasing after a long-gone train won’t yield the same results
Are hot trends particular to the tech sector?
Why are new, highly-profitable tech startups created every year, at a rate much higher than comparable companies in other sectors?
Since many new technologies and platforms are created/popularized every year, this opens up opportunities for yet more newcomers to enter the market and create other profitable apps. It’s a self-feeding cycle.
- The internet becomes popular around the 2000s
- Facebook is launched
- Smartphones are launched
- Smartphone apps linked to social media become possible
Every time there is a new paradigm-shift, or a new technology platform, new opportunities become available.
There are so many new hot technologies/platforms growing right now:
- Internet of Things
- Virtual and Augmented Reality
- Voice assistants
- Artificial Intelligence
- Wearable tech
- Business Intelligence
- and more
It’s almost like a gold-rush right now in technology — a land-grab. You can make money by joining the rush and striking gold, or by selling shovels to the people digging for gold.
Since all of these new trends are — well — new, then, by definition, there must be opportunities for products/services that use these novel platforms to create value in a way that was simply not possible until now.
This doesn’t happen in other industries very often. For example, the furniture industry has been (comparatively) stagnant for the last century pretty much, with the exception of IKEA, who has changed the paradigm.
The technology sector is experiencing multiple game-changing innovations per year, whilst other industries get these maybe once a century
So now the question is, how can we identify new hot trends, and profit from them?
There are many ways to capitalize on new trends, and focusing in aftermarkets is one of them.
An “aftermarket” is a market that exists after another market. You can think of it as a business built on top of a platform.
Some examples may include:
- The app store is an aftermarket for apps built for smartphones, like Instagram
- Facebook is an aftermarket for apps built to work with their APIs, like FarmVille/Zynga games
- Salesforce/Slack/Stripe enable an aftermarket for apps sold in their marketplaces
The idea of an aftermarket is that rather than selling your app to the whole internet (implying massive competition), you sell it to a specific group of people that are already using a service (the platform).
For example, if I created general purpose accounting software, I would have to compete directly with Intuit and other big companies. A terrible idea.
A much better idea would be to create accounting software that integrates with some new platform that handles payments. E.g. accounting software for Shopify.
Shopify enables people to create a store online and sell anything, e.g. merchandise, clothes, artisan goods, coffee, etc. This creates an opportunity for developers to create apps that extend the functionality of Shopify.
Shopify is still too large, so probably the idea of accounting software for this platform is still too competitive. Regardless, it illustrates the point that it would be more feasible than going for the whole accounting market.
The pros and cons of basing your business idea in an aftermarket
If you identify a suitable aftermarket, you will have several advantages versus launching a stand-alone product.
The pros of building a product for an aftermarket are:
- If the aftermarket is new, there may still be valuable ideas that haven’t been capitalized yet, i.e. a flashlight app for iPhone in 2007
- You can build a product that specializes in the platform. E.g. if you sell on Shopify, an accounting software product could automatically read/process financial data from your store
- Your target customers presumably hang out on a specific place (e.g. LinkedIn groups) and there may be efficient ways of reaching out
- If the platform is growing, you will grow with it — this is called riding the wave. I.e. as Facebook become more popular, third-party apps like FarmVille grew alongside it.
- The platform may eventually offer to buy your company at a high valuation if it fits it’s strategic goals
It’s not all benefits though, there are some serious risks in basing your business idea on an aftermarket
- If the platform goes bust, your business dies
- The platform may compete with you. I.e. Amazon has been known to create their own lines of products to compete with high-profit items sold by merchants on their online store.
- The platform may change their terms and conditions, functionality, or other aspect that makes your business non-viable overnight. I.e. Instagram has shut down plenty of auto-follow apps
- The platform may not open up all the necessary data/APIs/functionality necessary for a third-party developer to create a viable product.
A case study: Power BI version control
So far, this has all been theory, you can read ad-nauseam about the topic in books.
How does trend-chasing, wave-riding, and aftermarket product design look like in real life?
Here is my real-life experience trying to catch a hype-train: Power BI version control.
Power BI is a product from Microsoft that has exploded in popularity over the last couple of years. It’s used by teams in large companies to create Business Intelligence dashboards and reports. It’s a hot trend!
So, since Power BI is growing, and was not really available/popular until a few years ago, there may be some great ideas based on it waiting to be tapped!
Since Power BI is hot right now, we did some research and found, among other data, the Ideas log from Microsoft, where Power BI users vote on which features they wish Microsoft to add to Power BI next.
My business partner — Magda — noticed an interesting idea in the list: version control for Power BI. Btw, Magda would kill me if I didn’t give her credit for coming up with this idea. Entrepreneurs are territorial creatures when it comes to ideas.
So, what is version control?
When software developers work in projects, they use version control software — the most popular is git. Version control software facilitates collaboration and backs up work in projects of any size. It’s a crucial tool.
Turns out, there is no equivalent tool for Power BI yet. So if you spend all day working on Power BI, you don’t have an easy way to collaborate with others or back up your work… yet.
Taking this idea further, a quick check on Keywords Everywhere — a keyword research tool — shows that there are significant people querying this and related keywords in Google every month, and low search competition too.
This looks like a potentially good idea for a bootstrapped business. There is existing demand, no competition, decent volume for a small business, potential to have high-worth customers, and it looks like fun!
So why are we not pursuing this idea? When considering a new startup idea you should seek to validate it as quickly as possible. This is what happens when you don’t validate your ideas first.
So, the first thing to consider with an aftermarket idea is platform risk. We asked ourselves the following questions:
- Is Microsoft likely to go bust, burying the prospects of a Power BI version control tool? I don’t think so
- Is Power BI likely to be discontinued? The opposite is true. Power BI is growing. Plenty of data supports this.
- What if Microsoft develops version control for Power BI internally? This would destroy our idea. This is a valid concern
Since we have identified a perfectly reasonable and potentially insurmountable obstacle, let’s try to learn more.
To try to evaluate the risk of Microsoft creating their own version control software for Power BI, I used LinkedIn to reach out to several product managers in Microsoft working on Power BI.
After talking with them, I got the impression that their main goal right now with Power BI is to increase capacity and handle the vast amounts of data volume they are receiving from large companies.
This makes sense. A large company like Microsoft will do much better in growing their user-base for a product like Power BI by 10–20%, rather than focusing in the relatively tiny number of users that need version control.
Moreover, based on Microsoft’s user idea log, version control is lower than many other feature requests in their priority list. This idea has been sitting there for a couple of years and Microsoft hasn’t worked on it yet.
So, there is some risk, but if we launched quickly some version control software that addressed this demand, it would be really likely it would make some money, as it’s addressing a pain Power BI users have.
So why am I sharing our great idea with the world?
Well, unfortunately after checking the technical details of this business idea further, we realized that there are some technical challenges preventing us from creating this app.
It seems the data format Power BI projects use is a binary file. This severely limits the data access a third-party developer like us would need in order to create an amazing version control app.
The battle is not over though. If we identify a list of say, 10–20 opportunities like this one, and we monitor their status every week, we will be ready to pounce on ideas like this one the moment they become technically viable.
Luck happens when opportunity meets preparedness? Does the popular saying go something like this?
If you want to capitalize on new trends, ensure that:
- You identify the trends you want to pay attention to
- Assess existing demand for features/products that are missing in a new aftermarket
- Validate the viability of your idea, and hopefully launch a successful product!
I’m a bit fan of bat-swinging. If you swing your bat regularly, you will eventually hit a baseball. I’m not an American, so I don’t really understand this quote :/ anyway, try your luck many times and you will be lucky.
Hope you found this article useful. If you want to learn when I publish new articles, feel free to sign up for my newsletter at https://diego-os.com
Thanks for reading.
Originally published at https://diego-os.com on January 30, 2021.