by Private
It is now fashionable to start consumer facing companies that promise to radically change behavior and create new markets. The companies that have done this well have become legends and inspired a generation of entrepreneurs. That is a good thing. Indeed, on an absolute basis that may be where the majority of the profits accrue over the next 10 years. However, those profits are vacuumed up by a small number of very large companies. My belief is that the highest number of profitable tech companies will be those that address waste in the b2b space. That is, if you want to increase the likelihood of launching a successful tech venture, understand where the largest areas of waste are for businesses in a given industry and then build a solution that minimizes or eliminates that.
I’ve chosen to focus on serving other businesses (as opposed to consumers) for the familiar reason that they can be sold based on a P&L. That is, if my product saves you $10 without diminishing your operation, that $10 falls to the bottom line. This sale is a little bit easier than convincing consumers that they should spend their time or money in a specific way.
When selecting which industries to examine, let the Wayne Gretzsky quote be your guide: “skate to where the puck’s going, not where it’s been.” For instance, crawl through the economic census category by category and list out the most slow-moving, boring industries that are there. Examples I’ve found include “Lumber without yard merchant wholesalers,” “Office machinery & equipment rental & leasing,” and “Const/trans/mining/forestry machinery & equip rental & leasing.” These are all large market that will bore you to tears, and that is the point. Most of them have not taken full advantage of existing technology systems to optimize their businesses. This is not surprising: a lessor of construction equipment will not be likely to build a world class inventory management interface. You, Harvard MBA, could if you spend the time and effort to learn the business. Take the following example as a possible opportunity: in the construction business, each project manager orders her own materials for the project. This is fine for some things, such as lumber, concrete, etc. but problematic for others, such as emergency generators or elevator systems. The latter two examples are critical path items that are often highly spec’ed out but need not be. The specs can (and often do) lead to long lead times that delay the continuation/completion of a project. This is very costly. A technical solution to this problem would be to create vendor supply chain visibility – showing if the spec’ed product in stock and, if not, what is the lead time and the next closest item available. This would meaningfully reduce project times and costs.
While the above example may or may not be a good business, it is a classic example of how relatively simple technology could be applied to non-technical industries in a way that addresses waste. The larger point is that entrepreneurs ought to take step back from the consumer-focused frenzy (my sense is the vast majority of startups coming out of HBS are B2C) and think about industries where there is low hanging fruit due to lack of technology adoption.
