Lessons Learned from Shutdown Startups - Part 1: The Power of Recommendations and Focused Alternatives

Lessons Learned from Shutdown Startups - Part 1: The Power of Recommendations and Focused Alternatives

In the world of startups, there are valuable lessons to be learned from those who have experienced shutdowns. One such lesson comes from Rdio, a music streaming service that aimed to revolutionize the way we discover music. Instead of relying on recommendations from store clerks, Rdio took a different approach by offering recommendations from people we know. And it turns out, those personal recommendations are the best ones anyways.

The power of a solid recommendation cannot be underestimated. When someone we trust recommends a product or service, we are more likely to give it a try. This builds trust, and trust builds word-of-mouth, which is one of the most effective forms of marketing. Rdio understood this and leveraged the concept of recommendations to create a unique selling point for their platform.

But Rdio also understood that sometimes, smaller is better. In a world filled with noise and options, offering a focused alternative can be a winning differentiation. Instead of trying to compete with giants like Spotify and Apple Music, Rdio carved out a niche for itself by providing personalized recommendations. They recognized that by targeting a specific audience and delivering a tailored experience, they could stand out in a crowded market.

This brings us to the concept of the hierarchy of marketplaces, specifically Level 3. The insight here is clear: it's not just about being number one; it's about being number one by a wide margin. When a startup reaches Level 3, it means that they have surpassed their competitors and are experiencing strong organic growth. But how does one achieve this level of dominance?

Firstly, there is the need to outrun and become number one by a wide margin in your original market or category. This is like finding your own thimble in a game of hide and seek. By focusing on excelling in a specific area, startups can establish themselves as the go-to solution for a particular problem.

Secondly, there is the expansion beyond the thimble. Once a startup has achieved dominance in their initial market, they can start broadening their reach by solving for different buyer use cases. This allows them to attract a wider audience and diversify their offerings.

And finally, there is the pursuit of multi-threaded domination of the map. This means taking the playbooks that have been honed in levels one and two and applying them to conquer multiple markets or categories. By leveraging their expertise and brand reputation, startups can expand their reach and establish themselves as leaders in various domains.

However, it is important to note that broadening should be done in a way that aligns with the brand and mission of the startup. It's not just about expanding for the sake of growth; it's about staying true to the core values and principles that have driven success thus far.

With these insights in mind, here are three actionable pieces of advice for startups:

• 1. Focus on building a strong network of recommendations. Leverage the power of word-of-mouth by providing an exceptional product or service that people will naturally want to recommend to others. Invest in building relationships and fostering trust with your customers, as their recommendations can be a powerful marketing tool.

• 2. Find your niche and excel in it. Instead of trying to compete with larger competitors head-on, identify a specific problem or audience that you can serve exceptionally well. By becoming the go-to solution for a particular need, you can establish yourself as a leader in that niche and attract a loyal customer base.

• 3. Plan for expansion strategically. As your startup grows and achieves success in its initial market, carefully consider how to expand without losing sight of your core values. Broaden your offerings in a way that aligns with your brand and mission, and leverage the expertise and reputation you have built to conquer new markets or categories.

In conclusion, the lessons learned from shutdown startups can provide valuable insights for aspiring entrepreneurs. The power of recommendations, the importance of offering a focused alternative, and the pursuit of dominance in multiple markets are all key takeaways. By incorporating these lessons into their strategies, startups can increase their chances of success and build sustainable businesses in an increasingly competitive landscape.