Deliver value only on dimensions that customers care about.

(a thread on this mental model)

🎉 It's also 11th chapter of my book…
1/ Most markets are like the car market.

Some people like bigger cars, others like efficient cars and then there are some who like premium cars.

That is, markets aren’t homogeneous. They consist of different sets of people who value different aspects in a solution.
2/ Because different segments value different aspects, an improvement in one aspect will only be appreciated by that segment and get ignored by everyone else in the market.
3/ For example, if the customers in a particular segment are price-insensitive, your discounts won’t work on them.

In your mind, a discount should clearly work but for a certain segment of customers, it may actually decrease the appeal of your product for them.
4/ But, if a customer segment is price-sensitive, and you give them a clearly higher quality product at slightly higher prices, they may not care enough about the quality to make a switch from what they usually use.
5/ An improvement over existing solutions is not an improvement unless a large enough customer segment cares about it.…
6/ A good illustration of this mental model is a product called Cuil.

It was a new search engine launched by ex-Googlers in 2008.

Their point of differentiation was that Cuil organized results into various topics while Google didn’t.
7/ If you searched for Python, they’d cluster results into Python, the programming language, and Python, the snake. When it came to topic categorization, Cuil was clearly a better solution than Google.

But, apparently, they misjudged the market.
8/ While topic categorization was fantastic, nobody wanted it.

After raising $33mn in VC capital, they shut down because they realized that most customers care about the relevance of search results (on which they were not better than Google).
9/ Automatic topic categorization was certainly a cool piece of technology but people really don’t want to use technology.…
10/ People want a good solution for their desires, and when it comes to search the majority of users want to find the most relevant result in the shortest amount of time.…
11/ If they had improved on search relevancy, then they might have had a shot at stealing Google’s market share.

Or, if there was enough evidence of a customer segment caring about topic categorization...…
12/ .. they should have set their eyes on this narrow segment rather than trying to attack the incumbent (Google) head-on.…
13/ 🧠

Remember: do not improve a solution on a dimension that customers don’t care about.
14/ That's it!

The entire chapter is posted here:…
15/ I'm posting ~1 new mental model for entrepreneurs every week.

Here's the entire list of 60+ mental models that I'll cover in a year or so:…

Make sure you sign up for email updates on the book page.

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More from @paraschopra

22 Feb
A short thread on Venture Capital.
1/ VCs are a portfolio of uncorrelated, risky bets that entrepreneurs take.
2/ Essentially VCs underwrite business risk - they let entrepreneurs take the risk that has a small chance exceptional returns.
Read 9 tweets
20 Feb
How to make sense of negative interest rates.

(a short thread)
1/ In many developed nations such as Switzerland, interest rates have been negative for many years now.

This means you pay the bank to hold cash. How does that make sense?…
2/ The key is that this is happening in most developed nations.

In these nations, investable opportunities are going down because practically their economies - roads, industries and so on - are built out.

Imagine you have money but nowhere profitable to invest. What happens?
Read 10 tweets
15 Feb
All sophisticated solutions start extremely simple

(a thread on this mental model)

📕 It's also 10th chapter of my book…
1/ There’s always a temptation to launch a fully built product with more features and capabilities than existing competitors.

It’s exciting to build the next Google, the next iPhone or the next SpaceX, isn’t it?
2/ This temptation is dangerous because even the most successful products in a market had simple beginnings.

No product arrives in the market fully fleshed out.
Read 23 tweets
13 Feb
Since many folks are tagging me on this thread, here’s what I think about it.

1/ The argument isn’t that bitcoin is entirely useless, the argument is that cost-benefit tradeoff for it is *worse* than current systems such as banking or the Visa network
2/ Comparing bitcoin’s energy consumption with Gold mining is a false comparison.

Once gold is mined, it exists forever. If gold mining stops today, no additional energy will be consumed but gold transactions will still keep happening.
3/ If bitcoin mining stops today, no transactions can take place.

So the bitcoin mining has to keep happening forever for bitcoin transactions to occur.
Read 5 tweets
12 Feb
Bitcoin is a virtual fortress.

(a short thread)
1/ I’ve started imagining bitcoin as a virtual fortress which is secured mathematically so that even governments cannot seize it.
2/ There’s a price to pay to enter into this fortress but since there are limited entry tickets, if more people want to enter into it, the price keeps on going up.
Read 19 tweets
5 Feb
Is the 🌍 world becoming better?

(a thread exploring this question)
1/ This thread is my reflection on the #book Factfulness.

📚 I loved the book so I'm giving away 10 copies of it.

Retweet the thread and I'll randomly pick 10 people to send the book.

If you're a student without income, fill this form to get priority:…
2/ The key idea explored in the book is that the world has witnessed significant progress over the last few decades, but most people are unaware of that fact because they hold distorted views.
Read 51 tweets

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