Thread by @lennysan

Why, when, and how to pick a wedge—a thread 🧵

1/ Whenever I think of wedges, I think of this guy

2/ A wedge in business is the same idea—you drive a wedge into the market and then use that wedge to win the market

3/ @Twilio started with an API to send SMSs and is now the de facto communication API platform, worth over $60B. @Airbnb started out allowing people to rent their extra rooms and now accounts for a fifth of the $90B vacation rental market.

4/ What exactly is a wedge?
A wedge is simply a strategy to win a large market by initially capturing (1) a tiny part of a larger market or (2) a large part of a small adjacent market.

5/ "The wedge metaphor to me is most useful in making sure you’re not a blunt instrument trying to chop into a market by being everything for everyone, but instead the sharp blade with extraordinary focus on a specific persona/use case to start." @sarahtavel

6/ In business, as in rock cutting, a wedge is made up of two parts: (1) the right tool and (2) the right place to strike. In other words, the right initial product and the right initial market.

7/ Tesla’s wedge (into the larger transportation market) was a luxury car targeted at affluent early adopters. Robinhood’s wedge (into the consumer finance market) was a commission-free trading platform targeted at millennials.

8/ Do I always need a wedge?
I don’t think so. Companies like Zoom, Slack, Workday, Notion, and Datadog went straight at their respective markets with an amazing product and won. You can argue about semantics, but as far as I can tell, these companies didn’t use a wedge strategy.

9/ e.g. Datadog: "We kept hearing that to enter a big market, you need a wedge—something really sharp and really specific, and then you expand from there. It turns out for some classes of problems, such as infrastructure management, which is what we do, the wedge doesn’t work..."

"...There is a large amount of stuff you need to do from day one if you want your product to be useful. Our initial product was positioned as a very broad platform to bring multiple teams together, and actually didn’t have that wedge aspect.”
— @oliveur

10/ When do I need a wedge?
A wedge seems most valuable when you’re going after a market that is (1) entrenched or (2) crowded. When it’s hard to break in head-on.

11/ The more entrenched and competitive the market, the more valuable a wedge will be. Chime needed a wedge to get a foothold in the entrenched banking market. Stripe needed a wedge to break into the entrenched payments market.

12/ Why is a wedge useful?
A wedge gives a startup a number of advantages over its competition—primarily driven by having a narrower, more precise focus.

13/ "When I say it needs to have a good wedge, I’m looking for an entry point that provides some sort of power to the startup." — @annimaniac

14/ @sarahtavel has a similar view

https://twitter.com/sarahtavel/status/1303080271206428672?lang=en

15/ What makes a good wedge?

16/ "Wedge selection should be very intentional. Don’t just build for the first customer persona you think of or the closest city to where you live. Build for the group that has the most acute pain point, or the highest willingness to pay, or the fastest sales cycles. ...

"...The more carefully you pick your wedge, the easier it will be to succeed and to expand to the larger market. A product that’s 10x better on average might actually be 50x better for some groups but only 1.1x better for others." — @lpolovets

17/ How to pick your wedge

Find a large market and then:
1. Pick a very narrow (and very painful) problem
2. Pick a very specific segment of people to solve that problem for

For additional advice on how to pick your wedge, and what to do once you've figured it out, and much more, check out this week's full post
lennysnewsletter.com/p/wedge