OSD 148: A sales team is fine, a product team is final
Enterprise companies can't make consumer products.
A few weeks back in OSD 145: Guns, Andy Warhol, and Coca-Cola, we talked about a point that products reach in their lifecycle where the mass-market option is also the best option (like Coca-Cola in the famous Andy Warhol quote). The gun industry, like all industries, breaks down into three categories: products that have already gotten to that point, products getting to it right now, and products that aren’t there yet.
This week, let’s dive deeper on that last category. That covers products like night vision equipment and body armor, where the consumer market isn’t yet in the driver’s seat.
Back in 2007, Paul Graham wrote an essay called “Why to Not Not Start a Startup”. He enumerated the common sources of hesitation and critiqued each one in turn. It’s a great read, but there’s a section that’s particularly relevant to pre-Coke-point products (italics are ours):
4. Not smart enough
You may need to be moderately smart to succeed as a startup founder. But if you’re worried about this, you’re probably mistaken. If you’re smart enough to worry that you might not be smart enough to start a startup, you probably are.
And in any case, starting a startup just doesn’t require that much intelligence. Some startups do. You have to be good at math to write Mathematica. But most companies do more mundane stuff where the decisive factor is effort, not brains. Silicon Valley can warp your perspective on this, because there’s a cult of smartness here. People who aren’t smart at least try to act that way. But if you think it takes a lot of intelligence to get rich, try spending a couple days in some of the fancier bits of New York or LA.
If you don’t think you’re smart enough to start a startup doing something technically difficult, just write enterprise software. Enterprise software companies aren’t technology companies, they’re sales companies, and sales depends mostly on effort.
This was an efficient sentence for PG to include, because it’s simultaneously:
True
Attractive to the sort of founders he’d want to fund with YC
Repellent to the sort of founders he wouldn’t want to fund
The mistake, though, is to read it as an insult. It’s not an insult to enterprise software companies, it’s just a description of what they need to be good at in order to succeed. If you’re selling to consumers, your product is the most important thing. If you’re selling to enterprises, your sales org is the most important thing.
So apply that to, say, night vision. Those manufacturers earn their living by selling containers full of equipment to governments. That’s a skill. To pull it off, you have to be good at building relationships with procurement officers, putting together bids, juggling feature requests from military brass, meeting spec and passing strictly defined usage tests, and executing on fulfillment logistics.
You don’t have to be good at achieving high-quality manufacturing outcomes at low prices, running a customer service organization, or incorporating feedback that comes directly from end users (on pain of going out of business if someone else incorporates that feedback into their product better).
So when you look at a night vision company or a body armor company and wonder why the products are so expensive and hard to understand, it’s because you’re not the customer. For most of those companies, their defining expertise isn’t night vision or body armor. It’s selling to the government. That’s a skill to be sure. But not a skill that’ll do much for consumers.
The way this changes is not that enterprise companies figure out how to do other things. Oracle was never going to wake up one day and say, “You know what, let’s invent Netlify.” Instead, companies just get replaced by startups. (“Replaced” might be too strong there. Enterprise companies will always exist, it’s just that in any domain where they’re competing for consumers’ money instead of enterprises’ money, they’ll get outcompeted by startups. In the government domain, there’s also an emerging trend of companies that do put technology front-and-center. Anduril and SpaceX are probably the best examples of that today.)
Night vision has only started becoming a thing for consumers over the past couple years, and we can already see a shift towards consumers. The Phantom Hill Design CTF-1 is promising, and it’s just the beginning. In a world where there are 2-3 products like that out there that have all been well-reviewed, would you want to be one of today’s complacent incumbents?
The corollary is that this is a good way to find ideas for new gun industry startups. Anywhere you see consumers buying from a company that makes most of its money from military contracts, there’s an opportunity for a company whose core expertise is building what end users want.
This week’s links
When startups meet the defense industry
Interesting article on some of the themes above.
More data that young people’s views on guns aren’t what you see on TV
Credit goes to video games and the internet.
The FPC is asking the Supreme Court to strike down Maryland’s assault weapons ban
One to watch.
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