I think memorizing and using concepts to approach business problems is an underrated strategy. I’ve found the short-list of concepts below very valuable.
Abstraction and modularity
You don’t need to understand a microprocessor to use email. You don’t need to build a payment network and maps to build Uber. Divide larger systems into multiple, smaller, self-contained systems. Bring value to that smaller, self contained system then expand.
Aggregation theory
The Internet does not disperse economic power but in fact centralizes it. When services compete without the constraints of geography or marginal costs, dominance is achieved by controlling demand, not supply, and winners take most.
Value has shifted away from companies that control the distribution of scarce resources to companies (aggregators) that control demand for abundant ones. Aggregators have all three of the following characteristics:
- Direct relationship with users
- Zero marginal costs for serving users
- Demand-driven multi-sided networks with decreasing acquisition costs
Bundling and unbundling
There are only two ways to make money in business: One is to bundle; the other is unbundle. When a product or business is unbundled it’s often reformed into a version of the product or business they took down, just with a different paradigm.
Campbells Law | Goodhart’s law
Once a goal is quantified, people will change their behavior to change the metric. Therefore, make sure that the quantified goal highly correlates with the stated goal.
Disruption theory
Incumbents fail to value new innovations properly because incumbents attempt to apply them to their existing value networks. And the new innovation often doesn’t work as the business wasn’t set up with this new innovation in mind. This leads to incumbents eventual disruption.
Everything as a Service
Products are increasingly focusing on helping users deprioritize ownership in favor of renting what they need when they need it.
Expectation effect | Placebo effect
Holding a personal expectation for an activity or outcome of an event changes your perception and behavior. This is true for both negative and positive expectations.
Exposure effect
Repeated exposure to stimuli for which people have neutral feelings will increase the likeability of the stimuli.
Feedback loop
All complex systems are subject to positive and negative feedback loops. In general, aim to have a quick feedback loop so you can know if you are heading in the right direction.
First principles
Break down complicated problems into basic elements and then reassemble them from the ground up to truly understand feasible solutions.
Flexibility-usability tradeoff
As the flexibility of a system increases, the usability of the system decreases.To be a jack of all trades, is to be a master of none.
Hick’s law
The time it takes to make a decision increases as the number of alternatives increases. Design your product and team decision making with this law in mind.
Non-consensus and right
You’re only rewarded when you are both non-consensus and right.
Occam’s Razor
Everything should be made as simple as possible, but not simpler. Given a choice between functionally equivalent designs, the simplest design should be selected. Nature operates in the shortest way possible.
Overgeneralize from small samples | Anecdotal evidence
Where you come to a conclusion even if you have no statistically sound basis for that conclusion. Most of society makes decisions this way and they shouldn’t.
Parkinson’s Law
Work expands to fill the time allotted. Set short deadlines.
Pareto Principle | 80/20 rule
Make critical functions, the 20%, highly visible and optimize so noncritical functions that are part of the less-important 80% are minimized or removed altogether.
Recognition over recall
People’s memory for recognizing things is better than memory for recalling things. When possible, minimize the need to recall information.
Red Queen Effect
Standing still is the equivalent of losing. To be successful you have to move fast. You need to co-evolve with the systems you interact with.
Smiling curve
The two ends of a value chain – conception (R&D) and distribution (consumer relationship)– command higher value add than the middle part of the value chain.
Strategy Credit
An uncomplicated decision that makes a company look good relative to other companies who face much more significant trade-offs.
Strategy Tax
Anything that makes a product less likely to succeed, yet is included to further larger corporate goals. This tax keeps a product from reaching its full potential.
Talk to customers | See the Front
Get first hand experience of what is actually going on. Don’t rely solely on advisors, reports, or concepts, every situation has its own nuances that need to be understood and considered.
Wholesale transfer pricing power
When Company A supplies a unique and valuable product to Company B, Company A is able to extract significant profits from company B. For example, ESPN is able to increase its value by extracting profit from the cable bundle because ESPN has a unique product with strong demand and no viable alternatives.
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