When Being Contrarian May Sabotage Success

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Startups tend to be contrarian to the market. But… often they should not be completely contrarian.

Startups tend to be contrarian to the market on some fronts, but in step with the market on others.

There is a harmonized sweet spot of a startup being contrarian enough that it exploits a market inefficiency, but not being too contrarian that it sabotages the startup’s likelihood of winning. 

Let me describe what I mean.

The Four Major Market Constraints

A market constraint is an embedded market rule - a way that the market thinks, feels, and operates. Market constraints live everywhere in a market.

Yet, I have seen that there are four major categories of market constraints.

Market constraints are neutral in and of themselves. What is not neutral is the posture the startup takes on each one. The startup either takes a contrarian posture or an accommodating posture on each one.

1) Macro-Level Constraints

The top-down market pressures, e.g. regulatory or prevailing beliefs, that are directing the way the majority of the market is thinking and feeling.

2) Business Model Constraints

The business models that tend to prevail in a given market between market actors. Startups can either choose to employ a business model that is in harmony with existing business model or is at odds with them.

3) Go-To-Market Constraints

The way that customers are accustomed to discovering and buying products in the market. The startup can either be selling the way that the customer wants to buy or choosing to go to market in a way that the customer is not as used to.

4) Customer Behavior/Workflow Constraints

The customer behaviors and workflows that the market actors currently take to solve the problem. The startup’s product can either tamper with the existing customer behavior or accommodate it.

✅ Now, it is not that being contrarian or being accommodating is the goal. The posture that the startup takes across each one should be determined by where the untapped value in the market lies. ✅ 

Startups Must Choose Their Posture Wisely

I once talked to a startup that had a hardware and a software play for a given industry. The startup’s product had this unique combination of technology that it had never yet been accomplished in the industry. This startup’s play was that it was a 2 in 1 product selling to mass market consumers. The product was cool, technologically speaking.

As a considered the constraints across the four categories, this was my analysis of the startup.

1. Macro-Level Constraints

   1. The prevailing belief in the market was that the two products were sufficient. There was no observable demand for the combined “one” product that the startup was proposing. CONTRARIAN

2. Business Model Constraints

   1. We identified that the product involved paying for a subscription that the market was not used to paying for. CONTRARIAN

3. Go-To-Market Constraints

   1. We identified that the startup’s product was not in step with now the market wanted to buy. See email below. CONTRARIAN

4. Customer Behavior/Workflow Constraints

   1. We identified that the current customer workflow would be trimmed down, adding value to the customer in a strong way. ACCOMMODATING

Through the process of discussing with the startup, I sent an email to the founding team regarding their Go-To-Market motion:

Matthew: “Something that crossed my mind - the market dimension here seems to be that customers probably buy Product 1 and/or Product 2 once every few years. Perhaps the key limitation in your case is that rarely both the Product 1 AND Product 2 are needed simultaneously unless [listed a very unique use case]. Have you considered ways to think about the GTM with that in mind, to essentially make that a non-issue?”