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Market Friction

Smith Sense

Release Date: 06/09/2020

When A Founder Should Step Aside show art When A Founder Should Step Aside

Smith Sense

As Matt closes the door on his CEO days with Royalty Exchange and moves into a Chairman position, he speaks with Antony about when is it the right time to step aside and let someone else take the controls.

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Digital Nomads, Independent Thinking, and Why Bobby Casey is Optimistic show art Digital Nomads, Independent Thinking, and Why Bobby Casey is Optimistic

Smith Sense

Matt chats with Bobby Casey from Global Wealth Protection about digital nomads, working from home and independent thinking

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Distribution is King show art Distribution is King

Smith Sense

Entrepreneurs tend to focus on product and marketing. The real opportunity is in distribution.

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Killing Innovation show art Killing Innovation

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At a time when we badly need innovation, less regulation — not more — is the answer.

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Doug Casey Talks Covid-19, Fedcoin, and the Future of Western Civilization show art Doug Casey Talks Covid-19, Fedcoin, and the Future of Western Civilization

Smith Sense

A Conversation with Doug Casey about the current chaos the US finds itself in

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Performative Entrepreneurship show art Performative Entrepreneurship

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Are you innovating or performing?

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Frame show art Frame

Smith Sense

Gary Young joins the podcast to discuss how to use ‘frame’ to influence.

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The Power of the Overton Window show art The Power of the Overton Window

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Royalty Exchange cofounder Gary Young joins the podcast to discuss how self-limiting ideas — our own and those of others — shape our daily reality.

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Just Cause show art Just Cause

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To play an infinite game, start by defining what you stand for

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Hiring and Firing show art Hiring and Firing

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How to attract talent, pick the right candidates, retain star employees and say goodbye

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Market friction is at the heart of all entrepreneurial opportunity.

When you’re looking for a business idea, consider the things that keep people from doing what they want to do. The current product or service might be too time consuming, too expensive, or too confusing to use. Often, there’s a technology solution.

You can find friction in markets with lots of uncertainty and ones that require specific knowledge. Internal deadlines — like an upcoming wedding — can be a strong motivational currents that lead to market friction.

Be-do-have

To identify market friction, examine consumer motivation.

I use the “be, do, have” framework: People are motivated to be something, do something, or have something.

Apply this framework to your customers to figure out what motivates them and what keeps them from achieving their goals.

Strong vs weak currents

The best entrepreneurial opportunities have strong motivational currents.

Something that a customer needs — not just wants — by a certain time is the recipe for a strong current. 

It could be a customer’s need to get taxes filed by Tax Day, or fit into a dress in time for a wedding. When you identify the internal deadline, you can now focus your marketing on it.

Why me?

Once you’ve found market friction with a strong motivational current, ask yourself: “Why me?” 

Why are you the person to solve this particular problem? Do you have any expertise? Do you understand the complexities of the market?

Will it grow your identity capital?

Next, consider whether the opportunity will grow your “identity capital,” a concept coined by Dr. Meg Jay in The Defining Decade. This is the accumulation of knowledge and skills you need to be successful over the long-term.

Your calculation depends on where you are on your entrepreneurial journey. When you’re early in your career, gaining identity capital matters more than anything else you can do. Under a big mountain of hard work is the only place where you’ll find your passion.

Is it worth it?

The next question to ask: “Is it worth it?”

Is this worth devoting the next decade of your life to? Because that’s how long many businesses take to become successful. 

With Royalty Exchange, we saw that, in the U.S. alone, artists were collecting $3 billion a year. If you put a 5x multiple on it, that’s a $15 billion market, large enough to spend many years pursuing.

Do you understand the constraints?

Just as importantly, you must understand the natural constraints in the market: What are the limiting factors to success?

The market opportunity may be gigantic, but if there are major hurdles to being successful — government regulation, for example — then it may not be worth it.

Do you have a plan to attack it?

Next, do you have a plan to attack the opportunity?

When I get most excited about a business opportunity, it’s usually because I can see how I’d attack the market in a new way. Often, it’s a unique approach to distribution. It could be a sales or marketing advantage.

What’s the first step?

For many people, this next step is the hardest: What’s the first thing you’ll do to drive customers to your door?

A lot of entrepreneurs get excited about solving problems — especially when the market is significant — but fail to see their vision through. You have to be able to define your plan of attack. Be specific. Write down the first thing you’ll do.

Ideally, start small and grow.