I just spent the last two days straight working on one piece of code about the length of a paragraph.
Two whole days! You can imagine the frustration of trying a new line of code, testing it out, getting the same error message, going back to research new ways to do it and then failing… over and over again, every hour for two days.
And as someone who is building a business by themself, it is that much more frustrating knowing that everything else you want to do like writing content, building links or engaging on social media, is on hold until you figure out that one thing.
But in times like this, I remember that this is the work that is really making a difference and creating value for my business.
What makes work valuable
To see why, let’s first think about work and what actually makes it valuable from a business perspective.
It’s common for Venture Capitalists to evaluate startups based on how defensible their business models are. In fact, in this Tech Crunch article, James Currier of NFX shares his view that “defensibility creates the most value for founders.”
In it, he underlines his point by stating that:
“nearly all of the massive returns to you and your investors — the 100X or 500X returns — come from businesses that have long-term defensibility”
And he goes on to break down the four ways that businesses can build defensibility:
- Economies of Scale - costs get cheaper as you get bigger
- Brand - people know you and want to associate themselves with you
- Network Effects - every user you add makes the service more valuable for new users
- Embedding - making it painful for a customer to replace you with an alternative
In the article, Currier states that in the long-term Network Effects lead to the most value for businesses which you can see in the examples he cites like LinkedIn and WhatsApp. (both became more valuable to users with every new user who joins the network)
But Network Effects, along with Brand and Economies of scale, take time to build up. Sure, a startup or small business should start focusing on building them as much as they can from the beginning, but as a founder in the early stages I’m much more interested in Embedding - or how can I provide a service that is painful for my customers to live without.
This is the way I think about building value and defending it - everything that I do that will be painful for someone else to replicate is putting me one step ahead of the competition.
In my case, I’m building integrations between API’s that haven’t been done before, so there’s no tutorial or even good documentation on how to do it. Because of that, it can be really frustrating at times to figure it all out as I go.
But that’s exactly what makes it valuable - I’m doing something that will be painful for someone else to replicate, either a competitor or a customer who tries to do it on their own.
The value of embedding in action
On a larger scale, this same concept is what led to a VC to invest in a startup I used to work for, even though they were a travel technology company in the middle of a pandemic.
Part of their business model is integrating lots of small marine travel companies around the Mediterranean to create a marketplace that is the easiest place for someone to buy tickets when they are travelling by sea.
As you can imagine, small businesses in the South of Europe are not always the most technologically advanced and as a result every integration was difficult and led to lots of frustration from developers and product people.
But again, it was exactly these difficult integrations that kept competitors out of this space. They found it too difficult and slow to recreate these integrations, so instead they became customers themselves - essentially buying the integrations as a service. And it was also these integrations that provided value to customers, as they knew they didn’t have to search multiple places to compare and buy tickets, they could be sure the best possible search comes from this one marketplace.
This is the concept of Embedding in action: it’s a service that would be painful for customers or competitors to recreate. And the defensibility from that created enough value for a VC to see big potential and make an investment even though the environment was very uncertain.
Embrace the frustration
So the next time you’re working on something that is making you frustrated, think about Embedding and Defensibility. If you’re working on something that is making your customers’ lives easier and will be something they can’t live without once they have it, then the time you’re spending is well worth it. Even if it doesn’t feel like it at the time.