1. Mark Suster on should startups focus on profitability or not
2. Joel Spolksy’s Strategy Letter I: Ben and Jerry’s vs. Amazon
3. Jason Zimba on understanding exponential growth
4. Jason Freedman on Obliterating Startup Depression (H/T @dipankarsarkar)
5. via TheGuardian UK Humans have the need to read

COD or Cash on Delivery as we now know it wasn’t no where near its popularity today a few years back. Today quite a few people (who call us at dialabook and otherwise) know and talk about Cash upon Delivery as a concept (books milne ke baad paise de sakte hain?) if not the exact term. COD as we know has taken the entire e-commerce Industry(if we can call it) by a storm.

To give you some perspective, about 2 years back when we(@dialabook) started collecting payment for books on delivery, we had no idea about this term and no notable e-commerce site had this option. Fast forward it to today and almost all e-commerce sites(and a few others like the one below) accept(or rather promote) COD to lure more customers.

While COD as a concept has been there for ages under the name VPP (Value Payable Post) by India Post. Here’s how their website defines VPP

The value payable system is designed to meet the requirements of persons who wish to pay for articles sent to them at the time of receipt of the articles or of the bills or railway receipts relating to them, and also to meet the requirements of traders and others who wish to recover, through the agency of the Post Office the value of article supplied by them.

Govt VPP however seems to have an upper limit of Rs 5000/-, which means you can’t send goods worth more than 5k through them.

Not just VPP, some courier companies in India have been supporting COD since March 2009 at least. Though some  startups like @dialabook might have been offering COD locally before, the big shift happened in April 2010 when country’s leading e-commerce player Flipkart introduced COD in April 2010 with a cash limit of Rs 2500/-, followed eight months later by Infibeam (FYI: Indiaplaza announced COD on 25th March 2010, a few days ahead of Flipkart ). It is also worth noting that some services like travelguru.com were offering COD option at least 2 years before e-commerce companies started adopting it. Seeing its success elsewhere, online travel portals yatra and Ezeego1 also launched COD in year 2011

As it turns out India isn’t the only breeding ground for COD. China,Russia etc have been a witness to the popularity of COD for long.

Going by the stats in India, as much as 60% customers of top 5 e-commerce sites in India use the option of paying by cash on delivery (COD) and many of these sites have credited COD  for fueling their rapid growth. While COD for obvious reasons makes a lot of sense for Indian customers and definitely opens a new market (students etc) to e-commerce it isn’t exactly what the doc prescribed or should prescribe. Here are some of the things wrong with COD

1. Cost: Nearly all courier companies charge extra for collecting cash. This cost is divided in two parts
   Fixed Cost: Rs 20-150/- ;  Variable Cost: 1-3% of the COD Amount. (This is mostly for high price items like mobile phones, laptops etc). If the item is priced low then the COD charges at times exceed one’s margin in the product and if the item is priced very high then the % COD charge turns out to be in hundreds or even thousands
2. Delay in payment: Unlike credit card transactions, COD payment generally takes 1-2 weeks or more to be transferred to your account. This bites your cash flow especially as the COD amounts start becoming huge.
3. Delay in deliveries: On an average COD deliveries are delayed by 12-36 hours when compared to normal deliveries. The reasons for the same are mostly non-availability of customer or cash and many a times both. Here unlike regular deliveries the parcel can’t be dropped to a neighbors place
4. Higher Returns/Cancellations: Since the customer hasn’t paid in advance, they can always cancel/refuse to take the delivery and sight reasons like I found this phone cheaper locally and have bought it from there or I have changed my mind, will buy a new laptop later
5. Overheads: Collecting the cash, collating the receipts and maintaining records et all is a nightmare

With increasingly every online business offering it despite its disadvantages(to retailers) the situation might just go out of hand and turn into a death spiral (at least for some non/less funded businesses that rely heavily on their internal cash flows). Small startups are the ones that should be really concerned about these issues instead of blindly aping others and starting COD.

With time as the e-commerce market in India matures, there *might* be more trust in established mechanisms of swiping cards for paying and some people will get over the liking for COD and prefer pre-payments. But, given the case in China, Russia etc it looks like unless the e-commerce majors deliberately start demoting COD and promoting other payment options we just might replicate what’s happening elsewhere i.e 60-85% people using e-commerce sites paying by COD.

Some ways around COD

1. Multiple Payment Options (at least 5-6)
2. Pre-payment methods (like wallets, cards)
3. Mobile banking and SMS payments
4. Card on Delivery
5. Giving incentives to users for choosing online payment against COD
6. Alternative payment methods such as paypal etc

While COD is a good option to have in some cases its double edged sword which should be used with a lot of caution and foresight. What do you think?

One of the things that struck a chord with me was this thing called ‘The Myth of Perseverance’, which essentially means falling into the trap of believing that the hardwork one is doing for their startup will eventually pay off and result in success. A typical example of this could be a team of engineers & designers working a web product, adding features and making changes regularly and thinking that they are creating value and after a period of time their product will become popular/profitable and their efforts will reap good returns.

This phenomenon is quite commonplace at the individual level as well. There are plenty people who continue to slog in the jobs routinely spending hours at stretch and hoping their designation/pay etc will improve just because they are putting in a lot of hard work.

While there is nothing wrong with doing hard work in startups or jobs it also has its fallout. The biggest fallout  here is focusing too much on the hard work in hope that it will somehow work out and in doing this they delay/don’t realize if things aren’t working out the way they were supposed to and thus preventing them from making any effort in this direction. This gets particularly tricky when the business/product seems to be running but not running well enough, this illusion of progress can be really dangerous

‘

In short, be it a job or a startup it doesn’t have to necessarily take years of hard work  for finding the stairway to success.

This myth is applicable to anything from Business to Relationships. When things don’t seem to work even after doing everything you can think of, maybe its time to ‘Pivot‘

A lot has changed since I started working on Dial-a-Book some 2 years or so back(then part time though). Back in Q4 – 2009 e-commerce was quite nascent and VC funding for it was not even half as common as it is today. There were just 2-3 online bookstore or e-commerce sites that looked like they could go anywhere and every week a new online bookstore was being launched. Indiaplaza was probably the most popular one.

All these existing and upcoming online bookstores were pretty much doing the same things, building a half decent website, listing a lakh odd books and giving heavy discounts in hopes of wooing the online audience. Two years into it, a couple of the popular sites at that time have grown enormously, another couple new sites have emerged and attained very good scale  and almost all the remaining ones have either shut down or are doing just well enough to sustain the owners.

I’ve always been a price conscious book buyer with likings but hardly any loyalty to a bookstore.  I remember when i first discovered Midlands who offered me 20% discount on all books how I moved almost all(leaving a few impulse buys here and there) my book purchases to  them. Kinda same thing happened when I discovered the desi online stores, the fact that they offered even more discounts and could home deliver(for free) almost any book in a few days time was a good enough reason for me to move all my book shopping( a few books/month on average) to them.

Back then I was one of the only few people in my circle to buy books online and almost none of my friends/colleagues had much clue about the online book buying scene. The booksellers on the whole turned out to be surprisingly unaware of the developments in the e-commerce(mostly book selling) space.  They hardly had any idea about online bookstores and those who did were quite dismissive of them by saying ‘Such things work in the US not in India, here people want to touch and feel before buying’, ‘These online sites give too much discounts, they can’t last long’.

Circa 2011,  the same bookseller is now offering a recently released book by Amish Tripathi at 1/3rd discount, which is just 3 Rs more than the price (Rs 192) at which it is being sold at most online bookstores.

So what changed? More importantly, what led this change?

Q 1. What Changed?
A 1. The Market Dynamics  

1) More for Less 

Giving a 33.33 % discount on a newly released book would have been unthinkable for any bookstore, especially the ones which sells 200+ copies of each new release every month with a standard discount.  But now the whole game has changed, today’s reader is exposed(and addicted) to heavy discounts, highly efficient and user friendly customer experience and the only way to survive is to offer competitive pricing coupled with widest possible range and great overall experience. Gone are the days when the booksellers used to decide which books to import/stock, how to price them and to procure locally available books on customer request (if at all) and take a week for it.

Every search on twitter(for a big online store) would reveal at least a couple tweets mentioning how people now browse books at landmark/crossword and buy them online. You can see the shift happening right there.

2) Let’s Get Online

Seeing the stellar growth of some of the famous online stores a few bookstore chains also woke up from slumber and started developing and promoting their online stores. Landmark, Crossword, Odyssey et all now have online stores where they claim to offer hugh discounts  (interestingly on some books the discounts are even even more than anywhere else)

Not just this, even the smaller chains(like Sapna, oxford) and individual bookstores are online and spending money on google ads and social media to promote themselves.

Apart from these there are some publishers (like Pearson) and some distributors(like Prakash) who couldn’t resist the temptation of taking a shot and online bookselling and thus too have jumped the bandwagon and are doing their best to well, give more discounts.

Going further all the e-commerce stores which were focusing on other categories (mobiles etc) also have started adding books to their product list. In news recently was Homeshop18′s acquisition of Coinjoos

That’s not it, the grapewine has it that still more companies from different sectors dazzled by the million and billion dollar valuations of popular Indian e-commerce stores are planning to take the plunge and well start another online bookstore

3) Better Support

Thanks to the success of round 2 of e-commerce especially for books a lot has improved on the backend i.e at the end of publishers and distributors. Lots of processes have been initiated and followed regularly at the vendors end. Most distributors now stock their data and share stock reports bi weekly/weekly, publishers regularly share information about new and upcoming releases. Most of these guys are no better than sloppy govt officials who take enormous time and effort to do things but in order to survive some of them have learned to be better organized and efficient.

Q 2. What Led To The Change?
A 2. Lofty Ambitions Backed By VC $’s

A quick look at the new release section of most online book stores will put many a booksellers into depression. A new release on an average is on a 30% discount and depending on the hype surrounding it, publisher and competition it could go up to 50 % (Yes, that’s the cost which even the publishers might not give to their distributors but if you are luck that’s what a new release could cost you with free home delivery).

The logic championed first by Amazon (and thus replicated ad infinitum) is, give heavy discounts on new books to get more eyeballs/buzz and bigger volumes thus better topline and better pricing from suppliers.  Repeat.

You don’t expect a regular customer to understand(or bother with) all this but seeing massive discounts on the online portals make them feel that there’s a huge margin in books and as if all this while their neighborhood/favourite bookstore chain was ripping them of by not giving as much discounts.

For a customer who has bought a book at 30-40% discount will hardly ever buy a book at 10% or no discount at all

Though as a customer this would have been a dream come true for me but being on the other side of the business I too am surprised at how its working for some sites. You can now order a 95 Rs chetan bhagat book for Rs 57-60, make it two books and its free home delivery and the book is home delivered in 1-2 working days via class A courier (Bluedart if you are lucky).  It doesn’t leave much to imagination that no one, even the publisher can possibly make any money in these transactions.

A lot of small booksellers ask me “How can online sites give this much discounts when the big distributors themselves don’t get as much discount from the publishers?”

The answer more often that not lies in the fact that most sites are not focusing on making money on these transactions here but on just getting more customers. With  millions of $’s in VC funding the formula is simple

1. Position yourself as the cheapest place to buy stuff online.
2. Buy a lot of online ad inventory from Google/Yahoo et all
3. Point these ads to a web page on your site which list books at ridiculously low prices

However in all this merry making of deep discounted prices there’s a catch.

For every 5 or 10 super cheap transactions there’s 1 transaction on most popular online bookstore in which the customer ends up paying price more than the its price on a bookstore of at times even worse paying more than the MRP/MRP for Indian Market.

‘The Goddess In India: The Five Faces Of The Eternal Feminine’ by Devdutt Pattnaik (ISBN: 9780892818075) is one such title. I personally bought a few copies with Rs 395/- sticker on them and on checking online the same book (picked from the same source because I can compare the delivery time on the site) being sold for almost 4 times the price.
A possible trick here could be: Stock a few copies as per the local market MRP of book which is scarcely  available, once the copies at suppliers run out, sell them at international market MRP and deliver them in 2-5 days (because its in your stock).

Such cases are more common in categories other than general books/novels, especially where chances of price comparison are less. This is clearly a minority case

This is kinda similar to what a popular bookstore in Delhi does with their super discounted sales. Buy books as per local market MRP(which is easily half or less than the international market MRP) and then sell it on the MRP pretending it to be on heavy discounts . Ex: A book with local MRP of Rs 350 is being tauted as being for Rs 1200 and after 70 % discount it comes to be for Rs 350/-. So the customer ends up paying the local market MRP (no discount at all) but might think he saved 70 % and got a great deal

Going online one can leverage efficiencies like just in time inventory, virtually unlimited list of products, pre-orders etc which in itself offers a significant advantage over traditional bookstores but selling books with -ve margins, plastering the internet(or TV) with your ads is something that cannot be competed against.

I’ve heard of some booksellers and publishers taking up this issue of excessive discounting with online bookstores and they apparently have made some progress like this popular publisher of general books has told one big online store to not offer more than 35% discount on their new releases. For every big publisher that is able to get their concern heard and acted upon there are five smaller publishers that are given a choice to shut up completely or face de-listing from the site all together.

Having said all this I feel the time has arrived for every bookseller to re-think their way of doing business and figure out how are they going to sustain themselves in these times where their much bigger and deep pocketed competitors are willing to do anything that it takes to own more customers.

And if you are beginning to start an online bookstore(e-commerce store if you will), you better have a really well thought out execution and funding plan.

In middle of a telephonic conversation with a friend(web entrepreneur) I popped a question,

Did you see Indian e-commerce stores putting up phone numbers on their website/product pages to help people buy (read order) products?

Gladly, as expected he replied with a “NO” which brings me to the question if/why/how do things change in the startup/business world with new things being introduced and then blatantly reused (copied) by others.

When we started Dial-a-Book some 1.5 years back, we were the ONLY ones that took orders on phone and accepted Cash on Delivery(COD).  Yes, none of the existing players had anything remotely similar in their way of working.

Come 2011: The two biggest e-commerce players in India have started COD (about 6-8 months back for one and  2-3 months back for another) and now they also have put phone numbers on their portals to take orders.  Surprising? Hardly.

Wait for a couple months and you’ll see almost everyone following steps. In fact I remember one of the young and aspiring e-commerce startups went to the extend of launching a service similar to ‘Dial-a-Book‘ and branding it as “X.com’s Dial-a-Book”, Duh.

I don’t mean to say we are the inspiration behind these but definitely the uncanny resemblances are a bit too much for them to be completely independent in thinking and execution. I know it might be really difficult to acknowledge but that’s how it is. The idea of sharing this here was that I felt like putting it done of paper/web for records.

Copying a feature or idea is one thing and doing justice to it is completely different. The most painful part of it being the big guys almost always get the credit for doing new things which aren’t really new.

It will be interesting to see how things change going forward with the e-commerce scene also extending to the phone commerce scene. Stay Tuned !!

First off let me acknowledge that the title of this post is a bit exaggerated and not really apt but I wanted to use it anyways. Onto the topic now.

I’ve been kinda following(not very regularly though) the Indian startup scene ever since my Slideshare days and things have definitely changed in the last year or two. There are a lot more startups(of all sorts) now ranging from deal a day sites like snapdeal to comics companies like Vimanika. It’s absolutely amazing to see people from non tech background also coming forward and creating products/services in their respective fields. However being from a tech(web) background I am particularly interested in web startups.

The majority of current crop of Indian web startups is (not surprisingly) focused on e-commerce and as with the previous wave of Indian social web startups are religiously following the same path. Somebody whom I met last month mentioned that some 20 e-commerce sites or so are registered with payment gateways every month and a vast majority of them are into selling books. Yes, that’s the “thing” I am talking about. Suddenly everyone wants to do e-commerce and guess what they want to sell? Yes, BOOKS.

While it is not at all difficult to understand why selling books online is one of easiest (especially if you are an ex-amazon) and probably lucrative thing to do what defies me is WHY everyone who sets up an e-commerce store can’t seem to think beyond books? Unless I am missing something obvious here (point me if I am) selling books(particularly to begin with) might not be the best thing these days.

Here are a few reasons why I feel selling books isn’t the best way to start e-commerce

1. Differentiation: I have told this to at least a couple aspiring entrepreneurs the biggest reason why I feel an e-commerce startup should not start by selling books is differentiation. How on world will you differentiate yourself from half a dozen almost established and established online bookstores out there in the market?
   It becomes particularly difficult when you are late in the book market by at least 2 years and will take at least another 8-12 months to figure out(if at all) how the Indian book market works.
2. Red Ocean: Loosely related to the first point is the second point of competition. Online book market in India is easily one of the most sought after pie. From independent online retail companies to established bookchains everybody is trying to own as much as they can of this market and unless you have a significant edge in terms of vision/talent, money/resources and distribution/publishing it doesn’t make a lot of sense to join the chaos.
3. Logistics: Based on my experience of selling books I’ve realized that this is highly logistics oriented business. Since the whole model is based on economics of scale one needs to sell as many books as possible(very low average cost per item). Handling lots of books means lots of procurement, stocking, handling, shipping etc. This can be a huge pain during the initial days of a startup. This problem of high logistics can be avoided by dealing in other items of higher values where despite having lesser % margins one can make good amount of money.

Having said that I think people who want to start an e-commerce business should actively consider other options which have a demand but no one else is focusing on. Though I must say I haven’t deeply thought about the business/feasibility aspect I would actually love to see some Indian e-commerce company sell the following(in a proper way with due diligence)

• Clothes
• Watches
• Grocery
• Automobile Accessories/Spare parts
• Furniture
• Gift Items
• Food Items/Snacks
• Fashion Items

When such decisive moments occur regularly the business has two(obvious) choices

1. Drawing a fine line of what can and what cannot be done(A policy)
2. Stretching themselves to accommodate the  extra needs/demands of the customers (A policy of not having a policy)

I have an intuition(and some experience too) that most businesses though try for option 2 but settle for option 1 sooner than later. Pragmatically speaking it makes perfect business sense but I feel for some businesses it makes sense to bend a little more and choose option 2. The option to accommodate all the whims and fancies of a customer to the extent of them being unreasonable. Yes, in short “let your customers be unreasonable”. While this might sound unreasonable itself I feel its worth giving a try. The rationale(A bit optimistic and Utopian) behind the same being

• If you offer the kind of services which are really tough to deliver, your value in eyes of the customer is quite likely to get a raise. Do this again and they will set you up a notch up than others in your market and will most likely return to you again and again.
• By wowing the customer you stand great chances of them spreading the word about you. This works particularly well since no competitor of yours would have offered that service to them and you did.
• You test your limits and that of your system
• By accommodating all sorts of customer needs regularly you get some unexpected insights on how to do certain things or how to do them better or even better that of a new/better business Idea.

What do you think?

PS: I was inspired to write this post after our team at Dial-a-Book completed a book delivery around 9:45 PM to a place quite far from our office and home. The customer wanted the book after 9 PM in the night or before 6:30 AM in the morning and we were happy to push our limits

I’ve been into the business of building web applications for a good part of my professional career. During this period(around 3.5 years) I’ve worked for a MNC, two start-ups and also started two companies on my own. A couple days back while thinking about some business it dawned upon  that there are basically two types of businesses (guess you probably know this already) as far as my view point is concerned (Otherwise trading is also a business). If you are not working for someone else (basically a job) and doing your own thing you are either

1. Building a product (A website, a facebook app or something else for Ex: Kwippy)
2. Providing a service ( Social Media Marketing, Website design/development, SEO or something else for ex: Dial-a-Book)
3. Mix of both (for ex: Shack Companis)

These two kinds of businesses (product and service) have almost equal scope when it comes to growing big, becoming popular etc. However what’s interesting is what it takes to get them to that level. I’ve been on both sides of the line that separates a  product business and a services business. I’ve build a product and am now building a service . Kwippy and Dial-a-Book are as different a business as they can get. While Kwippy was all about building a web product from India that had a global appeal, Dial-a-Book is a over the phone service that’s aimed at the local/domestic market(for now at least).

If you think about it product and service based businesses require way different inputs and take way different life forms once they start to grow. I’ll attempt to explore those differences and what we can do to leverage/optimize them

Product Vs Service Based Businesses:

1) Starting Capital: Product based businesses on an average require more capital to startup than the service based businesses due to the raw material and infrastructure needed. While web products don’t require as much starting capital, services will more often than not be relatively cheaper

2) R&D: Irrespective of the line/domain in which you are building a product, you’ll need to spend considerable amount of time as a team or as an individual to understand what’s been done before, what’s not been done, latest technologies involved, costs, maintenance and other issues. While (most) service based businesses don’t need to think as much(it’s a plus if they do) before starting up.

3) Time to go Live: Product based businesses by their sheer nature will take longer time to go live as compared to almost no-time to launch for a service based business. Essentially a service based business is live from the minute the founder(s) decide to start.

4) Business Development/Marketing: How good a services based business will do depends significantly on the founders interpersonal/selling skills the same gets tough for a product based business. For a product based business you need to have the product right, you need to make it easy to find and spread(viral) and market it in a completely different way.

5) Technology/People Balance: I kinda feel that after a while product based businesses are more dependent on the technology than the people as compared to the service ones. For a company that makes diapers for example, the machines, the processes, raw materials are an important bit and once the basics are taken care of it can run without as much involvement  on the founders part. However for a services based business, say a consultancy service started by 5 guys with a finance background the business depends a lot on the people. Even when the organization grows big it will be known/trusted for the few names of smart/senior guys and once they leave for some other company, the clients might just follow them to their new home.

These are some of the differences I could feel and keeping them in mind I feel one might be (slightly)better of choosing the kind of business they want to do depending on their personality/skill set etc.

Guess you know what I mean, if not drop in a comment and we’ll take the discussion forward.

Link to Shack’s post: http://shackcompanis.com/post/1521371790/service-vs-product-business

Posted at an interval of two days these two blog posts taken together offer a nice(different?) perspective of looking at things when it comes to Customer Development. Against the common notion that you should try to attract all kinds of customers Seth suggests that you choose your customers. Yes, you choose your customers for your business by your brand value proposition, pricing, customer experience and other things. All aspects of the way you run your business attracts or repels certain kinds of customers. You might wonder, why is it important to choose your customers?

It is especially important to choose your customers if you have a perspective/vision and you want things to happen according to that and not according to the terms defined by the market. For example sake, consider two product companies, one of which is very choosy when it comes to picking their customers and would rather prefer a smaller set of customers of the kind that they’d like while the other company is not really that choosy and is open to catering to all sorts of customers, the more the merrier. Assuming they both start from the same point, it won’t be difficult to imagine how differently would shape up after an year into the business. Company A which focuses of select customers will emerge out to be almost on the lines of the founder(s)’s vision while Company B which wants to get as much customers as it wants will have significant difficulty living up to the varied expectations and might just give in to the (un)reasonable demands of the majority.

Not only this, Seth suggests that businesses should also train their customers. Yes, training the customers by encouraging certain type of behaviour by rewards etc and discouraging certain type of behaviour. For ex: If you’ve priced your product slightly above the market standard then there’ll be lots of customers complaining about your price and trying to negotiate their way down(in terms of prices). Now there are two ways to go about it, one that you let customers negotiate and other is to don’t bother. Over a period of time if you follow the don’t bother policy you’ll observe how some price sensitive customers will move out and the remaining customers will get used to the higher than market price and stop complaining (This assumes that their is something that the business  offers to offset the high price).

Another interesting effect that this has is that it helps in building a culture among your customers that’s decided to a large extent by your terms and not the markets.

The easiest, most straightforward way to create a great product or service is to make something you want to use. That lets you design what you know—and you’ll figure out immediately whether or not what you’re making is any good. – Jason Fried & DHH in Rework

(Image courtesy: topnews.in)

“Scratching your own itch(SYOI)” is a popular phrase amongst many startup circles. What it essentially means is to build something that solves a problem you face. The case in point cited by many is the fact that when you are solving your own problem you know what exactly the problem is and how it can be addressed while on the other hand if you are scratching someone else’s itch you are sort of taking blind shots at both the problem and the possible solution(s).

Apart from the obvious fact of knowing the problem a bit better what works for SYOI is

1. Immediate & Direct Feedback: You can directly feel the impact that your solution creates. If for example one builds a product to manage his food expenses, the utility/futility of the product can be judged directly and immediately. One doesn’t need to do a long trial run/demo to see if the product works.
2. Extra Incentive: You + Customers > Customers. Working on a problem that benefits oneself directly has additional incentive because of the direct personal impact. Not just this, the beauty of this scenario is that one doesn’t need to think about the customers all the time i.e one can be content by just solving his/her problem. Other customers become secondary and this is a good thing because you don’t have to worry about what they might/might not like and just focus on what works for you, simple.
3. Passion: SYOI also makes one more passionate about the problem they are working on because they can relate a lot more to the problem and the issues that arise because of it. The direct impact of the solution on you also adds to the passion.

However having said all that, Is ‘Scratching your own itch’ the only way out? or Is ‘Scratching your own itch’ better than ‘Scratching someone else’s itch’?

While SYOI might have it’s own benefits, it certainly isn’t the only way out for entrepreneurs and not every invention/business is born out of it. For ex: A closed social networking platform for Chief Executives (CEO’s, CXO’s etc) of Fortune 500 companies built by 24-25 year olds can still work or a dating platform built by a married man is no less likely to work because he’s not scratching his own itch {assuming he’s not interested in finding himself a date through this platform }

Also, not all’s good with SYOI and it also has its fair share of negatives

1. Small Market: What bothers you which might not be bothering others. Thus some SYOI businesses also stand a risk of solving problems for a very small market segment. For ex: A friend of mine hates to wait in queues for getting CNG for his car and is ready to pay someone extra amount to take his car and get CNG filled in it. So if he were to start a service based just on this then it’s quite likely that there might not be a lot of people willing to pay extra money to get CNG/Petrol.
2. Financial Feasibility/Business Model: SYOI might work great for Open source where all developers are constantly writing/modifying code to meet their needs and in the process helping scores of other fellow developers it might not work that well when it comes to doing a business. Not all personal itches and their solutions can have business models. This is not to be confused with the previous point on Small Market as having a solution for small market can still be monetized but monetizing something that appears to be a problem to you but no one else might see it as a problem can be an issue.
3. Domain Knowledge or lack thereof: Needless to say, while starting a business it makes a lot of difference if you have enough domain expertise in your team and it might hurt if you are trying to solve your problem without having enough domain knowledge. For ex: I probably won’t land anywhere if I were to try to solve my itch of building a car that flies instead of crawling on Delhi roads. It’s worth noting that lack of domain knowledge is also likely(a bit more?) to hurt when you are trying to scratch someone else’s itch.

S0 are you scratching your itch or someone else’s? How’s it going?

Links:

1. http://archipreneur.blogspot.com/2010/03/scratch-your-own-itch-rework-by-37.html
2. http://gettingreal.37signals.com/ch02_Whats_Your_Problem.php
3. http://www.instigatorblog.com/scratching-your-own-itch/2010/08/12/