Business Strategy: From Zero to One

Everyone wants to start a business in today’s generation. The people even start it but they are not successful eventually. After that, they close it. If you want to know how to start a business or what are the strategies behind the successful business, then this article is you. Through this article, you are going to learn how you can approach business, what necessary steps to be taken for own startups of business and shape the future of the business in the world. What I am going to tell you these are all from getting after long research and you can also get these steps from the very famous writer of the book “Zero to One”.

business strategy

You are going to learn 3 important lessons from the book:

1. The real success lies when you move in a vertical direction i.e. zero to one, not in a horizontal direction.
2. Monopolies are good for establishing the business.
3. Founders should try to move their business from zero to one.

Let’s see how to shape the business model:

business model

Everything which happens in business for only once. Next Bill Gates will not create the next operating system. Next Larry Page or Sergey Brin will not create another search engine. Or next Mark Zuckerberg will not create another social network. If you are following these people, then I am sure that you are not learning anything from them.

This book is written by Peter Theil with the help of Blake masters. He has made PayPal with Elon Musk and sold to eBay for 1.5 million dollars. He is also one of the initial investors in Facebook as well.

Let’s start with the lessons:

lesson

Lesson 1: The challenge of future

challenge

If you are creating anything new then you are moving in a vertical direction i.e. zero to one. But if you are trying to improve existing products then you are moving in a horizontal direction i.e. one to n. The people who create from cart to car, from car to airplane or from telephone to mobile, they all move from zero to one. We usually call this technology. But if you improve typewriter with the addition to different language, then you are moving from one to n.

The author tells that you can develop a successful business by moving from zero to one. It means you need to create unique products with the help of a unique idea. But a single person cannot move from zero to one. This is only done by startups. Startups are the group of people to whom you can convince them in order to create new products. And the strength of every startup is unique thinking.

Lesson 2: All happy companies are different

company

If you want to start startups, then you need to have the ability to think opposite to conventional thinking. One question you need to ask yourself which is a valuable company that nobody wants to open it? This question is more difficult than what you are thinking about it. It is possible that you are providing value to your customer but you are not able to capture that value.

The term value creation and value capture are two different terms. For example- one US-based airline company earned only 37 cents from each passenger by providing value to passengers. In that year, the company occurred a business of 178 billion dollars. If we compare this profit with google, google occurred a business of only 50 billion dollars but earned a profit of 21% which is 100 times more than the profit margin of the airline company. If we add all the airline industry together, then also google earned 3 times more profits. It happened because all other airline business competes with each other but Google has created a monopoly which has no competitors.  

perfect competition

In Perfect competition, every company copy the products of other company and made the same products. After that, it starts selling the products as per the market price. If the firm earns a profit then there is the entry of new firms in the same industry. And start selling their products lower than the market price. In this way, no firms earn enough profits. But in monopoly business, monopolist controls the whole business because they have no competitors in this business and earn maximum profits.

monopoly

Monopoly usually tells a lie in order to save themselves from regulations. If the company tells that I am a monopolist and earn maximum profits then the government will put regulations on it. If we talk about Google, it does not itself as a monopolist. If Google tells itself that Google is just a search engine then the government will consider it as a monopoly. In 2014, the search results for Google’s search results were 68%. Google’s closest competitors had 19% search results in Microsoft Bing and 10% in Yahoo search.

Now the question arises, how can we start business startups as a monopoly business in the competitive world?

Lesson 3: The ideology of Competition

competition

In a monopoly, we create new products and it will give profits to the owner. But in perfect competition, the owner may not find enough profits that will help to sustain in the market. How much if we compete with each other, it is a loss for us in return. But it is strange to tell you that our education system also believes in this theory. The marks of students taught to compete with each other after that we start competing with each in the field of a career as well. The same thing also happened with the author. He was an intelligent student that once his friend told him that you will be going to take admission at Stanford within the next 4 years. The same thing happened, he took admission in Stanford law school and started competing there. After that, his last goal was to go to the Supreme court. If he cleared his last goal then he will make business deals for other people.

But when he started his PayPal company he did not want to compete for the same with people. Instead of, he wanted to do something different. He and his team dream of transferring money with email. In 1999, this was a very big problem with transferring money. And they wanted to solve it. With this mentality, he created a company of net worth 1.5 billion dollars.

Lesson 4: The last mover advantage

last-move

The people who want to avoid competition then only you can create a monopoly. You have heard about the advantages of the first mover. The one who enters first will capture the big share in the market. But the author tells that the last mover has more advantage than the first mover. In this way, you can see the products of others and you can create a monopoly which is really difficult to copy you. Then only you will become the entry barrier and take advantages of it.

Now the question arises how can we create a monopoly business?

Step 1: Start with small things and create monopoly afterward

small things

You need to start a business with a small market because you can easily create a monopoly in the small market. But if you try to do this in the big market then you are not allowed to do this. When the author developed the concept of e-wallet in PayPal then he offered this concept to his existing customers who find problems in paying money with cheque rather than in the market. In this way, PayPal made 25% of its customers within the next 3 months.

Step 2: Scale your business

scale

When you dominate the small business, you can start to dominate the related market of your products slowly-slowly. If we talk about Amazon founder, Jeff Bezos, he started selling the books in the initial period. After that, Amazon becomes the biggest source of selling books where Amazon takes the books of sellers and display books on his site. As he created the monopoly in selling the market of books, he started adding categories of different products in his site.

Step 3: Non-disturbance

non-disturb

In the initial period of starting up of business do not disturb the big business of your category. It is because you do not have enough funding in order to compete with them. In his way, you will come out of the business.

Lesson 5: The Secrets

secrets

The author Peter tells if you want to improve the chances of startup of getting success, then you need to ask these seven questions to yourself. If you are able to find the answer “YES” of at least 5-6 questions out of 7, then you can start your startup.

questions

• The Engineering Question: Can you able to create the product which is far developed 10X than the existing products?
• The Timing Question: Is this the correct time to start the business with those products?
• The Monopoly Question: Are you starting your business with a small market or big market?
• The People Question: Do you have the correct team?
• The Distribution Question: Do you know the correct way of selling your products?
• The Durability Question: Can your business will continue after 10-20 years?
• The Secret Question: Are you able to find the opportunity which others are missing?

In this way, you can start your business with a successful strategy as well as startup.  

At last

Competition means no profit for anybody, no meaningful differentiation, and struggle for survival. 

                                                                           - Peter Thiel