The Untapped Gold Mine

For the last few days, I have been using a time machine to do some anthropological research on ancient entrepreneurs. In 3029, my time period, an A.I. algorithm uses aggregated data to determine which business will succeed or fail. This tool was invented for financiers to de-risk their funding with this tool. This A.I. eventually decided to eliminate humans from any business decision-making process. The research I’ve done so far will be used to re-program the Business Analytical Tool (B.A.T) to serve humans and also help us find users to test an entrepreneur’s ideas.

After nearly being killed by the B.A.T and narrowly escaping, I was skeptical I could change things. However, my business research has inspired me. So far, the most significant finding has been that each successful entrepreneur I’ve met envisioned their concept without a uniform system in place to do so. Although some of my research focused on one feature of a business framework, I’ve learned their success was a blend of many things. Therefore, using a system that incorporates each of these will be helpful to entrepreneurs to understand how to execute their idea (both in your time and in 3029 as well). For this leg of my research, I wanted to understand customer alternatives.

What is a customer alternative and why do you need to know about it?

A customer always has a problem. Once they recognize it, they will actively seek out a solution. When they compare those options, the customer is analyzing their alternatives. For any entrepreneur, it is important to understand what the customer’s alternatives are so the business can properly attract the customer’s attention as a possible solution. Doing some investigation into the ideal customer that fits your solution can also help you find users who can help you develop and test and iterate your concept so you can deliver them the relief they seek.

How does this knowledge benefit you?

With all research, there is primary and secondary research. Your research (product testing, surveys, observance/experience) is considered primary research. Someone else’s research (Internet, studies, data) is considered secondary research. Ideally, an entrepreneur should have both. Due to this factor, no algorithm can understand customer sentiment the way an entrepreneur who is testing their solution and understanding customer alternatives by evaluating their competition.

Every business has competitors. Some will be direct competitors and others are indirect competitors. Any entrepreneur who doesn’t understand how the customer views competing solutions is at a disadvantage. This kind of knowledge can help an entrepreneur to be aware of what their customers will pay to solve their problem. The B.A.T would do this by finding the top 3 competitors and comparing those offerings to the prospective business. However, I suspect it may have missed the historical context of the data it uses. So, I wanted to do some exploring of my own.

Why does this research matter to you and how can it help you?

For this journey, I chose 8/29/1997 because I wanted to understand Netflix, which is still around in 3029. In 1997, Marc Randolph and Reed Hastings founded Netflix in Scotts Valley California. In the beginning, Netflix was a movie rental service where users rented whatever movies they wanted on the Netflix website, then those were mailed to them with a return envelope (why it was called Netflix). By 2020 Netflix was streaming 151 million paid subscribers in over 190 countries around the world.

1997 was a unique period of history, which provided me with plenty of context to analyze competitors’ offerings at the time. Something the A.I. could never do with just data alone. At the time, when consumers wanted to watch a movie they could either go to a fancy place called a “theater” or they could pay a fee to borrow a physical “tape” and watch the movie at home. In 1997, Blockbuster and Hollywood Video were two incumbent businesses that dominated the home movie rental market.

The B.A.T. would have scored Netflix very low because at the time shopping online wasn’t the norm. Noticing that many people preferred to watch movies at home, but hated to go leave the house to get the movie, Netflix recognized an opportunity to deliver that experience in a better way. Unlike Blockbuster and Hollywood Video where the customer had to visit a storefront and then select from the available movies, Netflix allowed customers to select whatever movies they wanted from a website. When the movie arrived in the mail they could watch their selections at their leisure. Then return those through the mail when it was convenient for them.

Also, being that their customers were ordering their movies online, Netflix could survey them and also track what their marketplace liked and disliked. At the time, Blockbuster charged late fees and if a movie was in high demand it was difficult to rent. The founders had analyzed their competitors and found a gap they could fill and Netflix quickly became a viable alternative. However, Netflix didn’t take over the home movie market.

Since I’m from the future, I already know what will happen. So, I went to 6/15/2007 and observed Netflix’s “new” and innovative streaming platform. Understanding the time period better I learned how Blockbuster, which was valued at $5 billion dollars could have pivoted into streaming movies and they even had an opportunity to purchase Netflix for $50 million. Yet they didn’t.

In 2007, Netflix’s market cap was 1.7 Billion. Back in 1997 Blockbuster had over 9,000 stores, employed 84,000 people, and had 65 million registered customers. In 2011, it was sold for $300 million, and by 2014, Blockbuster closed the last 300 stores it had left and was defunct. By 2014 Netflix’s market cap was 20.3 Billion, which was 4 times what Blockbuster had at its peak. In 3029, Netflix streams movies on 4 planets.

Why does researching the customer’s alternatives matter to an aspiring or established entrepreneur?

Undoubtedly, understanding customer alternatives is an important factor in assessing the success of the business opportunity. That research might include examining the features that customers use, investigating brand loyalty by reading reviews, and knowing if the alternative remedies are a discount or premium solution. It’s also vital to know if the competitor’s solution is a necessity or a luxury and the customer’s typical demand. Unlike Blockbuster, Netflix surveyed their customer and did primary research on its competition’s offerings, but Blockbuster was oblivious.

By eliminating humans from business decisions, our A.I has limited ways to test its hypothesis in real-time. Based on my findings, I now understand how the changing customer sentiments of the time period had a significant influence on the fate of Netflix and Blockbuster. Despite Blockbuster’s access to capital and customer feedback, they did almost nothing with it. Netflix did a far better job gathering information and acting on it to make sound decisions.

Who are your competitors? What are they not doing that you can?

This lesson is something our algorithm could never interpret. For this reason, I have developed a unified system that anyone can use to build a successful business. Before I use it to reprogram the B.A.T. to save humanity I need someone to test it.

Do you want to save mankind?

-Bill