The end of Steve Blank’s Epiphany

Everyone who wants to be an entrepreneur should read Steve Blank’s book, The Four Steps to the Epiphany. But be aware that the era when this book was relevant is coming to an end, due to the high speed of innovation in some sectors:

This possibility allows the world to turn on its head very quickly, for Instagram to create a $1B company in 18 months with 30M users and for Whatsapp to amass a rabidly engaged mobile user base larger than Facebook’s.

Blank defines a startup as a temporary organization in search of a stable business model. And “stable business model” might have some meaning in an industry where the dominant position turns over once a century, or even once a decade. But once every 18 months? That is different. In such an industry, every company is necessarily a startup, no matter how big and successful they are. Every company is under the thread of temporariness, and every company must be constantly looking for a sustainable business model.

The falling cost of communications means that a new business will have an easier time finding customers. But that also means that older businesses will have an easier time losing their customers. Nor does the falling cost of communications suggest a one-time transition among the dominant players, rather, it suggests a permanent increase in the rate of churn among the big players. This is without precedent:

Mobile app store rankings don’t value historical relationships the way web search does. What have you done for your users lately, they ask? These near-instant feedback loops challenge incumbents to continue to earn the attention of their user bases with better products than rivals’ applications. As a result, Clay Christensen’s innovator’s dilemma surfaces not every decade, like the stories of steel mini-mills or hard drive makers, but every 18 months.

Because the mobile user base is 10x larger than the PC world, because the older competitive moats don’t work, because the disruption cycles are so fast, competition in the consumer web has never been fiercer. Ergo, massive acquisitions.

There will be a litany of cascading effects from this massive acquisition. I suspect consumer pre-money valuations will surge, founders will redouble their efforts to build strategically important services and innovation will accelerate. For incumbents, the race is on to save their businesses. For startups, the opportunity to disrupt has never been more accessible.