VC Deal Lawyer

Recently read an interesting article put out by Knowledge@Wharton titled The Long-term Downside of Overnight Success.  Relying on Wharton research, the article indicates that “products that catch on too quickly may end up being less successful overall.”  The researchers relied mainly on a study of first name popularity.  Names that soar into popularity fastest also tend to fall out of favor more quickly mostly, it is argued, because of parental intuition.  The article noted “even though parents participating in the survey did not see any data about the popularity of the names they were shown, they were less interested in adopting names that had recently experienced sharper increases in popularity.”  “By going around the world, or watching TV or talking to other parents, people get some idea of how popular a name is and how quickly that name became popular.”   

Maybe that theory works in the world of first names, but I am not as convinced when it is applied to the world of business or start-ups for that matter.  As I noted, the researchers posit that products that catch on too quickly may end up being less successful overall.  I’d argue there may be other reasons for this happening and that the relationship between quick ramp and lack of long term success may just be spurious.   First, maybe the product or business model never worked in the first place.  Maybe it was a flash in a pan and it’s lack of long term success had nothing to do with how fast it ramped.  Or maybe that was the plan all along (see the infomercial business – rather than sell sustainable products, those companies seek a flash in a pan and seek to replicate it many times over with similar products).  Second, maybe the product or business model was a fad and never had any sustainability.  Lastly, maybe the product or business model saw quick success because it actually worked and fulfilled a need but in the end the management team wasn’t strong enough to capitalize on its early success and grow with it.  In the the latter case, I think you’ll find that those management teams didn’t have much of a plan beyond launch and that the failure was a failure of talent. 

I’d also point out, what’s so wrong with popularity anyhow?  In the context of a product or business model, maybe it’s popular for a reason – because it works!  I say look past the popularity (i.e., don’t judge a book by its cover) and look under the hood to see what is really going on.

As an aside, I think fast product adoption is actually part of the recipe for success in some sectors.  Take Web 2.0 for instance, I think quick adoption rates are vital.  The capital efficiencies in those models lend themselves to numerous competitors.  I say go fast and furious for the quick adoption and tweak as you go – it may help you to stay ahead of pack.  But don’t sit on your laurels if you find success.  Continue to innovate and stay ahead of the curve.  Also, don’t wait for the perfect version to launch.  As Guy Kawasaki once said – “Perfect is the enemy of good enough.  When your product or service is good enough, get it out because cash flows when you start shipping.  You’ll also learn what your customers truly want you to fix.  It’s a trade-off:  your reputation versus cash flow, so you can’t ship pure crap.  But you can’t wait for perfection either.”