8 - Finding A Slice
My last post set out how I fell in love with the emancipation of expert knowledge as the problem space for my next startup. This was an inspiring mission. But it wasn’t an actionable business. To illustrate, let’s say you and I got talking at a social event:
You: “What do you do?”
Me: “I’m an entrepreneur. I’m actually just starting a new venture.”
You: “How exciting. What’s the venture?”
Me: “It’s all about emancipating expert knowledge. What is currently the preserve of the professional service industry which is expensive, antiquated, rigid, opaque and offers a primitive customer experience. [Cites asteroid first principles perspective].”
You: “Sounds brilliant. So what are you building?”
Me: “The world looks so different when you view knowledge first as a product rather than a service where you’re charging for people’s time. We’re going to delight the customer. And deliver knowledge in a better, cheaper and faster way. And offer a platform for experts to flexibly leverage their expertise that doesn’t exist today.”
You: [Masking exasperation] “So who are your customers and what do you sell them?”
Tumbleweed
A Single Step
Lao Tzu said “a journey of a thousand miles begins with a single step”. I had my thousand-mile journey. I needed to find the first step. Expert knowledge is vast. The combined global revenues of just the Big Four accounting firms are over $160bn. A startup has the advantage of being able to move quickly from first principles without the shackles of inertia. But it has very limited resources. The risk of getting spread too thin is treacherous. Peter Thiel puts it brilliantly in Zero To One:
“Every startup is small at the start. Every successful startup dominates a large share of its market. Therefore, every startup should start with a very small market. Always err on the side of starting too small. The reason is simple: it's easier to dominate a small market than a large one. If you think your initial market might be too big, it almost certainly is.”
I wanted a single slice of expert knowledge. One that was as narrow as possible, and at the same time big enough to build a beachhead of a business.
My Beachhead Criteria
These were the criteria I applied to selecting slices of expert knowledge to consider:
B2B
Lends itself well to transformative new delivery with high scope for technology-based productisation - I took inspiration from SeedLegals in B2B and TaxScouts in B2C here and am very grateful to Anthony and Julien, and Tram, respectively for sharing their insights
That I could sell to startups as likely early adopters, mindful that “nobody got fired for hiring the Big Four” syndrome was likely to be a near term insurmountable obstacle with larger businesses
High scope to land and expand into other areas of expert knowledge in due course
I coupled these with the same checklist I used at the problem space selection stage to assess the level of opportunity:
How big is the market and how quickly will it grow?
How big is the gap between the problem and how it’s being met at the moment? Is there high scope for wowing the customer (the current customer experience is low and prices are high)?
How much competition is there?
Why now? Is there a rising tide of need for this expert knowledge?
Selecting The Slice
Over the course of my 43 conversations researching the expert knowledge problem space, I’d asked a lot of people for suggestions of areas of expert knowledge that lent themselves to technology-based productisation. I combined these suggestions with my own knowledge and a review of the catalogue of services on professional service firms’ websites to form a long list of potential slices. I desk-researched these areas of expert knowledge and their current competitive landscapes to come up with a shortlist of slices of expert knowledge to consider. This shortlist included:
Transfer pricing
Research & development and other innovation reliefs
Intellectual property - patents and trademarks
VAT & sales taxes
Contract review
I selected the slice that scored highest based on the criteria above. This was transfer pricing - the pricing of intercompany transactions for tax purposes. This was a great starting point. But it was just a hypothesis. Now I needed to do two things to validate this hypothesis:
With target customers - those responsible for procuring professional services within startups, mainly finance leaders
With transfer pricing practitioners
I spoke to 39 target customers. I asked what their biggest needs were in terms of expert knowledge and where they spent money on professional services today. I wanted to check if there were superior opportunities in other areas of expert knowledge that I may or may not have already had on my shortlist. I then asked about how they thought about transfer pricing and their experience of getting professional advice in relation to it. I wanted to check that there was sufficient demand within these would-be early adopters and that there was high scope for delivering a transformationally better solution.
I spoke to 23 transfer pricing practitioners. At Deloitte, I’d worked in tax and qualified as a Chartered Tax Adviser as well as a Chartered Accountant. But I’d not been a transfer pricing specialist. I needed to speak to deep transfer pricing experts to understand the constituent work involved and whether it lent itself well to productisation in the way that I hypothesised it did.
All of these conversations came through my network, in some cases with many degrees of separation. I directly messaged existing contacts. I asked people I spoke to for recommendations and introductions from their own network. Some very generously posted my details in relevant networking groups that they are part of. And I posted on LinkedIn. I’m hugely grateful to the 62 people who shared their time. I learnt an incredible amount and was able to validate my hypothesis with conviction.
It took me about 6 weeks to land on transfer pricing as the chosen slice of expert knowledge and come up with an initial product strategy. More on the latter in the next post. Thanks for reading and stay tuned!