Overcoming the rich-get-richer phenomenon
With the start-up culture in the modern world, we see so many companies trying to become “the next big thing”. Yet, as we saw in class with the rich-get-richer phenomenon, there is a clear tendency for customers to choose the current big name brands over the smaller company products.
This interesting article gives us insight into the things that may allow a small company to break this cycle and join the big names. The article talks about 4 categories: Innovation, Access to markets, Finance, and Leadership.
Innovation is important in the most intuitive way: if a product is more innovative, then it is more likely to be chosen over a similar product that is less innovative. This is certainly important to go past the tipping point. However, this alone is definitely not enough as explained by the other categories.
Access to markets is extremely important, beyond the sense that a product must have a market. The article claims a product must have a global market as anything smaller will limit the growth of the product. This can be made sense of in terms of what we learned in class (Bayes Law). Since there is always a certain probability that your product will be chosen over another (A|B, A probability of choosing A given the user sees option A and B), and by increasing the total number of potential customers, you also increase the total amount of the product likely to be purchased. If your product can’t get above the tipping point in NY, maybe it will in Florida, or Germany!
Finally, finance and leadership are important for obvious logistical reasons. Without proper financing, the product cannot be created/exported properly. Not to mention, there company must have good leadership to make the right decisions at the right time, like when to trade equity for cash (to finance the company) and what to do to give the product additional edge.
It all loops around, but all four are definitely needed if a company intends on being the outlier to the cycle of the rich getting richer and poor getting poorer.
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