Why contrarian business ideas are worth the gamble


Starting a company is a gamble, not too unlike betting on horses, but instead you bet it on a business idea. And just like horse racing, the least likely winner often pays the best. Businesses that are based on contrarian, immediately non-obvious, ideas often totally alter people's perception of what's possible. These companies reap massive benefits. If people respond to your ideas with "but..." you might be on to something.
In a recent article by Y Combinator partner, Garry Tan, the idea of contrarian business models is discussed. Quoting Tan:
"To create something entirely new--something that the world has not seen before--requires contrarian thinking."
Tan also brings up a number of examples of businesses that challenged "truths" that were widely held. One such is Airbnb which has been hugely successful:
"When Brian Chesky, Joe Gebbia, and Nate Blecharczyk at Airbnb set out to build their company, the world was a different place. The generally accepted truth was that normal people would never be willing to rent out their place--or a single room in their place--to strangers. Nor would they be willing to stay with people they didn't know when they're travelling to other cities."
He makes a compelling argument for the power of contrarian thinking. For many of us, contrarian thinking is at the core of startups, entrepreneurship and innovation.

Applying contrarian thinking doesn't necessarily mean doing something entirely novel. Doing that may involve a lot of risk with very little chance of a pay off. However applying it to aspects or facets of existing business models or established modes of operation can unlock extremely valuable ideas for new business models.

Fact is, many businesses work well without radical innovation. Our society is based on there being a wide range of established businesses and services such as stores, repair shops and contractors. A salon is such an example and they cater to a need that almost everyone has. That doesn't mean that it's a business that has no room for innovation.

If a salon were to tweak their business model to challenge assumptions, they could tap into the power of contrarian thinking. One such assumption could be the idea that people enjoy having their hair done and want to go the the salon and discuss their hair with a hair dresser.

Let's challenge that idea.

Imagine a salon bets on this not being a universal truth. Imagine for example they were to offer a way for people focused on extreme time management to get the latest news at the same time as they get their hair done by setting up TV's running news summaries and allowing their customers to decide beforehand how they want their hair done by using an app allowing them to select style, color and length.

Suddenly, the mom-and-pop salon is a startup.

In the words of Lean Startup inventor Eric Ries who defines a startup as:
"a human institution designed to create new products and services under conditions of extreme uncertainty"

Challenging and testing assumptions

You can come up with rather innovative business ideas by breaking down existing ones into their core assumptions and challenging these by creating new assumptions.

Imagine you were to try a contrarian business model like this one, you wouldn't want to bet your savings on building the salon. You'd start by making sure that hypothetical demand actually existed by formulating the new contrarian assumptions about the potential customers that until now have gone unserved.

This is something Leancept can help you do. At Leancept, we use a set of methods for identifying the key assumptions about your customers and then empirically testing them. One way of doing that would be to use advertising or just buying a store front and see how many that pay attention to it or show interest.

Contrarian pivots

Contrarian business ideas aren't all born from from taking existing ideas and turn them upside down. Some of them are discovered through changes of strategy, what we refer to as pivots. After a company has realized that its initial business idea doesn't really have the traction they were hoping for, they can either persist and hope it will improve, give up or use the knowledge to try something different. Choosing something different is a pivot. Pivots exist in many forms. Some change the business idea, others just alter it slightly.

A recent article on a company named Anomo is a great illustration of the power of contrarian thinking combined with making a pivot. Anomo was initially thought of as a dating service for shy people. But after a while, its founders realized it could be so much more. They reimagined Anomo as a "social network for introverts." That idea itself may seem counter-intuitive but is a great example of the success of daring to think contrarian and how a change of strategy can open up the path to hereby unknown possibilities.

It's apparent that contrarian thinking lies at the heart of radical innovation and extreme uncertainty. And you probably agree with me when I say that contrarian thinking is one of the things that define an entrepreneur.