Sunday Reads #157: The great thing about hard things.

No, you didn't misread the headline.

Jun 26, 2022

Hey there!

Returned to Singapore last weekend, and plunged straight into a few crazy days. Still, managed to find a few golden nuggets.

This week, let’s talk about the story of Gojek. How it became one of Indonesia’s biggest startup successes.

1. The great thing about hard things.

An important theme that I visit often is defensibility. How building a moat around your business is THE most important thing you can do, to future-proof your business.

And this Warren Buffett quote makes a frequent appearance.

A related topic is: How do you build a moat when you don't have resources?

It's easy to pour billions into a cutting edge platform if... well, if you have billions. (And it might still not work - see Quibi 👀).

But… what if you don't have billions? Or even millions? How then do you build defensibility?

There are a few different ways you can create a moat from scratch:

Move faster. As I've said before, speed is the most lasting competitive advantage. In fact, this was my Big Idea #2 of 2021, as I wrote in Step by step, ferociously.
Wade into uncharted waters. Uncertainty can be a moat for a startup, at least at the outset. You can win if you get distribution before the incumbent gets the product, as I said in How Microsoft became a multi-trillion dollar company.
Focus razor-sharp on a tiny segment. Become the best solution for a part of the market that's too small to be interesting to the market leaders. Focus can be a competitive advantage.

Today, let's look at a 4th way to conjure a moat from thin air.

How Gojek built its moat.

I enjoyed reading Mario Gabriele's conversation with Kevin Aluwi, the CEO of Gojek.

The first principle Kevin talks about is: "Do the hard things".

Startups often prize speed above everything else. While fast execution can be a moat, over-optimizing for it might distract you from constructing stronger defensibility. As a CEO, you want to build a company that tackles really, really hard problems head-on – even if they take more time. There’s a good reason for this: hard things for you are also likely to be hard for your competition. You want to stack so many solutions to hard problems that when your rivals look at what you’ve constructed, they retreat or look for shortcuts instead of trying to compete head-on.
We didn’t embrace this for the first two years of operating GoFood, our food delivery product. Like Postmates in the early days, GoFood was a delivery service that relied on humans more than technology: when you ordered something, a Gojek driver went to a restaurant, stood in line, paid with their own money, and then delivered it. We didn’t integrate with kitchens or offer payments. It was a good enough product, built during a period in which we prioritized growth, but it didn’t solve the tough problems.
One such problem was that even though GoFood was growing fast, its reliability was mediocre; only 70% of customer orders were delivered. We needed to do better, which meant we had to do the hard things.
Over the next one and a half years, we did exactly that. We connected GoFood’s service directly to restaurant cashiers and, in some cases, directly to kitchens. This helped us save cashier time and get better data on which meals were available. We integrated online payments so drivers wouldn’t have to pay upfront and get reimbursed. We even created machine learning models to help us anticipate when drivers should arrive for pick-up, improving the network’s utilization and reducing customer waiting time.
Making these changes was not easy. It involved significant engineering time, customer research, and onboarding and educating more than 500,000 restaurants across Southeast Asia.
But it made a difference, significantly improving GoFood’s reliability and raising our conversion rate from 70% to more than 90%. We turned the difficulty of delivering a very reliable product (now a customer standard) into a moat.

This reminded me of something Paul Graham said in his seminal blog post, How to make wealth:

Use difficulty as a guide not just in selecting the overall aim of your company, but also at decision points along the way. At Viaweb one of our rules of thumb was "run upstairs".
Suppose you are a little, nimble guy being chased by a big, fat, bully. You open a door and find yourself in a staircase. Do you go up or down? I say up. The bully can probably run downstairs as fast as you can. Going upstairs his bulk will be more of a disadvantage. Running upstairs is hard for you but even harder for him.
What this meant in practice was that we deliberately sought hard problems. If there were two features we could add to our software, both equally valuable in proportion to their difficulty, we'd always take the harder one. Not just because it was more valuable, but because it was harder. We delighted in forcing bigger, slower competitors to follow us over difficult ground.
Like guerillas, startups prefer the difficult terrain of the mountains, where the troops of the central government can't follow. I can remember times when we were just exhausted after wrestling all day with some horrible technical problem. And I'd be delighted, because something that was hard for us would be impossible for our competitors.

I love this metaphor. Run upstairs.

Take the difficult terrain. Take it precisely because it's difficult.

If you're split between two equally attractive strategic choices and don't know which one to pick: pick the one that's harder.

Everyone's favorite stock-picker Scott Galloway says something similar, in The Fourth Great Unlock:

Great strategy cuts a swath between market conditions and a firm’s assets. Put more simply, strategy is a firm’s answer to the following question:
What can we do that is really hard?

Remember: Money is made at points of friction.

Complexity is a HUGE source of friction.

You win by taking something complex, and making it simple. You win by doing the hard things, and making them look ridiculously easy.

PS. I also liked what Kevin said about focus:

Focus is everything. It is so, so important.
And ... having focus doesn’t mean saying no to bad ideas; it’s saying no to ideas you think are exciting, high-potential, and easily justifiable – and doing so because you don’t want to give even 0.1% less to your existing business.
Focus should be painful.

Hi, I’m Jitha. Every Sunday I share ONE key learning from my work in business development and with startups; and ONE (or more) golden nuggets. Subscribe (if you haven’t) and join 1,300+ others who read my newsletter every week (its free!) 👇