2 builders who never spoke to each other

Draw the value chain and mark where money collects

Lay out your category from the work before creation through to consumption and see which link actually collects the subscription, because societies value some links at nothing. Buyers concentrate their spend on the thing everybody treats as compulsory, and an accessory only pays when the host category is enormous.

The method

1. 01

   Check which layer of your category buyers refuse to pay for before you build there - societies value some links in the chain at nothing.

2. 02

   Draw your category's value chain from the work that happens before creation, through creation, to consumption, and mark which stage collects the subscription money.

3. 03

   Aim at the product category buyers treat as compulsory rather than optional, since most of a category's spend concentrates on the one thing everybody buys.

4. 04

   Only build an add-on when the host category is genuinely vast, because the category's size and momentum decide whether an accessory can be profitable.

5. 05

   Remember that a company inevitably serves whoever pays it, so choose a revenue model whose payer is the person you want to serve.

What it returned

• 15

  Clearbit's Gmail add-on, Carthook alongside Shopify, plugins for Adobe Creative Suite's 15 million users, and utilities for two billion personal computers all work; Dropbox, dismissed by Steve Jobs as a feature, reportedly passed 500 million users by 2016.

• In the website market nobody pays for the publishing software itself - WordPress is free - while they will pay for hosting.

• A technique Justin takes from Nathan Baschez of Divinations; his worked example splits the newsletter category into content and signup forms, subscriber storage, composing and sending, delivery infrastructure, and the reader's inbox.

• Nearly every online business pays for a website, email marketing and a store, which is why Squarespace, MailChimp and Shopify do so well.

Sources

• Do entrepreneurs create demand?Justin Jackson · justinjackson.ca · New products combine demand from multiple categories · undated
• MeepsJustin Jackson · justinjackson.ca · What happened next · undated
• When you're building a product, whose opinion should you listen to?Justin Jackson · justinjackson.ca · Who you should listen to (and how you should listen) · undated
• The main thingJustin Jackson · justinjackson.ca · How to spot opportunities in the value chain · undated
• Creating a New Business Model for CartoonistsGreg Kogan · gkogan.co · 2014-03-01