37: ballet or opera?
when considering a new venture
When you start a new venture, you walk through a one way door. That door is what type of business you are building. I believe the conventional wisdom is that you can always pivot. So it doesn’t matter where you start.
Before deciding what to build, who to hire, and how to market, I think you need to decide whether you want to construct a ballet or an opera.
Both ballet and opera are performing arts originating from the 15th century Italian Renaissance. Ballet is profoundly structured, has technical guardrails, and requires a group to work in tandem to tell a story. Improvisation is limited because of rules (e.g. you cannot sing in traditional ballet).
Opera is a lot more elaborate. There is grandeur from the elaborate sets and characters. There are multiple modalities, including singing, acting, and conducted music. Therefore, there is a wider envelope for creativity. A powerful, multimodal story is being crafted.
Both require artists to work in tandem and success is unguaranteed. I view building a new venture similar to these captivating, performing arts. Businesses have a team of professionals working in tandem continuously to succeed: product development, marketing, sales, public relations, investor relations and so on. A founder then decides if she will construct a ballet or an opera.
A ballet is a business that meets existing demand. It offers customers a better, cheaper, faster and/or more accessible option in their life. These offerings generally produce differentiated outcomes either to consumers or enterprises. These companies have playbooks and guardrails (e.g. industry expected costs, cash flows, product/service reliability). Winners in ballet businesses are born from superior unit economics (selling price minus costs of goods minus costs of acquiring and servicing a customer minus cost of capital) and operational excellence. Future growth comes from reinvestment of excess cashflows or capital. In a ballet business, you need highly coordinated motion amongst various aspects of your business, because every mistake is magnified. I see these are largely operational businesses, where growth is not dramatic. There is more empathy in these businesses, because you need to walk in your customer’s shoes and understand their willingness to pay versus alternatives (direct, substitution and do-nothing). There is a lot of effort focused on team building, since resources must be coordinated in step dance.
Opera, on the other hand, is a story of net-new demand creation by meeting unarticulated needs. Direct competing products and services rarely exist. Opera businesses provide new experiences either to a large number of consumers or enterprises. Scale is vast, but I think this is potential scale, because changing customer behavior is very hard. Inventing value proposition is daunting but also exhilarating. There are limited or no playbooks to borrow from. Anything that may resemble a guide could prove useless because focus on punctuated turning points that are more chance or timing oriented. Unlike the ballet, the unit economics is not important here because both your customers (early adopters) and investors buy into the story. This typically results in the first few units of good/service being unreasonably high. They are in it for the grand story. This is why you write an opera with two audiences in mind - customers and venture investors. Generally, they are at odds but both want a grand vision. I think this type of business requires very long term thinking, and it may not be wise to do the typical fast launch. You will need a cast: more creators, builders, and marketers versus finance, business, and operations people upfront.
I love both ballet and opera. I think both type of businesses have some overlapping methods (e.g. you still have to find comparisons for sizing an opportunity), but there is a key difference. If you are building an opera, you can use the same information to draw parallels or entirely reject theories, since your vision is more risky and farther into the horizon.
As part of 2022 experimentation, I will be releasing this newsletter on a less frequent basis and focusing more on a new venture. In the past issues, I have been thinking a lot about critical thinking - I hope to do more work in this area and will share when I do!
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