We have previously written about the difference between attention and reputation in the messy middle, and that prompted some great questions about how to move from the left to the right — how to obtain reputation.
It is clear enough that reputation must be earned, but how exactly do you earn it? Founders face another challenge here in deciding who to build a reputation with, and this is where another confusion crops up.
Founders confuse a user of their product with the beneficiary of their product — these are often not the same thing.
One reason for stalling in the messy middle is that a truly sticky business model has not been found. Reputation is earned through delivering value and enabling beneficiaries to share their success with others.
In agtech, many products that have farmers as the target user can fall victim to this trap. For example, in-field monitoring of all kinds usually needs some device installed in the field. The device costs money, measures something (weather, water, pest), and provides information. That information may allow a farmer to make a better decision or act differently, but the changes are often small and incremental. These types of business models usually get caught in a race to the bottom on pricing or experience slow growth because of high churn and/or unit economics don’t scale.
The business model innovation here is to discover who benefits the most from that change in farmer behavior and focus on capturing and delivering the most value possible for them.
There is usually a critical relationship between user and beneficiary. You can’t deliver for the beneficiary at the expense of the user — especially in key psychological factors like trust and self-determination.
You can often engineer a business model so that the beneficiary subsidizes the cost of the product for the user, enabling faster and lower friction growth.
Nirvana here is when there is a virtuous cycle between user and beneficiary. Beneficiaries incent more use, more users deliver greater benefits.
Reputation grows when beneficiaries have news to share, and happy users are a great story. Happy users that deliver efficiency and profit is news that will spread itself and greatly enhance your reputation.
Tenacious Ventures Management Pty Ltd (CAR 001275760), Tenacious Ventures Management Partnership, LP (CAR 001298484), Tenacious Ventures Fund II Management Partnership, LP (CAR 001298483), and Tenacious Ventures Fund II Staple Co Pty Ltd (CAR 001298487) are Corporate Authorised Representatives of Sandford Capital Pty Ltd (ABN 82 600 590 887), Australian Financial Services Licence No 461981, and are authorised to provide advisory and dealing in connection with investments to wholesale clients only.