Being first may not mean being best, says Marc Andreessen

Being first may not mean being best, according to Netscape and Opsware cofounder Marc Andreessen.

STANFORD GRADUATE SCHOOL OF BUSINESS — A recession is the worst time and the best time to start a new business. The worst product in a new market usually wins. A good company knows when to listen to customers and when to dictate to them. And you can't control the most important factor in any company's success—timing.

 

These were a few of the business paradoxes Netscape and Opsware cofounder Marc Andreessen offered during his spotlight speech at the annual Entrepreneurship Conference held at the Stanford Graduate School of Business Feb. 22.

Although startup capital is scarce, smart entrepreneurs know how to use time to their advantage, said Andreessen, currently the chairman of Opsware, a database automation software provider formerly known as Loudcloud. He argued that during the high-tech bubble, a lot of people rushed into the market with half-baked products and set up companies with toxic corporate cultures.

"Cultures were geared around massive success. People wanted to get rich quick, not build and sustain businesses."

He said the worst product in a new market tends to win because it's the first one to ship—usually without adequate testing. Now that venture capital is hard to come by, fewer duds are making it off the drawing board. During a recession there are fewer competitors, which means there is more time to develop a good product.

Of the small number of companies that endure, most are based on simple ideas. "The process of refining and deciding which is the right idea is often the most important part of the process," he said.

"While it is important to understand what your customers want and how they'll use your product, you're supposed to know more than they do about what they really need," Andreessen said. "A good company listens to its customers, but at a critical point, it starts dictating to them. … It's not the customer's job to ask for a new product."

A good entrepreneur gives people what they don't know they need. "This is the Steve Jobs model of the world: 'You're a moron. Here's what you should use.'"

Timing is as critical to entrepreneurship as location is to real estate. "The strongest correlation to success is a great market, but a great market depends on timing," Andreessen said. "To me, that's what makes this interesting."

by Teresa Moore


To read more articles like this one, visit StanfordKnowledgebase, an online source for business news, analysis information and research. E-mail StanfordKnowledgbase directly at StanfordKnowledgebase@gsb.stanford.edu

This article is Copyright © 2003 Stanford University Graduate School of Business.

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