Substack's counter-positioning: skin in the game
Medium, Mailchimp and Substack are key players in the newsletter passion economy where they serve different schools of thought.
Happy Tuesday y’all!
Today’s post is on Substack’s counter-positioning.
You’ve probably noticed newsletters are having a moment. I subscribed to so many of them, each one is unique with great insights. I love that they promptly get delivered straight to my inbox and teach something new every time.
Medium, Mailchimp and Substack are key players in the newsletter and publishing passion economy where they serve different schools of thought.
Without wasting any further time, let’s get to it.
Brief:
💨 Screenshot Essay: Substack's counter-positioning: "skin in the game"
💪 Counter-positioning, riffing off Hamilton Helmer’s timeless: 7 Powers
✉️ Substack is caught in the duality of Shopify model(supply-focused) and Etsy model(demand-focused)
🤟 Mentions: Abhi Tyass Tunggal and Manas Saloi’s primer on 7 Powers. Both posts are a good starting point to 7 Powers.
Few of my recent posts :
📺 Netflix applies friction to fuel growth
💬 Slack is breaking through 'the wall'
🎲 Xbox Game Pass is “Netflix for Gaming”
💨 Screenshot Essay
💪 Counter-positioning
“A newcomer adopts a new, superior business model which the incumbent does not mimic due to anticipated damage to their existing business.”
Excerpt From: Hamilton Helmer. “7 Powers”
Riffing off Abi Tyas Tunggal thoughtful and amazing primer on 7 Powers for clarity.
The crux of the issue is a business can try to improve its strengths, mitigate its weaknesses, eliminate competitor risk, better serve its customers, maximize shareholder value, or take advantage of its pricing power.
But there are very few times when a business can do all at once.
7 Powers breaks fresh ground by constructing a comprehensive strategic framework that can help every business to choose what to focus on next.
Hamilton describes three stages of power development:
Origination - Pre product-market fit
Takeoff - Explosive growth, typically >40% YOY
Stability - Continued growth, but not at "takeoff" levels
Counter-positioning is one of the power, usually developed in the origination stage of a company. Other powers and their characteristics are described in the image below. For more on 7 Powers, I highly recommend you to read it. For now, I want to emphasise on counter-positioning to help us set the context in today’s post.
(source Abi Tyas Tunggal primer on 7 Powers)
Counter Positioning: A business adopts a new, superior business model that incumbents cannot mimic due to the anticipated cannibalization of their existing business.
Benefit: Lower costs and/or higher prices due to more valuable product
Barrier: Cannibalization of existing business
Counter positioning is similar to Clayton Christensen's disruption theory but lacks the emphasis of moving from the low end of the market to the upper.
Counter positioning tends to come from outsiders and startups rather than existing market leaders. This is because the business environment does not allow market leaders to pursue disruptive innovations when they arise for one of the following reasons:
The total addressable market looks small;
It's difficult to see if the total addressable market will grow (and by how much); or
Their current cost structures are based on serving their existing market and not what is required to sell the disruptive technology, which may have lower margins.
✉️ Substack is caught in the duality of Shopify’s model and Etsy’s model
Shopify’s model (supply-focused): “Shopify is designed to help our merchants own their brand.”
Excerpt from: Shopify earnings
Etsy’s model (demand-focused): “We are much more demand-focused. So we try to not necessarily do what sellers are asking for but doing what we think is best for the seller”
So which is Substack? The answer is both, they’re caught in the duality of Shopify’s model(supply-focused) and Etsy’s model(demand-focused)
Substack CEO: “We are the Shopify of content” but “people will know us, but it will be the secondary brand to the brand of the creator, the writer, or whoever”
Excerpt from: Substack Raises Series A, An Interview With Substack Co-Founders Christopher Best and Hamish McKenzie
Overheard on Twitter
Notable and helpful primers on 7 Powers
Hamilton Helmer’s 7 Powers is a genuinely good read with new mental models to think about moats. Highly recommend you all to read it.
A few passionate bloggers have written a primer on 7 Powers which serves as a good starting point. I found these two very helpful.
-Manas Saloi’s primer on 7 Powers.
In closing
Hopefully, you have enjoyed this post. If you have any additional insights or feedback to share, don’t hesitate to DM me on Twitter & Linkedin.
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You can always read everything on the website at vishwanath.substack.com
Sincerely,
Vishwanath 👋
