What startups can learn from Chess

What startups can learn from Chess

It’s White’s move. What should White do next?

Before continuing reading, just take a minute and think about it.

If you’re an experienced Chess player, you’ll quickly see it. If not, it might take you a minute or two. In case you can’t find the solution, you might want to read up on the rules of promoting a pawn.

In this position, white has a clear disadvantage: It only has 2 pieces left. A king and a pawn. In chess theory, every piece has certain points associated with it. A pawn gets 1 point, a knight gets 3, and a queen gets 9. With that, White has 1 point, while Black has 14 points.

It should be clear, that Black wins here - there is a clear advantage in pieces.

But wait a minute, is Black really winning here?

It turns out, that there is one and only one good move for White and that one is winning.

Most people would move the pawn to F8 and turn it into a Queen. That’s what you usually do when promoting a pawn. But that’s not White’s best move. Remember, you are allowed to turn your pawn into any piece once it reached the last rank. Even… A knight!

By turning the pawn into a knight, White creates a check mate for Black in one move. Game over.

David vs Goliath. 1 vs 14 points. 1 point wins.

How can this be? How can White win, while it has such a severe disadvantage in pieces?

By having a superior position.

Black got itself into the corner. Although it has the mighty power of the Queen, Knight, and Pawns, it simply can’t utilize its resources. They’re stuck. In Chess this kind of checkmate is actually called a “Smothered Mate”. It sounds brutal because it is - at least for the king on the field. The king can’t move, as his own forces, his own allies around him don’t allow him. There also is no move that Black can use to stop White’s attack.

White, in this particular position is not only utilizing it’s pieces, it’s making them so dangerous, that they give Black the last fatal blow.

What does this have to do with Startups?

As a startup, you usually have very limited resources. You need to utilize them as good as you can - otherwise you might run out of money before reaching product-market fit and profitability. You want your team to be able to do their best work. You want to get into a situation, where you can have a very high impact with little work. You want high leverage.

Let’s say you are a startup entering an existing market with a decades-old incumbent. The incumbent’s company has incredible amounts of resources, thousands of employees, and billions of dollars in cash.

Then this young startup is coming. Having a specific insight, that they’re able to use as leverage. An insight, that allows them to maximize the utilization of their resources. And quicker than you might think, while the incumbent company is still laughing about the small startup, the underdog, with way fewer resources, grows and suddenly wins, just within a few years.

This is impossible you say?

Here are a few cases where this happened in startup history:

  • Stripe disrupting b2c finance. Incumbent: Banks
  • Paypal disrupting c2c and b2c finance. Incumbent: Banks (poor banks, everyone wants to disrupt them)
  • Cloudflare disrupting CDNs. Incumbent: Akamai
  • Tesla disrupting car manufacturing. Incumbents: Traditional car companies

This particular phenomenon is also called “The innovators dilemma”. A term, coined by the economist Clayton Christensen.

All of these examples have something in common. They use leverage to provide a significantly better solution than anything else out there. That leverage can be a technology like the internet, but also superior architecture or better working culture.

Coming back to the Chess example, where team White had way less players on the field, but could utilize their power to the max: How do you for put the right people on the right job so they can have the highest impact possible? By understanding, what people are good at and then enabling them to the max.

Credits to my father-in-law, who is a Colombian Chess Grand Master and showed me this and many more positions while we were stuck inside with quarantine because of Corona, last winter in Ecuador.

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