The Cumulative Advantage

In the early days of Google, a well-known test occurred dubbed Google's 41 Shade of Blue. This test arose out of a disagreement between design and product. Design preferred a "bluer" blue, while product preferred a "greener" blue. What to do? Google employee #20, Marissa Mayer, who was known as the gatekeeper of Google's home page and a big believer in quantitative decision-making, decided to A/B test 41 different shades of blue. Whichever color performed best would win.

It's been claimed that this color choice resulted in an increase of $200,000,000 in advertising revenue.

It would be easy to read that story and think, "Wow, the colors I choose have a really big impact on my business, so I should probably A/B test colors like Google did." After all, there are many such stories where small changes resulted in claims of large rewards. But that would ignore the fact that you're not Google.

What is it that makes such seemingly simple decisions or ideas result in big impacts?

Something I often see on X/Twitter is large build-in-public style influencers who say things like:

• "All you have to do is launch!"
• "Presells are the way to go! You can validate and sell before you build."
• "The most important thing is to ship!"

And for them, and others like them, that might be great advice, but when every day people try to take those "easy" steps, it often doesn't result in the instant success that those giving it experience time after time.

So, can anyone really do it?

Photo generated with DALL-E

Strategic Advantages

The traditional thought process behind why some succeed and others do not is the possession of "true" strategic advantages. I put emphasis on true, because if something doesn't work out, all that has to be argued is that it wasn't a "true" advantage. These advantages are formally identified through a SWOT analysis matrix:

Strengths

• Strong brand recognition
• Innovative product line
• Experienced management team

Weaknesses

• Limited market presence
• High production costs
• Dependence on key suppliers

Opportunities

• Expanding into new markets
• Developing strategic partnerships
• Leveraging new technologies

Threats

• Increasing competition
• Changing consumer preferences
• Economic uncertainties

You look at your business and try to determine the strengths, weaknesses, opportunities, and threats—a good exercise for becoming more self-aware—then you should be able to identify some strategic advantages that are unique to your firm.

In theory, if a firm mitigates its threats, leverages opportunities, fixes weaknesses, and uses strengths it will be successful. That may be true, but it doesn't really explain why some founders and firms can take small actions and receive big rewards. There's something more to it.

The Cumulative Advantage

This term was coined in the 80s as a part of cumulative disadvantage theory The general idea is that our actions and experiences and consequently our failures and successes do not occur in a vacuum or sterile environment.

In programming, we might think of it like this: If our life were a class, it wouldn't get re-instantiated every time we call a method; instead, the state persists until we go out of scope.

Things happen to us personally and professionally and to our business ventures that impact the future successes and failures of our efforts. As a result, it matters where and when we apply our effort.

Application to Founders

Now, we're getting to the main thought behind this post. It matters when you do something and what you've done in the past:

• Effort spent with no cumulative advantage won't have a big impact. Sorry, but changing the color of the button on your $1m gross ecommerce store is not going to turn it into a $201m store.
• Starting a product and posting about it on X/Twitter when you have 160 followers (like me) won't be enough to validate your idea or generate significant sales.
• Making a $200m mistake won't be the end of the world for Google, but it would be for most businesses.
• You get the point.

It's easy to see stories from those who have built up a significant amount of cumulative advantage and be tempted to copy or do the same thing that works for them. When you're the underdog, that's just not how it works. Having or building a competitive advantage is useless if you haven't built up enough cumulative advantage to truly leverage it.

For a competitive advantage to be useful, it has to have some momentum behind it. It's not as simple as working nights and weekends, making a design adjustment, or sharing on social media. Advantages are relative and can only be used successfully if they are the right thing at the right time. There's truly some luck involved, but that luck is only useful when you've put in the work in the past to build up the foundation upon which you can put your effort.

It's important not to let this concept become discouraging. The path to entrepreneurial success is rarely linear, and even those who seem to have overnight success started somewhere, even if they didn't document it or share it with the world. While the concept of cumulative advantage is real, it doesn't mean that you don't have control. The key is to start, stay committed, and continuously build upon each step forward. Shortcuts and get-rich tricks likely won't work, but persistent, incremental wins will.

If you're curious, it turned out that the greener blue was the one that performed best. But please don't take that as a reason to go change all your links and button colors. :-)