Imagine someone gives you a magic lamp, and if you rub the lamp, a genie pops out. But it’s not an ordinary genie. No, it’s a business genie. “A business genie?”, you ask. Yes, a business genie. “But I still get three wishes?” No, you only get one wish. “And I can wish for anything except for the three things mentioned in the Disney’s Aladdin?” Well, also no. You’re starting to have doubts.
This business genie, for all its power, has quite a limited scope on what it can do. (Some genie). But what it can do is grant you a technology that is guaranteed to feel positively magical in the hands of its users. It’s not going to give you customers, or a marketing plan, or a successful business model, or an ever-growing-pile of annual recurring revenue, but it will guarantee that when people use the technology, they’ll think it’s pure magic.
So what do you wish for? And more importantly, what do you do once your wish is granted?
Creating magic
FullStory has a genie named Joel Webber. Over a weekend in the early 2010s, Joel whipped up a demo for a javascript tool that could record a user’s experience on a website and play it back flawlessly, like watching a DVR replay. It was magic. The tool Joel had created went on to become an entire company.
I remember when I first saw FullStory. I also thought it was magic. “There’s no way this can be real.” I think I may have even dismissed it out of hand because of course it had to slow down your site because of how perfectly it replays a user’s interaction on your website. But no, they had figured that out and a lot of other things, too.
Trello was similarly magical, way back in 2011. Digital Kanban boards existed before Trello, but being able to easily drag around cards on a board where everything just works—that was magic. Just watch the demo from TechCrunch Disrupt and listen to this quote from Roelof Botha of Sequoia Capital:
By the way, I think the project file idea is beautiful [holds out hand in front of him and flips it over]. Most of the time I’ve seen collaboration software, they’re trying to integrate the content with the people and the messaging, and it’s just way too confusing. So the way you’ve done it I think is actually really innovative.
Now of course, being able to drag and drop objects in a board view (a Trello view, as I call it) is table stakes. But back in 2011, it was magic.
Fast forward to today. ChatGPT is having its magic moment. Launched at the end of 2022, ChatGPT is estimated to have reached over 100 million users within its first two months. And it’s no wonder why. When you play around with ChatGPT, it’s likely you’ll have a “wow” moment relative to an area of expertise or need that you have. I gushed about it back in March in relation to customer care.
Bottling magic (and selling it)
Of course, having the genie grant you magic technology is only part of the battle. It’s not going to get users to sign up and pay you money. But it might get you pretty close. How many of us, when we’ve had a magical experience with a product, have intuitively felt, “I want to buy this”, and then only in hindsight started looking for a justification?
The earliest version of FullStory was essentially a way to bottle up the magic and give you access to it on a regular basis. You weren’t paying for “reduced user frustration on my website.” You were paying for ongoing access to the magic. Presumably you would put the magic to good use, but the important thing was that the price was right and you could figure out the rest later. Put in credit card. Get magic.
In contrast, Trello traded its magic not for paid revenue, but for viral growth. The “price”—for the users of Trello—was simply signing up and collaborating with others who hadn’t used Trello before. Internally, we said Trello’s business model was “Get to 100 million users and figure out how to get 1% of those users to pay $100 per year.”
The first paid features of Trello—“Gold” and “Business Class”—offered some additional functionality, but it only made sense if you were already bought into the product, i.e. you had already experienced the magic. If you were reading the through the list of paid features of Trello and you’ve never used the product before, it wasn’t going to make any sense and you would have had no idea why Trello Business Class would’ve added value to your team or organization. “Restrict who can join boards”—Why? What’s a board? Anyway, it made sense at the time.
ChatGPT is interesting because it’s not even the primary product from OpenAI. Perusing their product page, it’s clear that they’re primarily an AI platform where developers can build out cool, targeted use cases that solve very specific problems for very specific customer segments. ChatGPT was, as far as I can tell, primarily a way to raise awareness about artificial general intelligence (AGI) and help society know that “this is coming.” Here’s Sam Altman, OpenAI’s CEO, speaking with Kara Swisher on her Pivot podcast a few months back:
Part of the reason that we deploy this is, I think, we need the input of the world, and the world needs familiarity with what is in the process of happening, the ability to weigh in, to shape this together. We want that. We need that input, and people deserve it.
…
One of the other reasons that we want to talk to the world about these things now is, this is coming. This is totally unstoppable and there are going to be a lot of very good open-source versions of it in the coming years, and it’s going to come with wonderful benefits and some problems. By getting people used to this now, by getting regulators to begin to take this seriously and think about it now, I think that’s our best path forward.
What’s fascinating to me is how quickly they turned around and launched a paid version of ChatGPT1. ChatGPT had clearly exceeded expectations in terms of raising awareness about AGI—perhaps a lot more than they had expected?—and then they decided to slap a price tag on it with just a handful of paid features (GPT-4 being the main one). If you were a user who happily pulled out their credit card to pay for ChatGPT Plus, was it because you really had to have GPT-4, or was it because “this thing is magical, the price is right, so I guess I’ll figure out the rest later”?
From magic to value
If you’ve successfully bottled up the magic of your technology into something that people actually want to buy, are you done? Can you go home now?
Something I’ve written about many times in this newsletter is the purpose of a business, which most recently can be summarized as:
The purpose of a business is to create a customer, retain them, and make them ambassadors of your brand.
If you’ve bottled up the magic and sold it, you’ve only accomplished the “create a customer” part. Good job, but the work’s not done. You also have to retain them.
On the third point—making your customers ambassadors for your brand—magic can go a long way. Users and customers will spread love for your product just because it’s magical, even if they end up churning. What does it look like if your product is magical but you’re struggling to retain them? You get churn emails like this: “We really wanted to continue being a customer—the product is awesome—but our organization was doing some cost cutting and we could no longer justify the spend.” The magic was there but the value was not.
Magic does not equal value.
Creating value
Our products and solutions don’t have a monopoly on producing value for customers. This is one of the humbling realizations of creating technology—even magic technology—that’s intended to provided value for customers. Often the technology is only a part of the value equation. Maybe it’s a key part, but it’s rarely ever the whole.
When we think about the three companies/products I mentioned in this article—Trello, FullStory, and ChatGPT—the value isn’t in the products themselves, nor is it in the feeling of magic these products incite in us (though that’s what may initially get us excited about buying). Rather, the value is what we as individuals and teams do with these products. It’s about the projects that get worked on with greater clarity and lower friction; the frictionless user experiences that are created for consumers; or the creativity that’s unlocked with much higher levels of productivity. Much of this work doesn’t happen in “the product” itself. It happens in the teams and individuals using the product.
Sometimes when I’m in an “engineering” frame of mind, I feel like I’m beating my head against a wall because I just can’t figure out how I can engineer value into the product. What needs to be faster? What features does it need? What needs to be more magical?
Many times—especially if the product is already perceived as magical by its users—the answer doesn’t exist in the product itself, but might exist within the customers and other stakeholders using the product. To that end, the “engineering” solution might not be to change the product, but rather to invest in supporting the systems of people that create value with the product. That could be the marketers, sales staff, customer success managers, partners, and the customers themselves. Give them a hand and let them create the value. If you do it right, it’s pure magic.
Further reading: As I was getting to the end of the post, I came across one of my favorite posts from Joel Spolsky from way back in 2006: The Development Abstraction Layer. This post will be old enough to vote next year and I think you should read it. It tackles much of what I discussed in this post, but from a different angle, and the writing is much better.
I can’t help but think of ChatGPT in the context of Trello’s original business model of trying to get to 100MM users and then charge 1% of them $100/year. ChatGPT already has (well over) 100MM users. If even 1% of them are paying the $240/year for ChatGPT Plus, that’s $240MM in annual revenue. That’s pretty insane?