HunchCrunching Theory | HunchCruncher
Hunch - Crunch - Munch
The table below shows how we define Hunch, Crunch and Munch as part of the innovation process. There are fuzzy boundaries but we define Hunch Crunching as everything that happens before the first product or service is sold. This is a very, very small part of overall business activity - perhaps less than 0.1%. This is something that most business people only do a very few times in their life, and maybe only once.
I've always loved the TED by-line "ideas worth spreading." In this terminology it would be "crunched hunches worth munching."
The vast majority of effort in building a start-up happens after you have shipped your first product. The vast majority of value is created from growing the business (munching) rather than in the pre-first product stage, and almost all business books focus on running your business rather than how you decide where to start running from.
If HunchCrunching is such a small part of business, why bother?
The lean start-up theory popular at the moment suggests the need to produce a Minimum Viable Product (MVP) as fast as possible and iterate quickly after that to build a business (I generally agree). It really doesn't matter too much what your MVP is if it takes very few resources to get there. However some of life’s more interesting issues do take more resources and hence anything that can be done to make sure the first MVP is on the right track can pay dividends. The graph below illustrates the relationship between the time it takes to get to your MVP and the importance of how good the MVP is.
Our assumption is that by focusing only on hunch crunching and systematizing the way we approach it we can get better at it. At HunchCruncher we are only interested in problems that are non-trivial. MVP’s that have a bigger head start are more likely to thrive on subsequent iterations. It is far from clear that repeating and systematizing the HunchCrunching process is a learnable skill but we suspect it is (either that or we have had a remarkable amount of luck so far). It’s an open question as to whether we can build a business out of focusing on HunchCrunching but it looks promising.
What comes after the hunch in crunched? Minimum Viable Innovation
We almost always are involved in some munching with the innovations we start as it is often required to get to the Minimum Viable Innovation. Our aim is to get the innovation into a form that gives it the best chance of being adopted (munched), by doing one of the following:
Note that our aim is not to get to minimum viable company but minimum viable innovation - growing our own standalone company will not always be the best way to make an impact with our innovations and our aim is to make the biggest impact – we don’t have to own it all.
The unwritten assumption of almost all business books, particularly those focused on innovation, is that your desire is to start up and run a huge organisation. This is not our goal as there are lots of people who are better at the munching than us. We believe that we have a unique advantage in focusing on the micro pre-startup phase of the game. We aim to get systematically better at identifying and verifying quality opportunities that create a good head start and some very unfair sustained competitive advantage.
Level of competition and time to MVP
The graph below shows the relationship between competition and the size of the innovation. Everyone’s first business is usually in the bottom right, and it has to be because of lack of resources. Because of this there is usually brutal competition and a large amount of luck and contacts involved in determining the outcome. We certainly got lucky with our first innovation (GlobalBrain). The best muncher, or fastest runner, will be most likely win these opportunities and it's not a space we like to play in.
At the top left it is generally the best funded, connected, and staffed companies or innovation that win (Khosla Ventures target market).
HunchCruncher targets the middle spot that require more resources than your average set of Stanford students can throw together. We also actively target non-trendy areas where we may be creating a new class of product.
Laser like focus on a very, very small part of the game
As discussed Hunch Crunching is a minute part of overall business activity (less than 0.1%). But we have an additional level of focus that is summarized in the diagram below. We split innovative opportunities based on the level of complexity and level of trendiness.
High complexity - this tends to be mainly scientific risk and is normally where university research is active, eg: advanced nano-tech, drug discovery, biotech. Huge brains are key requirement here (hence not for us.......).
Moderate to high complexity - (trendy and competitive) - this is generally where large companies play eg: new smart phone, aeroplane design, oil exploration (if it wasn't for Elon Musk I'd also include car design and rockets but let's face it the man is an outstanding innovation freak). Deep pockets and long term commitment are key here.
Moderate to simple complexity - (very trendy and highly competitive) - This is generally where the Stanford and MIT folks go crazy - eg: YouTube, Instagram, Facebook, NetFlix, Zappos, AirBNB, Zipcar. Speed and rapid iterations are key here along with lots of capital to run fast and dominate the market once you have traction.
Very simple - these things tend to be trivial and mostly involve first time inventors or existing companies eg: beanie babies, leatherman multitool, post-it notes. Lots of perfectly fine businesses here but we'd prefer to find non trivial things if possible.
Moderate complexity in non trendy area eg: YikekBike - too simple for university professor, too out there for existing large company, non-trivial if it works, not as likely from MIT or Stanford students (bit untrendy and takes time for first MVP)
As illustrated in each part of the innovation space there are lots of great opportunities but we actively choose not to compete in most of them because other people are better suited. While there may not be much left we think there is plenty – take a look at what we are working on to get a feel for what we are doing.
We prefer to put lots of hard work into finding a really great head start and working with others that are better suited to run the race..