OP: "Fix something that’s broken. In business, it seems to me that the traditional banking business models are broken or at least no longer fit the purpose. On the other end of the spectrum, Internet dating sites don’t seem to work. They have millions of users, so they must be promising something people want. And yet they work horribly. Just ask anyone who uses them."

to pg: "One way to make something people want is to look at stuff people use now that's broken. Dating sites are a prime example. They have millions of users, so they must be promising something people want. And yet they work horribly. Just ask anyone who uses them. "

Or "Take a luxury and make it a commodity. People must want something if they pay a lot for it. It is a very rare product that can't be made dramatically cheaper if you try. When you make something dramatically cheaper, you sell more, and people start to use it in different ways. For example, once cell phones were so cheap that most people had one, people started using them as cameras and Internet devices."

to pg's : "Another classic way to make something people want is to take a luxury and make it into a commmodity. People must want something if they pay a lot for it. And it is a very rare product that can't be made dramatically cheaper if you try.

This was Henry Ford's plan. He made cars, which had been a luxury item, into a commodity. But the idea is much older than Henry Ford."

I posted a pointer to this on http://news.ycombinator.com/ at http://news.ycombinator.com/item?id=661440 and this reply http://news.ycombinator.com/item?id=661875 pointed out exact matches for six sentences in an October 2005 essay by Paul Graham at http://www.paulgraham.com/ideas.html

here are the matches:

   [dating sites]
   They have millions of users, so they must be promising something people want. 
   And yet they work horribly. 
   Just ask anyone who uses them.

   [T]ake a luxury and make it into a commmodity. 
   People must want something if they pay a lot for it. 
   And it is a very rare product that can't be made dramatically cheaper if you try.

   Thanks for the note. I have added a credit link at the end, and an apology note 
   as a comment to the blog following yours. 
   I’ll be more diligent on this in the future

   P.S. I would like to give credit to an October 2005 essay by Paul Graham for a 
   couple of the ideas above, at http://www.paulgraham.com/ideas.html

It works the other way, too. Water is a commodity -- a commodity which is, essentially, free at the margin -- that is also a multi-billion dollar business in the US. Much the same could be said about food.

(I am about to step on some toes. Turn away if you're easily offended.) There are entire industries which are designed around the proposition "You are too good to consume X. Poor people consume X. You should instead be consuming X Prime. You can tell it is better than X, because it costs five times as much."

A separate but related issue: consumption of status goods among poor people.

In terms of selling B2B services, I am often amused by re-luxurization of commoditized services: taking something which was once customized and extraordinarily expensive but then made into cheap-and-infinite-scale and then competing with the cheap-and-infinite with something that is a cut above but which still scales.

Data centers circa 1996: luxury service. Web hosting: commodity service. Slicehost: not a commodity service, but the marginal cost to the firm is still close to zero.

Personalized financial advice: luxury service. Your bank's website and free checking: commodity service. Mint: personalized financial advice, but at scale.

Graphic design: luxury service. Stock icons: commodity service. 99designs: commodity-priced luxury service that scales.

In many cities the "native" water is full of chlorine If you travel to a foreign country, you may not be able to drink the native water at all If you are not at home, getting water may not be possible unless you by it in bottles. Bottles enable you to carry around water, which is useful for car trips, etc.

(I mention this because it is intellectually interesting to me, not because I hold contempt in my heart for people who buy bottled water, by the way.)

Incidentally: HN doesn't support unordered lists very well, particularly if you like starting them with asterixes. The best alternative I have for you is starting them with + signs and putting two linebreaks between points.

Case in point the above comment. Those of us in our thirties remember the world without bottled water, and life went on.

Or iPods, really.

Coke with corn syrup is far cheaper to produce, but tastes really bad.

Coke with real sugar costs more to produce, and tastes better.

Care to enlighten?

If you want to know how to get food without garbage in it, go find some non-rich people who have moral or religious restrictions against the garbage, and then do what they do. It actually works.

For reference, here is the deliciousness Coke spectrum, from best to worst:

YUMMY...

Coke with real sugar in a glass bottle

Coke with real sugar in a can

Coke with real sugar in a plastic bottle

Coke with HFCS (yum!) in a can or glass bottle (makes no diff)

Coke with HFCS in plastic

...GROSS

For the record, Dr Pepper with real sugar is even more amazing than Coke with real sugar. And you can't apparently make Mtn Dew with real sugar because it'd be so saturated it wouldn't stay in a solution. Rock on!

Yet another reason to move to Canada and/or Europe.

Suffering at a large company for a while isn't self-flagellation, it hands you hundreds of things needing solutions.

Example: I have a mortgage, a wife who is studying and a 6 week old baby.

Today I need to bring in at least 2500 GBP after tax per month for us to break even or set aside sufficient savings first to make up for the shortfall; when I started my first company I had no dependents, no commitments of any kind, shared a flat with my co-founders that we rented for about 1000 GBP/month, and beyond that we paid ourselves 600GBP/month each. There were four of us, so in effect we were each living on 850 GBP/month after tax while getting things off the ground.

In other words the threshold for me to start a company now is much higher than it was, and that is excluding the "luxuries" that drives the income I expect to have even higher. Then I could jump at anything exciting; now I won't consider something unless I think it has a reasonable shot at making me a solid salary and with a shot at making it big.

Doesn't mean I'm not still working on various ideas, but it takes more before I can afford to take the risk of going it full time and I need to choose more carefully.

If you have a good idea, right after (or before - I quit after a year, but since went back and got a degree) university is a good time to throw yourself into it. You're likely used to living on little money.

If you make it big, it doesn't matter, and if you don't you get plenty of chances to have a go at the grind of a larger company later while contemplating your next move.

I have worked on systems for Healthcare communication, strategic marketing, online promotions and game development.

Almost everything I am working now it based on problems or immense walls built up at companies in those industries that I wouldn't have had the insight to understand had I not taken the apprenticeship through anti-patterns via horrible political walled situations at other companies first.

Also, every company has good patterns and anti-patterns that can be applied and work in many other situations. Maybe something can come from all the pain.

There is something to this.

I have accumulated enough business problems to stay busy for 3 lifetimes. The only issue is "What's most important?"

To anyone searching for startup ideas, get a job. You won't be searching for long.

The semantics are crucial here, because solving a problem almost implies that it is something a customer 'understands' to be a problem and not just satisfed with the status quo - that is true for almost everything - give me a better house, car, laptop, email, search etc. etc. anyday and if its really good enough I will switch.

The biggest startups were not found by scratching an 'itch' but through founders idiosyncratic views of the status quo and how they belived (without an MBA, without a customer survey and without figuring out if it was really an 'itch') on what was a better way, and for a long time without any external validation.

Selling books online - how does that even make sense, the internet was supposed to get rid of books but Amazon found a way. The iPod - if no one even knew something like this can be built, how can it possibly be a part of their 'itch'. Twitter - I bet there was no itch here too.

The iPod solved the problem of poor user interfaces and managing your music collection, and it did this better then any other current mp3 player on the market.

The main point of the article is to make something because it is of actual use and not just because it seems like a good idea. He never says only confine yourself to well defined problems, and he explicitly says to consider making something which is better then any of the existing solutions.

Your own idiosyncratic views of the status quo can allow you to see the situation in a different light and how things can be better. You may be the only one who thinks this way, and others will only understand that there was a problem only after seeing your solution. But that does not mean that the problem did not exist or that a better solution did not exist.

These are outliers. For every Google, there are thousands of successful startups built to scratch an itch.

The way I see it the take away is more about the way you think about your product than about where or how you started or what terminology you give.

And also as edw519 there would be very few outliers and of course they are a gamble. Every invention is. As you mention google and twitter you should also note that figuring out how to build a business out of these ideas is hard. All search engines faced the problem - advertising made it a huge success but did come very late. Twitter for a long time now has been on the same Q.

So it does make sense to think of your product as an idea to create something ground breaking but for most part, figuring out the problem you solve simplifies a lot.

I don't really agree with OC on other points, but the iPod really didn't scratch an itch. It changed the game by creating something new, not something that "solved a problem."

To say the iPod solved a problem is pure hindsight.

No they weren't, most people couldn't figure them out.

> To say the iPod solved a problem is pure hindsight.

No it isn't, the iPod brought it to the masses by making it simple enough for everyone to use.

I don't own any mobile Apple products now but the iPod really did make portable digital music players mainstream through its cachet AND the problems it fixed.

I think 'start with a problem' - creates a clear definition of success (solve the problem), demands focus and makes everything so simple to figure out.

Then, why there's still room to grow for IM, Meebo, and now Twitter?

I would argue that while it may have been introduced to solve a certain “problem” (communication hub for friends/local groups, “I want to have a dispatch service that connects us on our phones using text.”), its success comes from accidentally satisfying different needs.

    What is the Problem?
    Who is the Customer?
    Who is the Competitor?
    What is the Revenue Model?

Given the innovation of the web, Blue Ocean is just as viable than these other four methods.

There are several ways to implement a winning business, talking points tend to forget that.

http://journal.dedasys.com/2007/04/26/ideas-are-worthless