Lenny's Newsletter - Picking a wedge
This is a peek at today’s subscriber-only post. Subscribe to get access to the full issue, plus every issue from the past 2.5 years. 👋 Hey, Lenny here! Welcome to a 🔒 subscriber-only edition 🔒 of my weekly newsletter. Each week I tackle reader questions about product, growth, working with humans, and anything else that’s stressing you out about work. Send me your questions and in return I’ll humbly offer actionable real-talk advice. Now, on to this week’s question…
Whenever I think of wedges, I think of this guy: A wedge in business is the same idea—you drive a wedge into the market and then use that wedge to win the market: Twilio started with an API to send SMSs and is now the de facto communication API platform, worth over $60B. Airbnb started out allowing people to rent their extra rooms and now accounts for a fifth of the $90B vacation rental market. Amazon started out selling books and now represents about 40% of all U.S. e-commerce. If these companies had gone at their massive markets head-on, they’d arguably have had a much harder time. But by using a wedge strategy—focusing all their energy at one precise point—they were able to break in, build momentum, and win.
What exactly is a wedge?A wedge is simply a strategy to win a large market by initially capturing (1) a tiny part of a larger market or (2) a large part of a small adjacent market. In business, as in rock cutting, a wedge is made up of two parts: (1) the right tool and (2) the right place to strike. In other words, the right initial product and the right initial market. Tesla’s wedge (into the larger transportation market) was a luxury car targeted at affluent early adopters. Robinhood’s wedge (into the consumer finance market) was a commission-free trading platform targeted at millennials. PayPal’s wedge (into the payments market) was an online payment platform for eBay sellers. Do I always need a wedge?I don’t think so. Companies like Zoom, Slack, Workday, Notion, Datadog, Spotify, and Peloton went straight at their respective (large) markets with an amazing product and won. You can argue about semantics, but in practical terms, as far as I can tell, these companies didn’t use a wedge strategy—they attacked a large market straight-on.
When do I need a wedge?A wedge seems most essential when you’re going after a market that is (1) entrenched or (2) crowded. When it’s hard to break in head-on. Subscribe to Lenny's Newsletter to read the rest.Become a paying subscriber of Lenny's Newsletter to get access to this post and other subscriber-only content. A subscription gets you:
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