The Misconception of Utility

Utility isn’t just “being a Swiss Army knife.” In fact, this might be one of the biggest misconceptions in entrepreneurship.

Too many founders conflate the value of their products with the amount of potential problems it can solve. They spend their time and efforts slapping on more and more perceived “functions” that end up diluting the actual overall utility of the product.

The Power of Specialized Tools

The Swiss Army knife metaphor is particularly powerful here. Have you ever seen a chef using a Swiss Army knife to filet a pricey Tuna? Or does a roofer screw in the tiles of your new fancy metal cladding onto your house with the flimsy screwdriver bit of a Swiss Army knife? Of course they don’t. They are using professional tools to do a professional job. Or at least, they learned not to use the generic tools anymore.

From Generic Spreadsheets to Specialized Software

That’s why many successful SaaS businesses originate from self-built Excel sheet monstrosities: initially, the generic spreadsheet tool was good enough to handle most things that were needed to solve the problem. But, at some point, complexity caused diminishing returns: edge cases made the spreadsheet hard to use. From high utility to low. A fertile ground for a for-this-use-case-only software product.

Dual-Sided Utility

Utility is strongest when it’s dual-sided: the products are useful for the customer and the business selling the product is profitable for its owner. A successful business sticks around and reliably produces and distributes a useful product to the people who need it.

The Psychology of Pricing

But once again, we run into diminishing returns. This time, on the founder side of things. People will only pay so much for any given solution. In fact, they will pay only as much as the problem that the solution is for costs them. That’s why founders find it easier to land a $5000 customer than a $50 customer: a $5000 problem hurts way more than a $50 problem.

This introduces an outsized impact of fees. If you offer a software product, Stripe takes a cut of every transaction, and the lower your price, the higher their share of your profits. When you build something physical, like a set of 3D-printed keycaps for a mechanical keyboard and list them on Etsy, you have to deal with a listing fee, a processing fee, a transaction fee, shipping, expense fees, and the cost of your raw materials. That’s often more than half of what you can price things at.

That’s why SaaS businesses are all the rage: their marginal cost is almost zero. It costs you next to nothing to allow one more customer to use your product. But you do need a critical mass of customers to initially become profitable.

The Importance of Intersectional Specificity

Utility can also be something you can’t find anywhere else. Something specific. As an entrepreneur, the most impactful place for your work is at the intersection of all your fields of interest. If you’re a person who loves to tinker with electronics, has a 3D printer, and knows how to set up an Ecommerce website, you can quickly build and sell bespoke gadgets that no one else is building. Sci-Fi themed power outlets that have illuminated lightsabers sticking out of them as nightlights? Delightful. Intersectional specificity is magic.

Building for a Narrowly Defined Niche

What matters is that you make things for a very narrowly defined niche of prospective customers who are already aware of their budget. You need your customers to understand what utility looks like. Something made especially for them will be the easiest for them to judge on its utility. Be their Chef’s knife or their high-powered screwdriver. Offer the thing that professionals use to do their professional jobs.

Solve one problem really well, and not much more.