With the abundance of opportunities in this digital and data overflown age, an innovative and entrepreneurial mind may get quickly lost by choosing the “wrong” path, leading to lost time, energy and resources, the most constrained and finite assets in the social world.

A rule to follow on an individual or even a company level is the order of magnitude (OOM) rule. If a product or an idea doesn’t lead to at least an order of magnitude improvement in the current market, where the interpretation of the measure order of magnitude depends on the context, the return from investment of time and resources to enter the market will not be worth it.

Famous examples of OOM improvement include companies such as Google providing more than an OOM in search, Apple with mobile music players and mobile phones, Microsoft with personal computers and the Windows operating system, all led to a practical monopoly in their separate markets. Another example is that of SpaceX. The rocket industry hasn’t changed much since the 1960’s, dominated mainly by countries such as Russia, USA and china. Elon Musk (CEO) realized that to be competitive a significant reduction in the cost per rocket lunch needs to be achieved, which he has managed to achieve through an OOM (factor of 10) reduction in the cost through reusable rockets.

An example of a market in which there hasn’t been an OOM improvement in a while is that of transistor (semiconducting devices used in CPUs and other electronic circuits) made of Silicon. Although other semiconducting materials have been shown to provide improvement, this wasn’t substantial in both cost reduction and performance increase. Adding to that the prevalence and popularity of using Silicon resulted in its dominance. An in between case is that of EV vehicles. The monopoly of petrol powered cars and the long time it’s been improved both vehicle wise and infrastructure wise, makes it significantly harder to make an OOM in the field, which is partly why EVs are still not a real competition to their petrol counterparts.

There are three possibilities for the state of the market at the point of entry.

  1. The market is over populated with players and consumers are overloaded with choice, potentially there is a monopoly in the market. In this case, unless there is an OOM improvement, consumers will not be tempted to change, simply from inertia, and the fierce competition with other players will result in more resources and time spend on mediocracy.

  2. The market is underpopulated, even though there is a need and demand (the market tends to be efficient at seizing opportunities, therefore this is the rare cases) in this case knowing that you can enter with OOM improvement is easier, and will ensure in the short term a monopoly. In this case an OOM can actually be much more than a mere OOM but few to infinity OOM, where infinity being the case when players don’t exist yet, or you create the demand and need (not sure how, or if there is a precedence of that).

  3. The market is under populated and there is no need/demand, in this case it is easy to create a monopoly and an OOM, however it’s pointless.

Following the OOM rule allows to invest time and resources in a calculated way, with a higher overall likelihood of success in the long term.