After the dust settled after MapCamp 2019 and I managed to get home, I had a chance to think about my discussion with @alexander.simovic about Inertia. And I know that he and Adam are working on a really cool stuff in this space, so this is my brain dump, which I hope will serve as the primer.
Inertia has been the subject of my second position paper at LEF. The general conclusion was that Inertia is formed by capital with low-liquidity, such as knowledge or skills. It is far easier to learn something than to make money out of it.
In short, when your car gets old, you know it, and you know that it is worth much less than a new car. But when your knowledge gets old, you rarely notice that. More, you are inclined to believe that it still has value. And when we get to concepts even more challenging to analyse, such as being successful, things get really, really weird. People can think of themselves as about being successful, but I have not yet met a person who explicitly recognised this state as temporal. Actually, I would consider people that would loudly say they cut coupons from their past achievement as having extreme self-awareness. But I digress.
The Inertia is created and sustained by components on two different levels - by people who use a particular component and by people who produce a particular component.
The moment you get your first customer, the customer learns how to use your solution. That newly created knowledge is customer intangible and illiquid asset. The customer spent some time (and money), but he cannot get it easily back. Most of the time, he will consider any changes to the component characteristics as undesired, because they render his skills useless and require more investments (learning time). And since components change characteristics significantly at least when moving from Custom-Built to Product and from Product to Utility, as @alexander.simovic summarised it, you cannot retain your first customers forever.
The good news is that customers’ Inertia goes away when a contract (API) is put in place. You can do whatever you want as long as you don’t invalidate customer knowledge!
Vendors’ Inertia is caused by the same mechanism that creates Customers’ Inertia, with a few notable differences:
- As a vendor, you own a lot of stuff. Being asset-heavy makes it challenging to change almost by definition because you have a lot of things to sell.
- Your employees invest in particular skills and build their position based on them; they may ignore the fact that reality has changed.
- All your incentives may reinforce existing behaviours.
That is the fear of the unknown, and it makes people prefer what they have over what they could have.
What I am really curious to see is whether there is a way to measure the level of uncertainty in the organisation, even if the measurement will be just an approximation.