One of Native Americans’ most insightful ideas, or at least one that gets attributed to them a lot, is that you should use every part of the buffalo. They didn’t just eat the animal’s meat: they also used the skin for making clothes and tents, the bones for tools, the dung for fuel, and so on.
I really like this philosophy of taking things that would normally go to waste and turning them into creative, useful new products. The raw materials are basically free — they’re just lying around — and yet the potential upside of your creations is huge.
A motto for entrepreneurs
The idea translates quite well to entrepreneurship. When you’ve created something of value, there’s probably a lot of hidden infrastructure propping it up from below the surface. And it’s quite likely that someone else who’s trying to create a similar product would pay good money to reuse the infrastructure you’ve built. That infrastructure doesn’t cost you anything more to produce — you’ve already built it — so you just need to identify it, haul it up to the surface, package it up, and ship it out.
As an example, if I were redoing my latest book, Product Management’s Sacred Seven, I wouldn’t just want to sell the finished book. I’d also want to consider:
Selling the LaTeX template and tooling I used to compile the manuscript
Spinning out the video-creation tools and techniques we used to create the companion videos we linked to in the book
Teaching other authors my writing techniques and style through a consulting service or online course
Or even… writing another book about the process I used to brainstorm topics, write drafts, revise manuscripts, and create a multimedia book
Not all these secondary business ideas would be worth the additional time and money it’d take to productize them, but you get the point: a single parent business can spawn many valuable ideas for spinoff businesses.
Getting into the pickaxe business
The every-part-of-the-buffalo strategy dovetails nicely with another strategy I enjoy, which is pickaxe theory: instead of being a gold miner yourself, you can make a lot of money by selling pickaxes and shovels to other miners. It’s a more stable revenue stream than trying to strike gold yourself, and you don’t have to try and pick winners — you just need to know that somebody is going to win, which is a pretty safe bet.1
If you follow the buffalo strategy and sell the infrastructure you made to support a surface-level product, you’re basically getting into the pickaxe business, since most of your customers will be trying to build their own surface-level products. So, now you’ve got two complementary lines of business: trying to mine gold yourself (the surface-level product), and selling pickaxes to other miners (the infrastructure). And the second line came for free after you made the first!
Works for product managers, too
Finally, the buffalo strategy is also useful if you work at a BigCo. Chances are that any product you ship will have a ton of reusable infrastructure supporting it. You can either pick up social capital by giving this infrastructure away to other teams at the company, or you can help your company get financial capital by selling that infrastructure to customers.
Amazon, for all its faults, is an expert at this strategy. The company doesn’t just sell Alexa-enabled gadgets. It also sells the many technologies that make Alexa possible (speech recognition, natural language understanding, etc.) to AWS customers as Amazon Lex, so these customers can build their own voice-based chatbots. Again, this technology cost AWS next to nothing, and by all accounts Lex has become a lucrative business.
Looks like the Native Americans were right: one person’s byproduct is another person’s raw material. ◽
To extend the mining analogy, if you put your money into NVIDIA, which makes many of the GPUs popular with crypto miners, you would make a much more stable return than if you tried to pick the next breakout cryptocurrency. Of course, your best-case return would be lower than if you bought crypto directly. It’s instructive to compare the price graphs of NVIDIA and Bitcoin here: solid and smooth versus explosive and volatile.