This essay is a sequel to my note on distribution.
Behind Escobar’s success in the United States was a distribution network like no other. He created his own shipping routes from Columbia to North America. He went from renting planes and pilots to owning and building his own airports while controlling routes through the Caribbean and Mexico. These syndicated distribution lines also became stand-alone sources of revenue later on as even his competitors paid him to transport their own products in and out of Colombia.1
At his peak, Pablo Escobar had a net worth equivalent to $70 billion today! He was infamously known as “the king of cocaine”. He went down as the wealthiest criminal in history. His cartel —the Medellin Cartel—dominated the cocaine trade into the United States in the 1980s and early 1990s.
As unglamorous as his path was, the quality of his narcotics was said to be of the highest standards. But that was hardly why he succeeded —anyone could have matched his production standards. It is important to understand that a key —if not the most important— element of his success was distribution.
His biggest losses happened at production, and his biggest profits came from distribution. He knew that if he found a way to establish a fail-proof distribution system, he could take over the world. And that was exactly what he did. Despite losing several cannabis farms to military raids, he waxed stronger. The US gave up trying to nip the distribution and instead focused on nabbing him (Escobar), as that was their only reasonable chance of stemming his narcotic invasion. His distribution was that good.
A small observation: business is ultimately a distribution game; the team that wins at distribution ultimately wins the game. Building great product is no good if there is a lack of proper distribution channels, funnels and pipelines. This is a major challenge for a lot of tech-focused companies.
The biggest hack to leap-frogging distribution is communities. Communities aren’t always a group of people who know each other, sometimes it’s different people with interest in a common thing. Apple has an incredible community of users who might not necessarily know or even interact with each other, but are independently important for Apple’s success.
It comes down to selling your value to potential customers who will in turn invest enough interest to catalyze your spread as a side effect.
A local Nigerian example is Paystack and payments in Nigeria. Quickteller used to be the sole gatekeepers of payment processors. To accept payments, merchants needed to pay a non-paltry fee first, before they could get their hands on the Quickteller SDK.
Not to mention, merchants would also need to pay an engineer for the integration. Too much friction. This meant that whatever genius product Quickteller claimed to have built was severely limited in terms of distribution to all the viable potential customers on account of too many bottlenecks and technical cost.
Enter Paystack. They cleverly targeted their product at developers and allowed for a simple plug-n-play library that could be integrated very quickly. They cut out the entry barrier which allowed anyone to freely access and use their API to process payments quickly.
They also pioneered new channels of distribution that enabled non-technical customers utilize their magical product as well. By building one-click plugins for popular CMS (like WordPress and Joomla!), many merchants could integrate their payment gateway without hiring a developer. Thus, expanding the distributive reach of their product.
They didn’t quite stop there. They rolled out payment links that let anyone receive payments by simply using a unique link generated from Paystack. This allowed them expand horizontally to expand their distribution funnel to capture even non-merchants. Invoices could be settled with Paystack.
Of course it was never going to stop there. Soon, they implemented a feature that let anyone set up their own custom ecommerce stores without hiring a developer! Thereby enabling more people start digital businesses with less friction and no cost.
Every iteration of progress in a business should feature a tighter optimization for even more seamless, deeper distribution. Every iteration must cut even more bottlenecks, reduce more friction, and expand the distribution funnel wider.
A brilliant product matters little if it is not backed by a strategy that gets it into more hands with less friction and fewer roadblocks. Distribution is a full spectrum, and not just a point in the journey. It goes beyond meeting customers where they are; it also involves helping them get where they want to be. The business that wins distribution is the one that has figured out where their customers currently are, armed with a plan to help them get where they’re going.
In all modesty, anyone can build a great product, given sufficient incentive and resources; the real edge is who is able to get their products into the most hands as efficiently and effectively as possible. And this is where a lot of businesses struggle.
Any moat that does not translate to a higher fidelity of distribution is probably not as important as thought. Apple’s biggest moats: ecosystem, high quality, and simplicity all translates to —not just more distribution— but a higher fidelity of distribution. This means it is as extremely unlikely that an Apple customer would abandon Apple for competitors, as it is likely that a non-Apple customer would switch to Apple after having a feel of even one product from its vast ecosystem.
Distribution is an immutable law in business. Especially businesses that are intended to be large scale, and high growth —like many startups tend to be. The same is true for deep tech, emerging tech, and innovations. Solutions are only as viable as the intended audience. An interesting pair of examples would be Crypto and AI.
The latter has seen an explosive rise only recently, despite several decades of development, progress and advancement in the sector. This rise has happened in large parts due to distribution-focused companies like OpenAI taking the initiative to lower barriers of entry and providing access to AI on a consumer level. By also building a platform that powers AI products, more apps have been built that could never have been, given the prior entry bottlenecks and infra limitations.
A significant determinant for effective distribution is usefulness: useful to whom, and useful for what? Like with AI, sometimes the particulars and specifics of the utility are not immediately obvious. Why would anyone want to use your product if they cannot tell what it is useful for —and most importantly— how it would be useful to them?
Sometimes effective distribution comes down to cheaper pricing. But pricing —however attractive— means little if the fundamental question of “who is this for” has not been addressed.
This is where Web3 as an industry has been stuck. Until the fundamentals are addressed, it will be difficult to truly find an overwhelming fit like AI has.
The ultimate filter for measuring effective distribution is how many hands you can get your product into —narcotics or a mobile app, distribution does not care. If your distribution efforts are not getting your product to the intended hands, then it is clearly not working.
Know your customers. Ask questions. Sell convenient solutions. A brilliant solution that is technically difficult for the intended user will not be adopted. Humans will generally tradeoff difficulty for convenience, regardless of how much potential rewards the difficulty promises.
Little wonder the hardest part of distribution ironically starts from the product. Who is this for? What is this for? It is the poor knowledge of customers and users that blindly leads businesses off the cliff.
As much as advertising efforts help, it is important to add that the best way to derisk distribution efforts is to build what people want. Not what they might want. Not what they should want. But what they actually want. The most effective distribution is the type that meets the intended people right where they are, and possibly, where they might be next. What sustains it is a different topic for another day.
