The Pyramid of Standards

We've talked before about standards being whatever you treat as normal. There's one more thing worth adding.

Standards come in two kinds.

The first kind — the ones you set yourself. Deliberately. These are your personal standards: how to live, how to work, how to treat yourself and others.

The second kind — the ones you agreed to. Or didn't. Standards of the market, the industry, the environment around you. Set by someone else — and now they define the rules of the game.

And that's where it gets interesting.

The market pyramid

Picture a pyramid. Not personal this time — a market pyramid.

Top of the pyramid — the one who sets the standards.

This is the market leader. The one who defines the norm for everyone else. Take the soft drinks market. Coca-Cola sets the standard. The colour the drink should be. The sweetness. The taste. The shape of the bottle. The emotion the ad should land. Everyone else looks at Coca-Cola and either reaches for that standard or loses.

When you're at the top, you don't follow the rules. You write them.

Middle of the pyramid — the one who follows the standards.

This is number two, three, five on the market. Pepsi is the classic case. They know the rules, they play by them, they compete in the same category — and that's how they stay in the game. They don't set the norm. They don't break it either. They exist for the market.

Base of the pyramid — the one who tries to play their own game against the standard.

These are all the other drinks — lemonades, regional sodas, local brands. They're not bad. Sometimes they taste better. But they're trying to sell a different format to a market that's used to Coca-Cola. At best, they take five percent. The other ninety-five stays with whoever follows the established standard.

And there's one more level — outside the pyramid entirely.

The people who don't even know the market has standards. Who don't understand the rules. Who watch from outside and think, «I want to get into this market». For the market, they don't exist — because they haven't learned the language the market speaks.

First step — learn the standards. Second — match them. Third — beat them.

How one raised standard takes the whole market

Now a personal story. In 2009 I built the largest online store in Ukraine for wireless internet equipment. We became market leaders. It happened because of one decision — we raised the standard.

What was the standard before us?

When a customer bought wireless internet equipment, they didn't know whether it would work at all. In a sense, it was magic. Whether the carrier's signal would reach their house depended on terrain, on trees, on tall buildings nearby, on signal reflection. Nobody could guarantee it in advance.

By law, the customer had the right to return equipment within fourteen days. That was the standard. Every seller worked the same way — fourteen days for returns.

I understood that wasn't enough. The customer felt the risk and often simply didn't buy.

So I made a move no competitor followed.

We gave customers thirty days to test it. Free. The site ran a promotion: «Try it for thirty days, free». We told them: «If the internet doesn't work — we refund everything. Including your shipping. Including the bank fee. All of it».

A customer could use the equipment for twenty-nine days and return it on day thirty. No questions.

About ten percent came back. Ninety percent stayed — because everything worked for them. But those ten percent we refunded without arguing became our best advertising.

Not one competitor had the will to raise the standard. Everyone stayed on the legal fourteen days. We raised the bar — and took the market.

Over the company's lifetime we connected around one hundred and fifty thousand subscribers to wireless internet.

One raised standard — the whole market.

Four questions for decisions

When you're facing a hard business decision and don't know what to do — ask yourself a few questions.

«If I make this decision — do I strengthen my position on the market or weaken it?»

«Am I raising standards or lowering them?»

«Am I going to be the one who matches the market norm — or the one who sets a new bar?»

«Am I ready to set a new standard right now — or do I still need to catch up with the leader first?»

These aren't abstract questions. It's a concrete framework that gives the answer fast in most cases.

The ones who missed the rising bar

Standards don't stand still. The world changes, and the norms change with it. The ones who don't see it get knocked out. Not in a year or two. Sometimes in months.

Nokia. In 2007 the company controlled more than half of the global mobile phone market. Fifty-one percent. That same year Apple released the first iPhone — with five percent share. The outcome looked obvious: the giant would crush the upstart.

Six years later Nokia had lost ninety percent of its market value. In 2007 it sold four hundred and sixty-three million phones. In 2013 — four and a half million. Its smartphone share fell below three percent. The business was sold to Microsoft for nothing.

What happened? Apple raised the standard for what a phone should be. Not buttons — a touchscreen. Not carriers deciding what's on the phone — the user. Not features — apps. A higher bar. And a customer who tried it once didn't want to go back.

Nokia saw all of it. Their engineers proposed moving to Android. Their analysts showed the falling sales. But leadership believed the world wouldn't change. That their customers loved buttons. That their reputation would protect them from any upstart.

It didn't. Because when the market standard rises, old reputation is worth nothing.

Kodak. An even sharper story. In the mid-nineties the company was worth twenty-eight billion dollars. Eighty-five percent of the world camera market. Ninety percent of the film market. The phrase «Kodak moment» meant a moment worth keeping.

And the strangest part — digital photography was invented at Kodak. In 1975 an engineer there, Steve Sasson, built the world's first digital camera. A prototype the size of a toaster. Leadership told him: «That's cute. Just don't tell anyone».

They were afraid of cannibalising their film business. And that fear ended up killing the entire company.

Thirty-some years later, in 2012, Kodak filed for bankruptcy. The company that invented the standard for digital photography died from it. Because it wouldn't raise its own bar.

The ones who raised the bar above everyone

Tesla came to the car market when the standard was the internal combustion engine. Everyone knew — a car is four wheels, a motor, a steering wheel. Tesla didn't build another one of those. It just raised the bar — higher than anyone else could afford to.

A car can run on electricity — no noise, no exhaust, instant acceleration. A car can drive itself on the highway. A car can get new features over the air, the way a phone updates apps. A car can go zero to sixty in two seconds — what used to take a million-dollar supercar.

This wasn't «a different game». It was the same game — on a fundamentally higher level. And once the buyer tried that standard, every other car looked outdated. Today every major carmaker is forced to catch up with what once sounded like a crazy idea.

Netflix started as a DVD-by-mail service. The market standard was Blockbuster — a giant chain of video rental stores. To watch a film you had to get dressed, leave the house, drive to the store, pick a tape, pay, bring it home, watch it, and remember to return it on time — or pay a fine.

Netflix raised the bar. No going anywhere. Nothing to return. No fines. Any film available right now, in one click, any time of day. The same industry — watching a film at home. Just on a fundamentally higher level of service.

Today Blockbuster doesn't exist. Netflix has more than two hundred and fifty million subscribers worldwide.

Airbnb came to the hotel market without owning a single hotel. The standard was Hilton, Marriott, Hyatt. A standard hotel room: small space, two beds, a TV, a mini-bar. The same in every city in the world.

Airbnb raised the bar on what accommodation could look like when you travel. It can be a full apartment with a kitchen — where you can cook your kid a proper meal instead of ordering room service. It can have a washing machine — for a long trip. It can have several rooms — so the whole family stays together instead of in three separate rooms. It can be a house with a garden, a loft in the city centre, an apartment with an ocean view.

The same industry — somewhere to stay in another city. Just on a fundamentally higher level of comfort and choice. Today Airbnb is worth more than most traditional hotel chains.

What do Tesla, Netflix, and Airbnb have in common? They didn't try to become the second Hilton, the second Blockbuster, the second BMW. And they didn't invent a brand-new industry. They raised the bar so high that the old standard stopped being acceptable. That's how they took the market.

The standard forming right now

Right now, in front of us, a new standard for running a business is forming — the use of artificial intelligence.

It's not a fashion. It's math. A company that has rolled out AI in sales, marketing, customer support, and operations runs at a fraction of the cost of one that hasn't. One employee with the right AI tools does the work of five.

That means your competitor who has mastered AI has a cost base that's a fraction of yours. They can offer the same price and still earn. Or drop the price and take your customers. Or hold the price and reinvest the difference into marketing and growth.

In every one of those scenarios — you lose. Not because you're a bad entrepreneur. Because you didn't adopt the new, higher standard.

That's the standard today. In two years it won't be an advantage — it will be the minimum condition for staying on the market. The way today's minimum is having a company website or accepting card payments.

The way to stay in the game

The only way to stay in this world is to keep raising your own standards.

You don't need to reinvent the bicycle. Look at the bicycles that already exist. Ride a few. Pick the best. Add something of your own. Build your version — on top of what already works. And always — one step above the existing standard.

The fastest way to raise your standards is to find a teacher. Someone already where you want to go. Don't invent — learn. Don't burn years on mistakes someone has already made before you.