The startup world sells a dangerous fantasy: the explosive launch, the viral loop, the hockey-stick chart that signals inevitable success. This narrative is a substitute for strategy. Growth is not a singular event triggered by a silver bullet; it is a complex system, the outcome of a disciplined and often grueling process. As growth expert and entrepreneur Aaron Schildkrout emphasizes, the path to sustainable scale requires moving beyond mythology and confronting the stark mathematics of building a business. The most common failure point is “magical thinking”—the belief that users will simply appear. True growth strategy is the opposite; it’s a deliberate process of architecting a repeatable engine for customer acquisition.
“It’s crucial for leaders to nurture the entrepreneurial spirit within their company. When you do it well you can unwrap hidden value that was previously locked in the system.” In conversation with Vivaldi CCO Tom Ajello, Entrepreneur and growth advisor Aaron Schildkrout reveals the importance of encouraging entrepreneurialism in companies that truly want to thrive. With Aaron’s insights as founder of HowAboutWe and top marketing and data executive at Uber, you’ll be ready to empower your team for the future. https://vimeo.com/283858525 See below for highlights from the conversation:
Q: I’d love for you to start with your experience at HowAboutWe. What’s changed, what’s the same, where the watch-outs are, and just in general you reactions to the space we’re in today.
A: The last 10 years I’ve basically spent working on platforms in marketplaces of various kinds. The first company I created it was called HowAboutWe, it was a online dating site, which was very much a two-sided marketplace. I worked in Uber which is an archetypical marketplace and platform, and I advise many companies and a lot of them are building marketplaces and platforms. I’m personally very attracted to those kinds of businesses and those kinds of projects because of the profound value that they unlock that was previously nascent, hidden, underutilized. The power of building a network of people or institutions that can interact in ways that are facilitated by technology again and again has been shown particularly I think in the last 10 years to facilitate this incredible unwrapping of value that was previously locked in the system. So if you’re an Uber driver, you’re able to spend all this time earning money driving folks around who request through the app, as opposed to in a world where there was an enormous amount of overhead to provide that service which would distract from the creation of that pure value. We also think a lot about participants in the platform contributing to the greater good of the data that gets shared amongst the other participants. To use a very subtle example, every additional ride in Uber provides a ton of additional data about things like routing mapping, pricing, etc., so it can happen in a very obvious way or in deep subtle ways that allow the core infrastructure that powers the platform to get incrementally better.
The Uncomfortable Reality of Startup Growth
The startup world loves a good growth story—the explosive launch, the viral loop, the hockey-stick chart that shoots up and to the right. But this narrative is a dangerous fantasy. Growth isn’t a singular event triggered by a silver bullet. It’s a complex system, an outcome of a disciplined, often grueling process. The hard truth is that most new ventures fail because they substitute hope for strategy, chasing growth tactics without a grounded plan. The path to sustainable scale requires moving beyond the mythology and confronting the stark mathematics of building a business from the ground up.
Confronting the 95% Failure Rate
Let’s start with a dose of reality. According to growth expert Andrew Chen, “Most new companies (startups) fail, with over a 95% chance of not making it.” This isn’t meant to discourage, but to focus. That staggering figure isn’t a matter of bad luck; it’s a predictable result of common missteps: a weak product, a non-existent market, or a flawed growth model. The most successful founders and corporate innovators don’t ignore this reality—they build their strategies around it. They understand that building a resilient brand and business requires a rigorous, evidence-based approach to business strategy and transformation, one that systematically de-risks the venture at every stage.
Avoiding “Magical Thinking” in Growth Projections
One of the most common failure points is what Chen calls “magical thinking.” This is the belief that “users will just show up without a clear, realistic plan for getting them.” It’s the “if you build it, they will come” fallacy dressed up in a pitch deck. This mindset leads founders to overlook the hard work of building repeatable acquisition channels. Instead of architecting a growth engine, they wait for a miracle. True growth strategy is the opposite of magic; it’s a deliberate process of forming hypotheses, testing them with data, and scaling what works. It replaces wishful thinking with a clear-eyed view of the mechanics of customer acquisition.
Ineffective Growth Levers for New Ventures
In the rush to find users, many new ventures pull levers that feel productive but generate very little real momentum. They chase vanity metrics from press mentions or spend precious resources on channels that only work at scale. The problem is a mismatch between the tactic and the stage of the company. Early-stage growth isn’t about broad awareness; it’s about finding a core group of users who deeply love your product and proving you can acquire them profitably. Many of the most popular growth tactics simply don’t serve that primary goal.
The Myth of Instant Virality
The dream of a product that markets itself is seductive, but as Chen notes, “It’s very rare for a product to spread by itself.” True virality is a product of sophisticated design and deep user motivation, not a happy accident. When it does happen, especially in its early, unrefined stages, it can even backfire by feeling spammy and cheapening the brand. Instead of chasing a viral coefficient, the focus should be on creating “product magic”—an experience so compelling that users naturally want to share it. The goal is not forced virality, but authentic advocacy born from a superior brand and customer experience.
Why Press and Business Deals Rarely Convert
Getting a feature in a major publication feels like a huge win, and it certainly can be for brand positioning. However, as a primary driver of user acquisition, it almost always falls flat. Chen points out that a big news article “usually doesn’t bring in enough new users to build a whole business.” The traffic spike is temporary, and the conversion rates are often low. Similarly, big partnership deals often sound impressive but rarely translate into a meaningful, sustained flow of customers. These are tools for amplification, not foundation-building. They work best when you already have a product that converts and a story that resonates.
Rethinking Content, SEO, and Paid Ads for Early Stages
Content marketing, SEO, and paid advertising are powerful channels for mature businesses, but they are often inefficient for new ventures. These strategies require time, data, and significant investment to pay off. As Chen explains, creating content is “usually not a main way to get new paying customers unless the content itself is the product.” An early-stage company simply doesn’t have the domain authority to rank in search or the conversion data to optimize ad spend effectively. The initial focus must be on channels that offer direct, immediate feedback from a specific target audience.
A Framework for Realistic Growth Planning
If magical thinking and ineffective levers are the problem, what’s the solution? A framework grounded in reality. It starts by trading vague ambitions for concrete mathematics and focusing on the core product experience as the ultimate source of growth. This approach doesn’t look for shortcuts or hacks. Instead, it builds a durable, predictable engine for growth by connecting high-level goals to the daily activities required to achieve them. It’s about designing a system, not just launching a product.
Introducing “PainMath” for Grounded Projections
To escape magical thinking, Chen proposes a simple but powerful exercise he calls “PainMath.” The process is straightforward: “Pick a big goal… Figure out exactly how many people need to join your product every day to reach that goal.” This forces a confrontation with the raw numbers behind your ambition. If you need 100 new customers a day, where will they come from? What channels will you use? What will your conversion rates need to be? This exercise quickly reveals the gap between your goals and your current capabilities, turning an abstract target into a concrete operational challenge that your team can solve.
The Power of “Product Magic” Over Growth Hacks
Ultimately, sustainable growth is not about the tactics you use but the value you create. The most potent growth engine is a product that people genuinely love. As Chen concludes, “The key is to understand *what* makes your product special and then quickly move from hopeful ‘magic’ to realistic plans.” This “product magic” is the unique, compelling core of your offering. Your entire growth strategy should be built around delivering that magic to the right people and creating an experience that they can’t help but share. Everything else is just noise.
Q: How do businesses weather the storm? How do they participate in a world that basically Gen Z is creating around us?
A: The way that you work as an organization has a massive impact on whether you’re able to unlock the value that’s sitting within your organization. Really amazing entrepreneurial innovative execution and wannabe innovation is night and day. If you get it right, it will unlock amazing potential; if you get it wrong, you will have mediocre ideas that fall flat. It’s subtle: getting that right. Unlocking that entrepreneurial spirit inside of a company is very hard, but that is the critical thing. You have to find a way to work that unlocks entrepreneurialism because it is entrepreneurs – people with ideas and vision – that are incentivized and supported to create breakthroughs with the assets they have at hand. That is how innovation occurs, again and again. It’s hard for companies that make money and increase through incrementalism, through the steady effort of cutting costs, increasing margins, and slowly staying ahead of the game. That is the death knell of innovation. You have to talk to your customers. The worst thing is a bunch of people sitting in a room thinking they have a great idea and spending a long time working on that idea and getting it right and never talking to the people who actually matter – customers.
The Niche Strategy: How to Win by Starting Small
The prevailing wisdom in business often echoes a single mandate: scale at all costs. We’re told to chase massive, total addressable markets and build solutions for everyone. But this approach is a trap. It mistakes breadth for impact and noise for momentum. True, sustainable growth doesn’t come from trying to be everything to everyone. It emerges from the opposite direction: becoming absolutely essential to a small, well-defined group of people. The most resilient brands aren’t built on vast, shallow foundations; they are built by first dominating a single, strategic niche and then methodically expanding from that unshakable core of loyalty and expertise.
Why Dominating a Niche is the Foundation for Growth
Think of your initial market as a beachhead. Your goal isn’t to conquer the entire continent at once, but to establish a secure and defensible position. By focusing on a specific niche, you can pour all your resources into solving one problem better than anyone else. This intense focus allows you to build a product or service that feels like magic to your target customers, creating passionate advocates who become your most effective marketing engine. Most successful companies begin this way, building the best solution for a small market and then riding the wave as that niche grows. This is the essence of modern brand and innovation strategy—creating a category-defining experience for a select few before earning the right to serve the many.
The Startup’s Advantage: Exploiting Markets Incumbents Ignore
Large, established corporations are prisoners of their own scale. For a company generating billions in revenue, a $20 million market opportunity is a distraction, not a priority. Even if they captured 100% of it, the impact on their bottom line would be negligible. This creates strategic blind spots—fertile ground where new ventures can thrive without inviting immediate competition from giants. This is the startup’s inherent advantage. You can dedicate yourself to these overlooked markets, building deep relationships and a tailored solution that an incumbent would never have the focus or incentive to create. While it’s still unclear if a wave of “AI-first” startups will disrupt industries as the internet did, the principle remains the same: leveraging new technology and data solutions to win in niches that incumbents deem too small to matter is a powerful path to growth.
Q: What’s the common thread across all the CEOs you’ve helped?
A: There’s some fundamental hunger, core drive, ambition to make something and have something that’s theirs manifest in the world that empowers them to deal with the incredible challenges that come with this very particular job. It is more than one order of magnitude. It’s almost like a different dimensional of hardness to run a company – like really run and build a company – than it is to operate at a very senior level. You need to have this unquenchable need to create.### Essential Qualities of Transformational Leadership
The Ability to Continuously Learn and Adapt
The most effective leaders today don’t just manage change; they cultivate an environment where adaptation is the default setting. The old model of incremental improvement is no longer enough to stay ahead. As Aaron Schildkrout points out, true innovation comes from unlocking the “entrepreneurial spirit inside of a company.” This means moving beyond rigid hierarchies and empowering your teams to think like founders. It requires creating systems that incentivize and support people with ideas and vision, allowing them to create breakthroughs with the assets they already have. This shift requires a fundamental change in how teams are structured and motivated, focusing on building an organizational culture that thrives on curiosity and experimentation rather than just execution.
Balancing Big-Picture Strategy with Critical Details
A powerful vision is only as good as your organization’s ability to execute it. Transformational leaders are masters of toggling between the 30,000-foot view and the on-the-ground reality. They understand that, as Schildkrout notes, “the way that you work as an organization has a massive impact on whether you’re able to unlock the value that’s sitting within your organization.” The gap between “wannabe innovation” and real, impactful execution is enormous, and it’s closed by leaders who obsess over the operational details that bring a strategy to life. This isn’t about micromanagement; it’s about architecting a system where great ideas can survive and thrive, ensuring your business strategy is deeply connected to the daily work of your teams.
The Drive to Motivate and Inspire Teams
Beyond the frameworks and processes, transformational leadership is fueled by a profound, personal drive. It’s what Schildkrout describes as a “fundamental hunger, core drive, ambition to make something… manifest in the world.” This isn’t a manufactured enthusiasm; it’s an authentic and relentless need to create and build. This intrinsic motivation is contagious. It’s what empowers leaders and their teams to push through the immense challenges that come with building something truly new. When a leader’s passion is genuine, it gives the entire organization the resilience to turn ambitious ideas into market-defining brand innovations and experiences, creating a shared sense of purpose that transcends job titles and quarterly targets.
Q: What is the new business world, the new set of business dynamics? What are the promises they offer?
A: Unlock hidden value. Fractionalize that value into the smallest usable pieces that are possible so that people can specialize and do the thing they’re great at, so that tech can take over and do the things that don’t require people, with a lot of guardrails to make that safe for our children and our planet. Create new forms of art that wouldn’t otherwise have existed. Massive efficiency gains for everybody, more access to things we wouldn’t have had previously. Empowering people to become creators and entrepreneurs. Transforming industries that are less obvious targets for the tech set – every industry on the planet is ripe for disruption along these lines. That will bring more efficiency and better quality of life to those people working there. Tune into more of The Business of Platforms podcast here. If you’d like to learn more about Vivaldi’s platform strategy offering, contact us at hello@vivaldigroup.com.
The AI-Powered Battlefield: Where Incumbents and Innovators Collide
The narrative of technological disruption often follows a familiar script: a nimble startup outmaneuvers a slow-moving giant. But generative AI isn’t following the script. Instead of a wave of “AI-first” disruptors toppling giants, we’re seeing the giants themselves absorb AI into their core, creating an entirely new competitive dynamic. The battlefield isn’t about who builds the best standalone AI, but who can embed it most effectively into existing ecosystems. For incumbents, AI has become the ultimate defensive moat, reinforcing their market dominance by integrating intelligence directly into the products and platforms billions of users already depend on. This shift demands a new playbook, one focused not on isolated innovation but on systemic integration and strategic defense.
How Incumbents are Leveraging AI for Market Dominance
Established leaders like Microsoft, Google, and Meta are winning the first chapter of the AI story by treating it as a powerful ingredient, not a final product. They are weaving generative AI capabilities into their existing software suites, search engines, and social platforms, instantly delivering value to a massive, captive customer base. This strategy transforms their scale from a liability into an insurmountable advantage. Each new AI feature strengthens the entire product ecosystem, making it harder for users to leave and more difficult for startups to find a foothold. The fight is less about a single killer app and more about which ecosystem provides the most seamless, intelligent, and integrated experience across a user’s entire digital life.
Integrating AI into Existing Product Ecosystems
The true power play for incumbents is using their vast distribution channels to deploy AI at scale. When Microsoft integrates Copilot into Office 365 or Google embeds AI into its search and cloud services, they aren’t just launching a new feature; they are fundamentally upgrading the value proposition of their core offerings. This approach creates a powerful feedback loop: more users lead to more data, which in turn refines the AI models, making the products even more indispensable. For leaders at large organizations, the lesson is clear: AI strategy cannot exist in a vacuum. It must be deeply intertwined with your core brand and business strategy, designed to amplify the value of what your customers already trust you for.
The Strategic Rise of Open-Source AI
While a few giants dominate the proprietary AI landscape, a powerful counter-movement is gaining momentum: open-source AI. Companies like Meta are making significant investments in models like Llama, not just for altruistic reasons, but as a strategic hedge. By fostering a robust open-source community, they prevent a future where the entire AI ecosystem is dependent on a handful of closed-source providers. This move democratizes access to powerful AI tools, allowing a broader range of companies to build and innovate without being locked into a single vendor’s ecosystem. It’s a calculated play to ensure the market remains competitive and to prevent the kind of platform monopolies that defined previous tech eras.
Why Companies are Hedging Against AI Monopolies
The push toward open-source AI is a direct response to the risk of over-reliance on a few key players. For many organizations, building their future on a proprietary model from a competitor or a single tech giant is a strategic vulnerability. Open-source offers an alternative path, providing greater control, transparency, and customization. It allows companies to build their own specialized AI solutions on a solid foundation without paying a premium or ceding control to a third party. This strategic diversification is becoming a critical component of any forward-thinking AI and new technology strategy, ensuring that organizations retain their autonomy and can adapt as the AI landscape continues to evolve at a breakneck pace.
New Challenges for “AI-First” Startups
The internet boom was fueled by startups that built new empires from the ground up. The AI revolution, however, presents a different challenge. Many “AI-first” startups are discovering that having a powerful model is not enough. Without the distribution channels and existing customer relationships of the incumbents, they struggle to achieve scale and differentiate themselves in a crowded market. The path to disruption is no longer as clear-cut. Startups are finding that they must either find a highly specialized niche that incumbents have overlooked or partner with the very giants they once sought to displace, creating a complex ecosystem of co-opetition.
The Unclear Path to Disrupting Established Industries
Unlike previous technological shifts where new companies could simply build a better product, AI’s value is often realized when integrated into existing workflows and data streams. This gives incumbents a massive home-field advantage. A startup might have a superior algorithm, but a large enterprise has the historical data, customer trust, and integrated systems to make AI truly effective. This reality is forcing a strategic pivot for innovators. The most successful new players will likely be those who don’t try to replace incumbents but instead build essential tools and platforms that help established companies leverage AI more effectively, becoming critical partners in their digital transformation.
Global Competition and the Future of Innovation
The race for AI supremacy is not just a corporate battle; it’s a global one. The dynamics of innovation are being redrawn along geopolitical lines, with different nations adopting fundamentally different strategies for long-term dominance. The historical models of public-private partnership that fueled technological breakthroughs in the past are being re-examined and, in some cases, completely reinvented. As nations like the U.S. and China invest heavily in AI, their distinct approaches to research, data governance, and long-term investment will shape the technological landscape for decades to come. Understanding these global currents is essential for any leader aiming to build a resilient and adaptive growth strategy.
The Shifting Landscape of Technological Leadership
The global balance of technological power is in flux. While Silicon Valley has long been the epicenter of innovation, new models are emerging that challenge its dominance. The effectiveness of a nation’s innovation engine now depends on its ability to align government, academia, and private industry toward a common goal. As AI becomes more integrated into national infrastructure and economic competitiveness, the countries that can build the most cohesive and forward-thinking national strategies will likely produce the next generation of breakthrough technologies and market leaders. This requires a level of coordination and long-term vision that goes far beyond quarterly earnings reports.
Addressing the “Broken” Innovation Partnership in the US
The United States’ historical success in technology was built on a powerful synergy between government-funded research, university-led discovery, and corporate commercialization—a partnership that gave us game-changers like the internet and GPS. However, many experts now argue this collaborative engine is fractured. Re-igniting this partnership is critical for maintaining a competitive edge. It requires a renewed commitment to foundational research and a clearer pathway for translating academic breakthroughs into market-ready innovations. For business leaders, this means actively seeking out and fostering collaborations with universities and public sector initiatives to drive the next wave of business transformation and secure a stake in future growth.
Understanding China’s Long-Term AI Strategy
China’s approach to AI is characterized by its long-term perspective and centralized coordination. With the ability to execute on 10- to 20-year strategic plans, a massive population to fuel its talent pipeline, and access to vast datasets, China is methodically building a formidable AI ecosystem. This state-driven model allows for massive, sustained investment in key areas of AI research and infrastructure. This patient, strategic approach stands in contrast to the more market-driven, and sometimes short-term, focus of Western economies. Global companies must recognize that they are not just competing with other firms, but with a nationally coordinated strategy designed for long-term technological leadership.
Identifying the Next Wave of AI Opportunities
Beyond the current focus on large language models and generative applications, the next frontier of AI value creation lies in the underlying infrastructure and the systems that make AI reliable. The complexity of modern computing hardware is exploding, creating a need for new software layers to manage it all. Simultaneously, as AI is deployed in more critical functions—from finance to healthcare—the demand for accuracy and verifiability is becoming paramount. The companies that can solve these fundamental challenges will build the foundational platforms upon which the next generation of AI applications will be built, representing a massive and still largely untapped opportunity.
Building the “Operating System” for AI Infrastructure
As AI workloads become more complex, running on a diverse array of specialized chips (CPUs, GPUs, TPUs), the need for a unifying software layer—an “operating system” for AI—is becoming urgent. This OS would manage and optimize how AI models run across different hardware, making development faster, cheaper, and more efficient. This is a foundational infrastructure opportunity, similar to the rise of cloud computing platforms a decade ago. Companies that can successfully build and scale this new operating layer will hold a position of immense strategic importance, enabling innovation across the entire AI ecosystem and capturing significant value in the process.
The Critical Need for Reliable and Verifiable AI
One of the biggest hurdles to the enterprise adoption of generative AI is the problem of “hallucinations”—the tendency for models to generate confident but incorrect information. For mission-critical applications where accuracy is non-negotiable, this is a deal-breaker. The next major breakthrough will be the development of AI systems that are not only powerful but also reliable, verifiable, and trustworthy. This involves creating new methods for fact-checking AI outputs and ensuring their reasoning is transparent. Solving this trust deficit is the key to moving AI from a promising novelty to an indispensable tool for the most important decisions a business makes.
Frequently Asked Questions
The post criticizes “magical thinking” in startups. How does this concept apply to a large, established company trying to innovate? In a large organization, magical thinking looks a little different. It’s the belief that a major digital transformation initiative or a new product line will automatically succeed just because it has a big budget and executive support. It’s launching a new app and assuming customers will find it and use it without a rigorous, data-driven plan for acquisition and engagement. The principle is the same: you must replace hope with mathematics and map out a realistic, repeatable engine for getting your innovation into the hands of the right customers.
You advocate for a “niche strategy,” but my company is built for scale. How can we adopt this mindset without sacrificing our core business? Adopting a niche strategy doesn’t mean abandoning your scale; it means using your scale more intelligently. Instead of trying to be everything to everyone, identify a high-value, underserved customer segment within your broader market. Then, dedicate a focused team to creating a hyper-tailored solution just for them. This allows you to build deep loyalty and create a testing ground for innovations that, once proven, can be integrated back into your larger offerings. It’s about creating pockets of intense value to defend and expand from.
What’s the first practical step a leader can take to unlock the “entrepreneurial spirit” in their teams? Start by creating a “safe harbor” for a small, dedicated team. Give them a specific customer problem to solve, not a predetermined solution to build. Grant them a clear budget, a reasonable timeline, and the authority to operate outside of the usual corporate bureaucracy. The most critical part is empowering them to speak directly and frequently with actual customers. This shifts their focus from internal processes to external value creation, which is the very heart of entrepreneurialism.
As an incumbent, what is the biggest mistake we could make when integrating AI into our existing products? The biggest mistake is treating AI as a shiny new feature bolted onto the side of your product. Thinking of it as just a chatbot or a summarization tool misses the entire point. The real strategic advantage comes from weaving AI into the core fabric of your value proposition, making your existing service smarter, more predictive, and more personalized. Don’t just add AI; use it to amplify what your customers already trust you for.
The post mentions the importance of reliable and verifiable AI. Why is this more critical than simply having the most powerful model? For any serious business, trust is a more valuable asset than raw power. A highly creative AI that confidently makes things up is a massive liability when used for financial modeling, customer support, or strategic planning. A reliable AI, one whose outputs can be verified and trusted, becomes a true partner in decision-making. Long-term value isn’t created by the model that can generate the most impressive demo, but by the one that consistently delivers accurate, dependable results when the stakes are high.
Key Takeaways
- Shift from Growth Hacking to Growth Architecture: Sustainable growth isn’t found in viral tactics or press mentions; it’s engineered. Build a disciplined, repeatable system for customer acquisition that is grounded in real numbers and a product experience so compelling it creates its own momentum.
- Win by Being Indispensable to a Few: Instead of chasing massive, undefined markets, focus all your resources on solving a specific problem for a select group better than anyone else. This creates a core of passionate advocates and a defensible market position from which you can methodically expand.
- Use AI to Amplify Your Core, Not Replace It: The strategic advantage in AI comes from embedding it into your existing ecosystem to enhance the value you already provide. The next frontier is building the reliable, verifiable infrastructure that makes AI a trusted tool for critical business decisions.
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