Tool Thinking Vs. Problem Thinking: The 2 Ways to Think About Your Business

There are 2 ways to think about your business:

  1. Tool Thinking
  2. Problem Thinking

Tool Thinking is dangerous and backwards. Short term. Doesn’t endure.

It’s also how most businesses think.

Tool Thinking is when you start with the solution / product before deeply considering the problem you want to solve.

For example:

  • Startup: “I want to start a paid newsletter” (Substacker)
  • Business owner: “I sell an SEO course” (SEO trainer)
  • Big business: “We make film for cameras” (Kodak)

Why is Tool Thinking bad?

It fools you into solving a superficial, short term, and inferior version of a problem.

This leaves you stuck with 5 major challenges:

  1. Nearly impossible to innovate
  2. Commoditization comes quicker (you can’t differentiate from competitors)
  3. Word of mouth is harder
  4. Less impact and less profit
  5. You get bored

Let’s look at Kodak, for example.

Kodak used Tool Thinking. They thought they made film. Making film led to amazing profits and helped them become a world class company. It was the core of their business:

If you were to ask Kodak in 1995 what they did, they’d say, “We make film! Humans use millions of rolls of film a day. We simply fill that need with the best film ever created!”

Tool Thinking tricked Kodak into thinking they were solving the right problem.

Turns out, 2 things were true about Kodak’s business:

  1. No one cared about film
  2. Everyone bought film

People wanted to preserve their memories and share them with people. Film just happened to be the best way to solve that problem at the time.

So what happened when digital cameras got popular? Kodak went bankrupt. They were overcommitted to the tool they’d built their company around.

What would have happened if they had been overcommitted to “preserving memories and sharing them” instead? They would have invented the digital camera and Instagram.

Instead of having “we make film” at the core of their business, it would have looked like this:

Quick Sidenote: The craziest part of the Kodak example is that they actually DID invent the digital camera! An employee named Steven Sasson presented it to his bosses in 1975. They were unimpressed. In 1989, while still at Kodak, he also invented the first DSLR camera. The marketing department squashed it out of fear it would cannibalize film sales. Tool Thinking!

Tool Thinking has 3 fatal flaws:

  1. You never gain clarity on the problem you’re solving due to premature focus on a particular solution.
  1. You overcommit to your primary product.
  1. You avoid regularly asking the question: “What is the best possible way to solve this problem?”

But there’s an alternative way to think about your business—Problem Thinking.

Problem Thinking arises from…

  1. A strong belief about how things are or should be
  1. Selecting one primary problem to solve that would make your belief reality

Why is Problem Thinking better?

It guides you to creating a unique and innovative product that endures longer, works better, and is more profitable.


  1. Forces innovation
  2. Better profit and impact  
  3. Solves the problem better than it’s ever been solved

For example, SpaceX uses Problem Thinking.

Their primary domestic competitor, ULA, doesn’t.

Ask ULA what they do and they’d say, “We make rockets to fly government stuff to space.” (AKA: Tool Thinking)

This means we can predict what will eventually happen to ULA (and any company that thinks like this):

  1. Overcommitment to core product
  2. Entrenchment
  3. Doubling down on legacy
  4. Overrun by competition
  5. Will go bankrupt

SpaceX on the other hand has:

  1. A core belief about what should be (Humans should live on multiple planets)
  1. Identified a key problem preventing it from being (It’s too expensive to get to other planets)
  1. Created the best solution that’s ever existed for solving that problem (Reusable rockets that make space travel cheaper)

Thinking like SpaceX (Problem Thinking) naturally innovates and creates magic.

Thinking like ULA and Kodak (Tool Thinking) naturally doesn’t.

Note: Some refer to Problem Thinking as First Principles thinking. But I think that concept misidentifies the magic. “First Problem Thinking” might be more accurate.


  1. Start with a core belief
  2. Identify one problem preventing that belief from being reality
  3. Make best thing that’s ever existed to solve that problem
  4. Hold solution with an open hand
  5. Non-stop ask, “What’s the best possible way to solve this problem?”

Here’s a short video I recorded to show you how we’re applying this concept at Growth Tools:

After you’ve watched it, leave a comment and let me know: is your business using Problem Thinking? If so, what’s your core belief and big problem?