Myths vs. Reality: What does it really take to launch a new business?
Patrina Mack, founder and Managing Partner of Vision &Execution, has 20 years of marketing experience in both small entrepreneurial and large corporate organizations. She has extensive experience in business-to-consumer and business-tobusiness marketing strategy and implementation. Her industry expertise spans the Internet, telecom, software, financial services, and consumer products industries. She has been instrumental in key product innovations in new and emerging markets, and has been responsible for many product and process improvements for Fortune 500 companies.
Ms. Mack has held product marketing positions with AirTouch Communications (now Vodafone), where she was responsible for identifying market opportunities for PCS wireless, and with NetGravity (now DoubleClick), where she was responsible for hosted interactive advertising solutions. In previous consulting roles, Ms. Mack has worked with many Fortune 500 companies, including: Adobe Systems, Allen-Bradley Company, Bankers Trust, Del Monte, Mellon Bank, Microsoft, Nabisco Brands, Pacific Bell, Silicon Graphics, Visa. Ms. Mack’s affiliations include
• President (2004-2005), NorCal PDMA (Northern California Product Development & Management Association)
• Member of the Advisory Board, TechCoire
Myths vs. Reality: What does it really take to launch a new business?
Vision & Execution has examined entrepreneurs’ beliefs about how to be successful in launching a new business, and the success rate of those beliefs for new and existing businesses. Some of the questions asked were:
• How do you prioritize where to invest development funds?
• How often should strategy be revisited?
• How important is first-to-market advantage?
• How much process is needed in the product development life cycle?
• Does customer input matter?
We identified 5 myths about launching new products or businesses and the reality behind successful companies.
Myth #1: If we build something cool, venture capitalists will fund it, people will want it, and eventually we’ll figure out how to make money.
Quantifying the value of the functionality to the customer and the revenue it can generate for your firm not only helps you prioritize your limited development funds it also maximizes your revenue potential. In reality, identifying products that can realistically generate a substantial profit is critical to getting VC funding. Investors today need conservative and realistic forecasts demonstrating potential success in a sizeable addressable market. Products must not only be cool – they must have a competitive advantage delivering a value proposition customers will pay for. Companies that invest in validating customer demand and using rigorous financial analysis to assess rofitability have proven themselves more likely to gain market share and meet or exceed revenue projections.
Reality #1 – If we build something people want and are willing to pay for, we’ll make money.
Myth #2: Success is dependent upon a constantly evolving business model.
Companies that have not adequately thought through their business model and completed rigorous financial analysis spend more time taking corrective action and rethinking their business model. This diverts precious time and resources away from executing strategy. Companies that develop a stable business model and strategy based on a keen understanding of future trends at the start enjoy faster time to market and incremental market share gains. Companies that spend less time changing their business model because they got it right at the beginning have proven to be more likely to meet or exceed their revenue projections.
Reality #2 – Success is dependent on a business model with well designed, stable corporate and product strategies.
Myth #3: Being first to market is everything!
This is common folklore. The obvious drawback is that companies whose primary motivator is being first to market frequently cut corners. Consider these critical questions: «Are you best to market?» «Have you timed the market?» These determine the right time to launch your product. Introducing products faster may provide an early market share advantage but it is rarely sustainable. Being first to market has proven an unreliable predictor of meeting revenue projections. Companies often they find themselves making price concessions to make up for missing features or inadequate performance. It is also possible to be too early. Despite being first to market some companies fail to realize sales goals because they neglect to ensure that their product or service overcomes the inherent resistance to a product that is ahead of its time.
Reality #3 – «Being first to market» does not ensure success. Having a clear strategy for which products to introduce and their introduction timing does.
Myth #4: Market success depends upon rapid iteration rather than formal process.
Popular current thinking is «Rapidly prototype, iterate often, and design robust architecture later». This approach has as many issues as its heavyweight old school counterpart of «Define thorough requirements first, build cross functional consensus next, and then build out a robust architecture and a comprehensive solution».
We’ve seen both extremes fare about the same in terms of initial market share and revenue goals, though the “define thoroughly” camp has proven much more likely to meet or exceed revenue projections. Process choice is often a matter of culture or the life cycle stage of the company. For most companies the product development cycle has evolved from a lengthy sequential process to a more concurrent, highly flexible process. Regardless of your preference, processes are being compressed and many shortcuts are being taken in the product development process, frequently at the expense of meeting customer expectations. Important prioritization steps, such as portfolio management or even product road maps, seemingly are missing from the product development process. As a result, the development budget may be wasted on developing functionality with little commercial value. Companies that invest in creating a common vision for what the product should deliver in order to make money are more successful. All companies regardless of size or evelopment philosophy benefit from incorporating more robust portfolio management, or better prioritization, into their processes to help achieve their profitability goals. This is true even for early stage companies with only one product; understanding where your growth will come from through a clear product road map is critical to follow-on funding rounds.
Reality #4 – Rapid iteration requires process considerations to be a viable development methodology.
Myth #5: Innovation comes from within, not from customers.
Founders of young companies often believe their product category is so new that customers cannot understand it and cannot help identify an innovative vision for the product. Engineering driven companies frequently believe breakthrough ideas occur only as a result of a deep, technical understanding of a given technology. This belief drives the limited application and use of customer input. By not engaging with customers early and often, companies can miss evolving customer needs or critical usability factors that can make or break an innovative new product. Furthermore, engaged customers can often identify new uses for a new product expanding your overall market opportunity. In contrast, the companies that invest time in talking to potential and current customers show an attractive success rate measured by increased market share and faster time to market.
Reality #5 – Customers can help drive innovation - all you have to do is ask, listen and interpret. More importantly, delivering what customers need gives you the most profitable ideas.