Phoenix Business Journal: On 9/11, we’re reminded that the unthinkable can happen

Lots of things come to mind on September 11th. The bravery of the first responders, the way the country came together after the attacks, the changes in how we live our lives every day now because of what happened. The most important lesson that we learned was that “On 9/11, we’re reminded that the unthinkable can happen.

Startup Lesson Learned 5: Understand the Need, Focus on the Solution

10_Tech_Startup_Lessons_Learned-1_thAbout the Series “10 Tech Startup Lessons Learned”
PADT is a company focused on helping companies bring their physical products to market. As “We Make Innovation Work” for our customers, we learn a lot about what does and does not work in technology startup companies. In addition, we were once a startup ourselves and we now participate in Angel investing.  All of this has taught us a lot of valuable lessons.
In this series we will share some of those lessons learned and explore the basic concepts and ideas that will help startups overcome the odds and become successful.This posting is the second installment for our series. The previous postings were:

We hope that you find it useful and we look forward to sharing our thoughts on this topic with you.

It has been some time since we have added to this series, mostly because we have been busy working with companies both large and small helping to make their innovation work.  Its good to be busy.  We have also become further involved with several new startups by providing services, mentoring, and angel investing.  All of those experiences reinforced an important lesson we have learned through the years: you must have an honest and deep understand of the need in the marketplace, and your focus must be on finding the best possible solution for that need.

Need: What it is, How Much, and How Many

A technology startup is created as a business that uses some sort of technology to solve some sort of need in the market.  The need may already be met by existing solutions, it may be unmet, or it may even be a need that no one knows they have.  So first, find a need.  That is where you start.  Define the “Why” for your technology.  Then make sure that those who want that need met are willing to pay more for meeting that need than it costs you to provide the solution – profit.

People want coffee.  They will pay around $4.35 for coffee. It costs you $0.50 to make and serve a cup– profit. Switch out coffee with any other need and the equation is the same.

It is also a good idea for the need to be one that is large enough that the risk of doing the startup is counterbalanced by the possible return.  The old higher risk requires higher potential rewards equation. Taking our food example a bit too far, there are people who want Donkey Milk Cheese. They will pay over $600/pound for it.  But if there are only a few hundred of them, you will have a hard time getting investors or employees to invest a lot of money or time in your endeavor. Good enough for a family farm that just needs to make a little bit of money, but not good enough for a technology startup – low or negative profit.

This stuff is startup fundamentals.  Identify the market from a business standpoint and really understand it as a market: how strong is the demand (impacts price) and how big is it.

Avoid Overdoing the Need Part

Most companies start by identifying a credible and real need, then they veer off the road and start obsessing about why that need is important.  Going on and on about how bad the current solutions are, how it is ignored by others, how others just do not understand it, or that is is the next “big thing.”  These things matter, but only in terms of how they contribute to how much people will pay for a solution and how many of them there are. 

It is not uncommon for us to listen to a pitch and have the CEO of a startup spend over half of their time talking about the need in the market.  Going on and on why the need is significant or important.  This should be a small part of a pitch, simply presented to gain some interest and establish the size and desire of the market.

Meet the Need: Develop a Complete Solution that Works and Makes Money

So the easy part is done. A need is identified and the potential financial return for meeting it is also quantified.  Now comes the hard part – finding the right solution. As a technology startup, that solution is most likely technology based.  It could the the application of existing technology or it could require the development of a new technology.  Either way your job as a startup is to turn that solution into a product or service that can be sold to the market.

This is where you focus should be. Even if you have not solved the technical problems, you should be planning out what resources and how much money you will need to solve them.  If you are looking for funding, investors are going to want to know less about the nuts and bolts of the technology and more about how much it costs to get the technology working, and how much it will cost to produce or maintain the technology you will be selling.

The need to come up with a working solution is so fundamental some may ask why this is even listed in a “Lessons Learned” list.  It is obvious.  But our experience is that a large number of startup companies take the solution on faith. It is not uncommon for us to be hired by a startup, especially in the clean-tech sector, who wants us to help them evaluate or improve their technology.  When we look at the technology we often find that it is not unique, not as good as they think it is, or simply does not work.  And this is after the company has funding, employees and interest from customers.

A complete solution also includes a manufacturing or distribution plan. For software, this has become somewhat trivial, but for hardware solutions it is often overlooked.  You need to know as early as possible if you can make your solution, how long it will take to make, and what it will cost to make it.

A Solution Looking for A Problem is a Bad Thing

When you talk about a market need and a solution, you always need to ask yourself if a startup has a solution, but is looking for a problem to solve.  With the rising trendiness of the whole “pivot” thing many people downplay this more than they should. If the market is wrong, pivot. That is an expensive and painful process. 

We often see brilliant technical solutions that have a significant “wow” factor associated with them. They are often well executed and examples of how to do technology right. But they do not have a market or a market has not been identified.  This often results from an unrealistic assessment of the need up front. If you develop a Donkey Milk Cheese that is truly a work of art, your business will fail because you now need to create a market for Donkey Milk Cheese as a cheese, or find a new problem that can be solved with Donkey Milk Cheese. Perhaps it is a good foot balm?

It’s a Business

People have problems with understanding their market and focusing on their solution when they forget that what they are doing is a business.  A tech startup is not a club, a social experiment, or a family adventure. It can look like all of those things, but it is a business. And not just any business. It has significant financial and technical challenges and the expectation for it is rapid and significant growth.

Without the identification and understanding of a clear market need, and a team that is focused on providing a technical solution that makes business sense, a startup will surely fail and may not even be able to attract funding.

Startup Lesson Learned 2: Stay Focused, Be Flexible, Set and Use Goals

10_Tech_Startup_Lessons_Learned-1_thAbout the Series “10 Tech Startup Lessons Learned”PADT is a company focused on helping companies bring their physical products to market. As “We Make Innovation Work” for our customers, we learn a lot about what does and does not work in technology startup companies. In addition, we were once a startup ourselves and we now participate in Angel investing.  All of this has taught us a lot of valuable lessons.
In this series we will share some of those lessons learned and explore the basic concepts and ideas that will help startups overcome the odds and become successful.

This posting is the second installment for our series. The first posting was “If You Build It, They Will Not Come.”

We hope that you find it useful and we look forward to sharing our thoughts on this topic with you.

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There is a reason why so many business books and presentations use a picture of a guy on a tightrope.  Business is all about balancing.  But if you dig deeper, you find that in order to balance you have to do two things that are often in conflict – you must stay very focused on what you are doing while being flexible in how you react to things.  Getting the right balance between these two approaches is critical to success in any business, but especially for a technology startup.

To understand why focus and flexibility are so important it is a good idea to remember that doing a startup is a process that involves many steps, often executed at the same time.  The execution of each step costs time and money, and a startup has a limited amount of both. Therefore it is critical that you only execute the steps that will lead you to your goals. Doing anything else will lead to a squandering of precious resources and will result in your startup running out of funding or not getting to market in time.

The path seems obvious: come up with a plan, then follow the plan.  Easy.

The problem is that no one knows what steps are needed when they start, and even if you have a good idea, everything changes all the time. There are a host of external factors that impact what you are trying to achieve. Things like the economy, competition, changes in laws, shifting consumer trends, and new technologies.  You can plan for some of this, but not all of it. When circumstances change, successful startups react in a controlled but effective manner.  This requires focus, flexibility, and the effective setting of goals.

Focusing on Focus

image_thumb3Being focused is not the same thing as making a plan and sticking to it.  Focus is all about making sure you are paying attention to what is important, thinking about why it is important, and prioritizing your actions.  It is about having an inner dialog with yourself and within your organization that directs your actions, allowing you to keep moving towards your goals as things change.

Sometimes it is easier to understand the importance of a concept by looking at its opposite.  The opposite of focus, in this context, is distraction.  In the world of startups distractions are often deadly.  They sap resources and move your team away from what they should be doing.  They can also lead to making the wrong decisions because you loose site of priorities.

By concentrating on your companies goals and relating decisions back to those goals, you can stay focused and avoid distractions.  To do so we recommend the following steps:

  1. Any time you need to make a decision on if you should do an activity stop and assess it.
  2. Look at the activity in relation to your startup’s goals and decide if it moves you towards those goals and use that decision to label the activity as something to focus on, or as a distraction.
  3. Track the distractions for review in the future, they may become aligned with your goals as other things change.
  4. If it is worth focusing on, prioritize the effort required to complete the activity with respect to meeting your goals.  Not just what the impact is, but the impact relative to the effort required.
  5. Continue to monitor actives with respect to your goals and their progress. Make sure that you lower the priority on activities that are not moving you towards your goals or that no longer address shifting goals.

In the end, you just need to have the discipline to keep your whole team focused on what needs to be done, why it needs to be done, and how you are going to do it.

Stretching for Flexibility

image_thumb5Way back around 500 BCE, a Greek guy name Heraclitus said “Nothing endures but change.”  It was true then, it is true now.  When creating a startup there is only one thing that is a sure thing – that things will change.  The unexpected will happen and things you predicted will not. Worst of all, there is no way to avoid change.  You have to accept that it will happen, and when it does happen you have several choices on how to deal with it.

You can resist it, push back, fight the change.. But in doing so you can often loose your focus and create resource sapping resistance.  Another option is to ignore it, which is often the easiest response.  The problem with ignoring change is that your startup’s goals may actually change and you do not even know it.  Lastly, you can meet change proactively, embrace change, and adjust your activities to make the best of it. The issue with this approach is that you may make the wrong adjustments and stop doing what you should be doing.

As with most things, the best answer is a combination of all three of these responses, controlled by each unique circumstance.  That is why a startup needs to be flexible.  When change happens you need to stretch your perceptions and maybe your knowledge till you truly understand the change and how it effects your startup.  Once you understand it in the context of your business, you can devices a plan for dealing with the change, or decide you can ignore it.

The most important part of flexibility is being able to honestly look at your product and your organization and change your views, your activities, and maybe even your organization itself.  Being flexible is all about using change to deal with change.  It is about being open minded.

Having an open mind and being able to listen to other peoples ideas is a critical step towards being flexible.  This is often difficult for those with the drive and passion to create a startup. The self-confidence and determination that keeps them moving forward makes it difficult for them to except that change needs to happen or to let others decide what that change needs to be.  Entrepreneurs need to be open to the ideas of others and step up as leaders to modify their plans based on outside input.

For an organization to be flexible, it must constantly stretch and push its flexibility, just like with muscles in the body.  If a company is rigid and then tries to make a big change out of the blue, pain will result.  A startup that has flexibility as part of its standard way of doing things can bend and twist as needed, when needed, without stretching things beyond limits.

Goals

image_thumb7The key to staying flexible and focused at the same time is setting usable goals and effectively using them. Goals are the tool that a startup can use to find that balance between focus and flexibility.  They give everyone in the organization a shared set of guidelines to evaluate decisions with.  If you have clear goals, your team can look at change, assess its impact on goals, and make intelligent changes.

Easy to say, hard to do.  Setting up a concise set of goals and objectives is hard enough, but sticking with them and adapting them as the world around you changes is even more difficult.   Whole books have been written on the subject of business goals and objectives.  If you have not done so, it is probably a good idea to read one or two or read some articles on the web.  Inc. Magazine has a good article from 2010 on the subject.

Some of the rules we use for establishing goals are:

  1. Goals must be real and achievable
  2. Chose goals that can be measured
  3. You should be able to explain why each goal is important to your company in one simple sentence
  4. Keep goals as simple and practical as possible
  5. Do not word your goals for outside consumption, they are tool for you and your team.

Whatever method you use, identify real world long-term and short-term goals that everyone in your organization can understand.  Once established, make sure you review them and change your goals as you learn more and as things change. Then use your goals as a tool to help make decisions and guide your company through its growth towards success.

Thoughtful Controlled Adaptation

image_thumb9A common term in the world of startups these days is “pivot.”  Do a search online for “business pivot” and you will be shocked at how many articles and blog entries are written on the topic.  It is an idea that has come out of the observation many of today’s very successful software startups ended up being successful in areas they did not expect or initially go after.  Fast Company has a good article on the whole “pivot” thing and where it came from.

Doing a pivot in a business is being flexible and making changes to address changing goals. That is good.  However, what we see again and again is people justifying lack of focus or chasing after wild geese as a “pivot.”   We know, YouTube started as a video dating site.  Great for them.  That does not excuse your shift from bio-contaminant detection to making custom dog collars.

If you pivot without control, without looking at what is going on around you, you will fall over.  If you pivot away from your goals, then you will miss your target. The answer is to think and adapt to changing situations with control.  Assess the change you are looking at, compare it to your goals, and if it make sense, plan the proper effort to implement the needed change.  Make a conscious effort to thoughtfully work out your decisions.

The journey to success is a long one, with many distractions along the way.  You can complete that journey if you stay focused, be flexible, and set and use goals.

Startup Lesson Learned 1: If you Build it, They Will NOT Come

10_Tech_Startup_Lessons_Learned-1About the Series “10 Tech Startup Lessons Learned”

PADT is a company focused on helping companies bring their physical products to market. As “We Make Innovation Work” for our customers, we learn a lot about what does and does not work in technology startup companies. In addition, we were once a startup ourselves and we now participate in Angel investing.  All of this has taught us a lot of valuable lessons.
In this series we will share some of those lessons learned and explore the basic concepts and ideas that will help startups overcome the odds and become successful.

This posting is the first installment for our series.  We hope that you find it useful and we look forward to sharing the the other nine articles.

We see it over and over again. Someone has a great idea. They borrow money from their friends and family, they max out their credit card, they get angel funding.  They then build their product, putting every ounce of enthusiasm and drive they have into making the product perfect. All along they show it to people and get fantastic feedback like “I would buy that is a second” and “I wish I would have thought of that, it is a great idea.”  They are dripping with passion.  As soon as they can, they put their product out there…

And the product fails.

And they wonder why. They get frustrated and sometimes angry.  What the majority of startups fail to recognize is that no mater how good an idea is, no matter how real and tangible the market need is, products do not sell themselves.  This failure mode is different from failure caused by mistakes in execution, pricing, growth, or missing the market. What we are talking about here are perfectly good viable products that do not make it off the ground because the startup that created it felt that just building it was good enough.

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“Building it” is just one step of many in getting a startup to success.  You must also plan and implement everything that is required to build a business and launch a product. Those things do not come automatically. If you have a great idea with demand, then the implementation will be easier, but it is very rare for the idea or need alone to make a product a success.

There are many different areas that a startup must focus on beyond the product itself.  Many a book and even a few text books have been written to talk in detail about how to plan and implement a entrepreneurial business plan.  However, in our experience, there three critical parts of the business that every startup must carry out well to be successful.

Marketing

The first is marketing – because if no one knows you have a product and what it does, you do not have the opportunity to acquire them as customers.   You have to do it, and you have to do all of it: branding, messaging, social media, website, advertising, networking, trade shows, press, etc…. You do not have to do it big, and you can scale as you grow, but you must make sure that customers know your product exists and what it does.

We see many of our customers go to market with a name and maybe a basic website. When nothing happens they do not understand why the orders are not rolling in.  A consistent and properly scaled marketing strategy with a concise message that conveys the products value is what is missing. Coming up with this is not easy and time and thought needs to be put into it.  The good news is that this is one area where outside consultants can really help.

Sales

The critical partner to marketing is sales.  The ease of direct to customer transactions through the internet gives many startups the false impression that they can simply put their product on the web and they will get orders.  Even if no human interaction is involved, there is a sales cycle and you need to plan for it, manage it, and maximize the return on investment from the sales effort.

Sales is something that everyone in a company needs to be involved in to some extent. Success in this area usually comes when a sales process is developed that fits the product, and everyone sticks to it from the receptionist in the lobby to the CEO at the top.  It is also a skill that most people do not have, or can not do over the long term. It is important to hire real sales professionals and if needed, managers, to head up the effort.

Complete the Product

There is one more major step that needs to be taken for success, to get people to come and buy a product.  You need an actual product, and not just an idea.  This seems obvious, and not even worth noting. Many times we have been involved in projects or mentoring where, when you dig deep enough, you find out that the “product” is just an idea, or a half formed prototype, and all of the details have not been worked out.  To them they have built something great, so money and customers should be coming.  But money and customers need something real and finished before they will engage.

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Build It [finish it, market it, sell it], And they WILL Come

If you are thinking of doing a startup, or if you are in a startup now, take some time to look at your strategy and decide if you are counting too much on the power of your product’s appeal to make your successful. You probably are because most people make that mistake.  Be honest about what you need to do, plan and execute, and you can defy the odds and be that technology startup that makes it.