Strategy

Startups are an Experiment

The most interesting technology startups, in my experience, are those who are trying to do something new.

In Europe, prior to the Enlightenment, one group of people who tried to do something new were the alchemists. Classically stereotyped as people who sought to create gold from base metal, they were lampooned by Tim McInnerny as Lord Percy Percy with his nugget of purest Green. His depiction was of a group of people who attempted, seemingly at random, to apply treatments and actions in order to create change.

The alchemists were swept away, in part, by the propagation of the scientific method throughout Europe. The scientific methods remains with us today, informing the approaches we take to discovery – and arguably creating innovation cycles that are faster than any could have imagined a thousand years ago.

Do you want to be an alchemist or a scientist? I subscribe to the latter approach over the former – and I believe that those establishing startups should view them through the lens of a scientist, treating them as an experiment

What does this mean? To me it means following an ordered process in order to best understand what you observe and maximise your chances of proving your hypothesis.

Think back to school – hypothesis, methodology, results, conclusion (no, I cannot forget!) – and take the same approach. With reference to startups, I would summarise the scientific method as follows:

• Question – how can consumers and/or businesses most effectively complete an activity?
• Observe – what do they currently do, what are the deficiencies to the approach?  Coupons in magazines in 2008 – why?
• Hypothesise – we believe that businesses / consumers would use coupons more if they were online, promoted on single days
• Create a methodology – build a site, and promote it for those interested in saving money via coupons; get businesses to provide aggressively priced coupon deals on a daily basis
• Analyse the results – are people using my coupon site?  Is the promotion right, are the coupons offering deals in the right industries?
• Interpret – yes, people really like daily coupon sites
• Create a new hypothesis – people are willing to pay a monthly subscription of £15 to access my daily coupon site

New businesses are created by inquisitive minds who ask questions and observe deficiencies. However, just having a great idea (or a hypothesis) does not mean automatic success.

Consider your business – are you sitting in a candle lit room in a pointy hat, creating nuggets of purest green? Or are you a scientist in a laboratory conducting a series of experiments to prove or disprove hypotheses about businesses and consumers? I know which I’d rather be.

Posted by David Gates on April 26, 2013 at 10:09 am in Blog, Entrepreneurship, Strategy, Technology | Permalink | Comments (3) | Trackback (0)

         

How to think when building or reviewing your website …. 101

I want to turn the reader’s attention to websites – an object that evokes responses ranging from an obsessive-compulsive requirement to update, to that akin to a toddler who has seen a new pigeon in Trafalgar Square (with the old website being the previous pigeon).

I don’t sit at either extreme, but I do believe that for the vast majority of today’s companies the website is the ‘shop window’. Now everyone knows that a good shop window pulls in customers – provided it is seen – no matter what the size of the organisation behind the shop. The website provides the entrepreneur with the opportunity to present their wares on a level playing field (the internet) against much larger rivals.

“But I am no designer!” you might cry. Irrelevant; I am not talking here about the prettiest shop window aiming to attract the most conscious fashionista.  This is about getting the right message across to the intended reader.

Have a look here; did that site make any sense? Probably not. To its intended reader, it’s spot on – XP Power is one of the fastest growing companies of its type globally.

So, how can the entrepreneur make sure that they are hitting the (right) mark with the company website? I would advocate the creation of a simple grid – on one axis list your stakeholders (the people you want to communicate with), on the other axis list the reasons you believe people are going to come to your website.  Here are some examples of each:

1. Stakeholders:
   • Investors
   • Specific customer sets e.g. middle aged men, human resources directors etc.
   • Journalists
   • Potential employees
2. Reasons for visit:
   • To get contact details
   • Information for an business degree thesis
   • Find out about the company
   • Identify fit between product / service and need

Next, put a cross through each box on the grid that is clearly nonsense, e.g. the box which is at the intersection between the ‘investor’ column and ‘identify fit between product / service and need’ row.

Then review each of the remaining boxes. If you already have a site, match all the pages to the relevant boxes in the grid. Where a page appears in multiple boxes ask yourself ‘can I realistically service all audiences through a single page, or should there actually be multiple pages?’. In some cases, the answer will be ‘no’ – the homepage is the homepage; contact details remain the same for all audiences. In other cases, you might wish to consider creating multiple pages to reflect the differing information requirements of the audiences.

You will also find …. gaps. Be honest with yourself, identifying a gap is a good thing – it shows where you need to put in some work to give your stakeholders the information they need.

A final thought: make sure you are running and reviewing your Google Analytics data. I won’t accept any excuses on this one – Analytics will tell you where your audiences are going, and where you should be focussing your energies when producing content.

Posted by David Gates on April 12, 2013 at 10:53 am in Blog, Demand Generation, Entrepreneurship, Sales, Strategy | Permalink | Comments (0) | Trackback (0)

         

Testing, Iterating and Validating Your Business Model Canvas

RIG consultants David Gates and Jessica Tayenjam presented at Escape the City‘s Startup MBA course on Saturday 6 April at The Hub Westminster.

The slides from the presentation are available to view below.

Posted by RIG Admin on April 8, 2013 at 10:49 am in Blog, Strategy | Permalink | Comments (0) | Trackback (0)

         

Start digging your moat

Warren Buffett coined the phrase economic moat to describe those aspects of a business that provide competitive advantage. What is often stated within definitions of Buffett’s economic moat is the requirement for the advantage to be ‘sustainable’; as a value investor, Buffett does not want to buy into a company that wins today but loses tomorrow. His objective is long term performance.

I work with technology companies – the vast majority using a significant element of software within their overall offer. How does Buffett’s concept apply, when software is by its nature replicable – often by cheaper resources in other countries? You make the mistakes, others imitate with a much lower cost of establishment. Have a look at the Samwer brothers in Germany for the textbook case study.

So what to do? The obvious answer is legal instruments – patents and the like – but do all companies have the time / energy / finances to both create and protect intellectual property in this manner? I would argue (in a highly successful manner) not. There are enough things to do in the early stages, many of which will be the start of digging your moat, without recourse to lawyers.

Consider the component elements of a company selling software. These can be broken down into two categories:

1. Revenue generation and retention capability
2. Technology capability

When defining and refining your business, think about each category and ask yourself ‘what can I do here to develop my economic moat?’. Some examples might include:

1. Revenue generation and retention
   1. Dominate a specific market – either a vertical (e.g. supermarkets); a horizontal (e.g. human resources); or geographical (e.g. Italy)
   2. Ruthlessly pursue customer retention strategies – a business that does not lose customers grows
   3. Create revenue momentum – a series of wins shows the market you will dominate it
2. Technology
   1. Create network effects – leverage your users to dominate areas through networks (e.g. Facebook – there can be only one personal social network at any one time)
   2. Develop technology which will naturally expand its footprint within the customer, e.g. SAP – it reaches out across the enterprise
   3. Ensure accessibility – if technology is easy to acquire and use, it will stick
   4. Get multilingual quickly – think of the Samwer Brothers

You’ll note as you read through these points that there is significant overlap. Often the technology enables the revenue generation and retention objectives, and conversely the revenue and retention objectives will dictate (to an extent) what technology development must take place. Get out a sheet of paper and write these down for your business. Are they compelling? Do they link back to the objectives you set out?

Reflect on this exercise, and bring the thought processes into your day to day work – an economic moat creates sustainable long term advantage, enabling valuable businesses to be built.

Posted by David Gates on March 28, 2013 at 10:30 am in Blog, Entrepreneurship, Strategy | Permalink | Comments (1) | Trackback (0)

         

RIG Slides from Escape the City Workshop

RIG consultants David Gates, Jessica Tayenjam, and Simon Jackson presented at Escape the City’s workshop, ‘An Introduction to Building a Startup’ on Saturday 9 March at The Hub Westminster.

Their slides (minus videos) are available to view below.

Please email jessica@rapidinnovation.co.uk with any questions related to the presentation or RIG workshops.

Posted by RIG Admin on March 19, 2013 at 11:44 am in Blog, Entrepreneurship, Sales, Strategy | Permalink | Comments (0) | Trackback (0)

         

Managing the Chicken and the Egg

In starting new ventures, one confronts many chicken-and-egg type problems. Support for development of a new technology cannot be garnered without proven test results; proven test results cannot be demonstrated without development. One cannot build something without clear specifications; but in charting the unknown, one cannot get clear specifications without first showing something to prospective customers.

Managing these types of chicken-and-egg problems can be critical in getting something off the ground. Achieving success in this largely amounts to minimising risk to the point where one or both sides are willing to take the remaining leap of faith. Such a process often comes down to relationships: in the case of a chicken-and-egg problem, one can always fall back on the people involved. Is this entrepreneur someone who inspires confidence in me? Do I trust this team’s ability, even if I cannot see results of their technology?

From the entrepreneur’s standpoint, it’s important to see the risks from the other side. If someone is pitching money into a project, they may not be subject experts, and they may not know the team well personally. It can therefore be difficult to understand why a project will be successful or what its full differentiation will be. These issues must be understood and the entrepreneurs must find effective ways of communicating responses to the natural concerns that arise among investors—responses, not defences. As the entrepreneur, one must seriously ask, “Would I trust me if I were the investor? What would or could establish that trust?”

Managing and overcoming chicken-and-egg problems can be disheartening and frustrating, but will almost invariably involve significant back and forth between the parties involved: a little bit of chicken, a little bit of egg at a time, until there is both a chicken and an egg. Get it really right, and by the time the long and laborious process is over, you’ll have lots of eggs for plenty of chickens in the future (just don’t count them til they’re hatched).

Posted by Aaron Ralby on March 8, 2013 at 10:00 am in Entrepreneurship, Strategy | Permalink | Comments (0) | Trackback (0)

         

Market focus is directly proportional to deal value

I wouldn’t pay me anything to consult on Java development, if I were you.  Why?  Because, to be frank, I don’t know very much about it.  You are, almost certainly, wasting money.

So why would you separate yourself from a lot of capital, to buy services from someone who didn’t know a lot about your industry?   Again, you probably wouldn’t.

The lesson here for entrepreneurs, particularly those in the business to business space, should be clear: if you do not understand the industry you are selling into, you are unlikely to achieve significant revenues from it.  Is this always a bad thing? No.  Salesforce.com does not need to understand the markets it sells into in particularly great detail – why?  Because it’s a highly disruptive offering, primarily because of its low ticket price, which means the customer cannot reasonably expect to have an industry-specific product.

Salesforce.com is disrupting an existing market – not all entrepreneurs start in such a fortunate place.  If you have a generic product, with a limited market, and are resource constrained – you need to be doing big ticket deals in order to survive.

My argument for the non-Saleforce.com entrepreneurs is this: you need to create market focus to drive up deal values.  What does market focus do you for?  Several things:

1. Focusses the mind – no more ‘we can sell to anybody / we aren’t selling to anyone’ nonsense
2. It directs resource – you need to learn quickly, so learn French quickly – don’t decide to become a specialist in European languages tomorrow
3. It creates credibility – I really understand your industry, and because I understand it you are going to trust me to provide good advice on how to drive business performance
4. It informs the proposition – a well-researched and targeted proposition unlocks all the stores of value, and increases the likelihood of conversion

So ask yourself this: do I have market focus?  How focussed am I on that market – some entrepreneurs achieve a zen-like state where they will happily refuse business from those that are outside their target group, anticipating that in the long term this will result in a superior return.

One to consider…

Posted by David Gates on February 8, 2013 at 5:25 pm in Demand Generation, Sales, Strategy | Permalink | Comments (0) | Trackback (0)

         

Build Engines, Sell Cars

We often need to reinvent a concept entirely in order to improve it. Small tweaks here and there are only worthwhile if the underlying technology is as advanced as it can be. When we tear something apart and start over, however, we need to remember that the customer will want a car not an engine.

Building an engine is the hard part. It takes the most research and development. The majority of customers won’t want to buy the engine, but rather the vehicle that is powered with that engine. The same engine could power all sorts of vehicles or equipment; the customer pays for that functionality.

The analogy holds true for many businesses and innovations. Look at 3D printing, for example. Not many have really figured out how to build businesses around this technology, though most agree it has immense potential. A 3D printer itself is an engine. It allows you to do all kinds of cool things, from rapid proto-typing to creating bespoke parts. Most end users don’t want a printer, however; they want the things made with the printer.

Some people in 3D printing are trying to build businesses selling the printers and printing equipment. This is something of a mistake, in that the total market for printers will be relatively small, and the printing technology is likely to advance further before that market could actually be addressed. Other 3D printing businesses operate around a combination of products and services, capitalising on the flexibility of the printers and the knowledge of those in the business (it still takes a lot of know-how to work with 3D designs and CAD technology). Such a model plays to the strengths of the technology in question as well as the people working with that technology. From the customer’s perspective, it’s not even necessary to know that a 3D printer is being used to produce the product they are ordering or commissioning.

Developing 3D printers took far more research and work than it does to print objects with them now. They are an engine that will power all kinds of innovative businesses. Most people won’t want to buy that engine on its own. If developing a new technology with real IP, then in the process of turning that technology into a business, you’ll need to ask yourself: is this a vehicle, or just an engine? Developing a new engine is ultimately more valuable, as long as you remember to put it in a car before selling it.

Posted by Aaron Ralby on January 11, 2013 at 2:27 pm in Strategy, Technology | Permalink | Comments (0) | Trackback (0)

         

Operation “Get Some Leads”

The term ‘campaign’ has its genesis in the military sphere.  It comes from the French word ‘campagne’, which means ‘open countryside’, an area best suited to military operations.

But it’s also used in marketing.  And I am not sure I agree with this – not because of the military connotations, but because I am not sure that marketers really do go off campaigning anywhere.

A war is made up of a series of campaigns.  Wars are long and drawn out – but what I often see is short duration activities described as ‘campaigns’.  So, for example, ‘we are going to run a telemarketing campaign’.  In many cases, you aren’t.  Why?  Because a campaign involves the coordination of a significant number and types of assets – cold calling a group of people is actually just an over-the-top offensive – with similar results to those found in the First World War.  Remember the flags getting into the Ottoman trenches in the film Gallipoli?  They didn’t.

If you are going to start going over the top, stop reading now.  This is not relevant to you.  If you want to get your head around campaigning properly, continue.

Types and numbers of assets are important considerations for the veteran campaigner.  Do I have the right type of assets to achieve my objective (tanks / telemarketers / soldiers / case studies), and do I have the right number (you will not take Rome single-handedly, neither will a lone salesperson enable you to dominate the FTSE350)?

A veteran campaigner will also organise their assets in a sensible progression (don’t send the cavalry against the tanks first / don’t waste someone’s time trying to reach an individual who has never heard of your business).  Prepare the ground with a wide-ranging barrage of low-level material (perhaps a series of emails, linked but describing different elements of the problems you solve) – and observe the effect (use an email marketing program that allows you to see who’s engaging with your material).  Perhaps try to draw the prospects out with a non-threatening webinar – you could call them to ask them if they’d like to attend (remember: your business opportunities are not the enemy – this analogy risks going too far!), then perhaps actually make one-to-one contact with those people who have shown the greatest interest in you.

This will not happen overnight – continuous two week barrages had little effect in 1915, they will have little effect now.  A campaign is well planned, and spread over many months.  And remember: no plan survives contact with the enemy, so start thinking about what you will do if it doesn’t work out three weeks in.

Posted by David Gates on December 14, 2012 at 10:00 am in Account Management, Strategy | Permalink | Comments (0) | Trackback (0)

         

B2B2C: Generating revenue from consumer-orientated products

Many definitions of B2B2C businesses focus on e-commerce relationships where the ‘C’ is the buyer. However, I think there is a more interesting segment of B2B2C: a business selling a product to another business which its customers will engage with. B2B sales for products with a consumer angle.

Virtual fitting room technologies (e.g. Fits.me, Metail, Poikos) are a prime example of what I would consider to be a B2B2C play. The technology benefits the business – an online clothing retailer – by reducing returns rates and improving the customer experience. The consumer benefits from greater confidence in their purchases and less hassle with returns.

Another category of technology with B2B2C potential would be networking tools for conferences. This might be an app (Shhmooze comes to mind) or a device, such as those produced by Blendology. While the product itself focuses on the individual’s experience and improving the way end users connect, it can be sold to conference organisers to provide them with better data on attendees (customers) and their interactions.

For B2B2C to work, the product must have benefits to both the business and the consumer. I would suggest that the business benefits are of greater importance, and must be sufficiently compelling that a business is willing to pay for them.

And that is why I think B2B2C is more interesting than B2C: businesses have a lot more money than consumers (obviously). You can still build a “consumer” product, but with an actual chance of making money from it.

The usual challenges of B2B apply: understanding and targeting the buying centre, managing a more complex sale (varied, as ever, based on the cost and complexity of the product), and so on.

There can be a twist, however, in that although the consumer is not the “customer” (i.e. the buyer), they may still need to be marketed to. Consumers may need to have an awareness of the product to drive demand through to businesses, meaning the marketing strategy may need to have both consumer and business elements to it.

Many have lamented the fact that the start-up scene currently seems to be awash with B2C internet start-ups with no strategy for actually generating revenues. User acquisition is nice, but has no value if it cannot be monetised. B2B2C companies have a much clearer path for making money while still being able to serve the consumer.

Posted by Jessica Tayenjam on December 7, 2012 at 1:43 pm in Blog, Strategy | Permalink | Comments (0) | Trackback (0)

         

What I Know About Hiring and Firing: Part 4

In this fourth installment of this series on hiring and firing in growth companies, I look at the importance of ‘developing’ job profiles.

4.       Sweat the role

The hiring process is one with broader implications. Effective hiring starts with an attempt to define the role.

That is not to say that the hirer must be hostage to the role defined.  In the context of a start-up, role creep is simply adjustments made for learning and for talented individuals that make you think again. No two individuals will execute the same role in exactly the same way.  Find the “right person” and you will find yourself adding specific responsibilities and reassigning others.

What the hirer must bear in mind is the overall structure within which the role resides. That structure is largely determined by the company’s business model. The organising principle simply states that the optimum organisational structure is the one the best enables the company to ‘create, deliver, and capture value’.  For entrepreneurial ventures (businesses under construction), this is the point of departure that must be periodically revisited as hiring accelerates. Once the business logic for a function is firmly established, focus down on the role.

In start-ups, roles are widely defined. As the business develops, the span of roles contracts, and more specialisation is required.  To be the best ultimately demands recruiting and/or developing specialists.

Start by trying to define the key outputs of the role. These will determine the responsibilities of the role and inform how performance will be measured.

Second, try and be clear about how these outputs are to be delivered. Map the processes. Even where these maps are sketchy, they provide an invaluable source of discussion with the candidates. What will differentiate a strong performer from a weak performer is their method and the process they follow ( though they won’t talk about it in such terms). Interrogate their experience: explore how they might tackle the challenge given your particular circumstances.

The great challenge, of course, of hiring in a start-up scenario is that the basic premise of recruitment cannot be fully adhered to.  Recruitment is basically about finding a fit (i.e. between a desired set of capabilities and an individual who has demonstrated these capabilities in similar circumstances).  Hence the importance placed on the job profile by recruiters. A detailed and “knowing” description of the profile is ideal.

And there is the rub: in the start-up scenario job profiles, like the organisation itself, are often works in progress. Rather, the preoccupation is an on-going search for what works and can scale. The need therefore is not for a perfect fit for an imperfect, partially defined role; it is for an individual who can pioneer, work out, and define the role. That is how start-ups flow: from roughly and broadly defined roles, through first attempt, partially defined roles, to well-defined roles. People who are well suited to start-ups love these pioneering rolse.  People from larger organisations, used to operating within tightly defined job parameters, rarely do.  That is why in the early evolution of the organisation,’ big’ to ‘small’ so often ends in failure.

Click on the links to view part 1, part 2 and part 3 of this series.

Posted by Shields Russell on October 31, 2012 at 10:18 am in About RIG, Blog, Recruitment, Strategy | Permalink | Comments (0) | Trackback (0)