When should I start commercialisation?

The lean approach to software creation has brought market testing much earlier in the life cycle of a product.  Its aim is to try to find market acceptance as soon as possible so that companies minimise the risk of building products that turn out to be not sufficiently compelling.

How does this translate for non-software technology products?

If a product is based on new IP, it’s likely to have quite a long period before a first trial version is market ready. So how early should you start your commercialisation?

There is a concern that ramping up commercialisation efforts too far in advance of production readiness could lead to a loss of any momentum that has been built with potential customers and go-to-market partners. There is a temptation to think that it is better to put your head down and focus on getting to a production-ready model.

However, it’s important to remember that engaging the market serves a number of purposes:

  • There are often multiple parties that will be involved in the sales, implementation, operation and maintenance of a technology. Engaging with them is essential to understand what is required for each of them to adopt the technology. This will be central to the go-to-market strategy

 

  • Working with these parties will give a clearer sense of where the orders for the product will come from in the first 12 to 24 months post-launch. This is a period where sales velocity must be built. Only when they are prepared to shape up distribution or sales deals will it become clear that there is product-market fit. Confirming in advance where the actual orders are likely to come from will help mitigate commercial risk for investors and support valuation

 

  • Understanding why and how these parties will engage and buy is key to structuring a go-to-market strategy and sales process

 

  • In the process of verifying the needs of the market, it is quite possible that information will emerge that will result in changes to the product development path.

 

If market engagement is left too late, this information may not be uncovered. The cost of this in terms of lost time and missing targets will be considerable.

Want to succeed? Get used to failure.

A few years ago, at a startup networking event, a colleague of mine asked a budding entrepreneur how he was going to grow and scale a business. His response? “Build the app. Marketing. Go viral.”

Now, while I admire this individual’s chutzpah and ambition, this is not likely to be a successful strategy. Why? Because it does not allow for failure.

There are plenty of stories to be told of hugely successful entrepreneurs who started with failure before finally ‘making it’. Bill Gates with Trof-o-Data, Henry Ford with numerous failed automotive ventures, and even the iconic Colonel Sanders who, penniless at 65, decided that age was no barrier to starting a business that would eventually spawn a global food empire.

Inspiring and intriguing as these tales are, they do not explain why it is that failure is such an important part of the tapestry of success. Before I go on, I should say that yes, some people will achieve success at the very first attempt. But I would venture that there is always an element of good luck in this and, more often than not, this will not be repeatable.

 

Ffion's Blog

 

It is important to learn to fail but to fail fast. More often than not, we will learn what works from learning what does not work. That is how we as a firm enable both ourselves and our clients to achieve commercial success more quickly; we have been there, we have made those mistakes, and we know how to avoid repeating them. Now, this isn’t to say that we have a magic wand for avoiding failure. We will and still do experience it. But, having become familiar with some of the pitfalls facing early stage companies trying to commercialise their technologies, we now know how to navigate around them, and that makes for a shorter road to success.

Think about how you would approach a challenge. If you did not know how to overcome it, would you put all of your eggs in one basket and go with one approach? Unlikely. Would you be more likely to employ a tactic of trial-and-error, taking slightly longer to find the solution, but also avoiding fatal errors and, eventually, learning what works? I’ll wager it would be the latter.

In this way, we are naturally predisposed to learning from failure but for some reason, this is a bit of a blind spot when it comes to building a business. Too many of the entrepreneurs that I meet, fear failure. When things don’t go as expected, I tell my clients that it is a good thing. We learnt how not to do something and can therefore quickly move on to trying a different approach. This process of constant iteration is very much at the core of what we do.

As Samuel Smiles said, “We learn wisdom from failure much more than from success. We often discover what will do, by finding out what will not do; and probably he who never made a mistake never made a discovery.”

Garbage in, garbage out! It’s all about the process.

Have you ever been asked (or been the one asking): Why are our conversion rates so poor? If so you have probably also been asked (or asked): What can we do to improve them?

How many times has the answer been a mixture of confusion, self-defence and exasperation as to what else can be done? The team’s activity levels are high but the outcomes are poor and no one can understand why sales are not forthcoming.   Frequently this is what occurs in many start-up firms  and it is often due to the lack of a clearly defined process with distinct steps and actions that can be measured and which individually and collectively work in tandem to deliver high probability attractive leads?

Client acquisition is one of the key activities that any company regardless of size will undertake (it’s not an understatement to say that for start-ups it is the lifeblood of the firm) yet many fail to implement an efficient process for this activity and consequently end up with weak sales pipelines resulting in disappointing outcomes.  Equally important, the associated inefficient and ineffective allocation of limited resources on activities or presumed leads that result from having no process or a poor process can also lead to frustration and disillusionment amongst team members.

We recently ran a client acquisition programme in a geographic market that had previously been serviced opportunistically but which was now been given greater attention.  We employed a systematic approach to this activity and had

 

Set an objective

This may be a number of new recruits. Or it may be a new revenue amount.  Either way our experience is that without an end objective you have nothing to measure your process against and consequently will not be able to assess your performance at each stage or activity in the process vis-à-vis achieving your goal.

 

Define your Ideal Customer Profile

How can you find what you don’t know you are looking for?

The first step in developing your process is to define the characteristics and attributes of your ideal customer.  These may be both quantitative and qualitative in nature.  They may describe the size of the organisation, its structure, its culture, its buying processes and/or the markets it serves.  It should also include evidence that identifies its potential need for your products or services.  There is clearly a balance in developing this profile as you do not want the data requirements to be so burdensome that you spend excessive time researching very difficult to find information on each and every potential lead.  But it should be sufficient to allow you to discriminate between various would be targets in your universe.

 

Build your target list

Now that you know who you are looking for, how do you find them?

There are a multitude of channels and sources that you can use to source your initial targets.  Depending on your sector the volume of potential targets may be in the tens, hundreds, thousands or millions.  So what is more important that the channel that you use is the rigorous application of our ICP in determining whether a given company qualifies to enter your database of targets or not.  We are looking for quality here above quantity as any dilution of the quality factor here will mean that we waste time later on activities targeting unattractive prospects.  This is probably the most important step in the process as if it is not done well you will end up with irrelevant leads (i.e. those not conforming to the ICP) and this will result in wasted energy and reduced conversions and poorer outcomes.

In our case we used very traditional sources such as trade media, trade associations, trade shows and channel partners to build our initial list.

 

Prioritise amongst your initial list

Once you have built this initial list you will need to prioritise the various leads as it is unlikely that you will have the resources to target each and every one of them or to service all of them if you were to win business across a significant number of them.  We also want to learn from each wave of activity that we undertake and working in batches allows this.  In doing so we can see how one message works over another or how receptive one group of targets in a given segment are over those in another.  We also want to drive each batch to a conclusion before commencing with a subsequent batch as that ensures that we put emphasis on driving our activities to a conclusion rather than starting many activities and bringing none to an end.

We used our ICP to prioritise amongst all of the initial firms that we had identified as being of potential interest and decided to initially target the top 15%.   Once we had targeted these we then went back and targeted an additional 15% of our original list in a second wave based on our learnings and outcomes of our first wave at which stage we had met our objectives.

 

Send your initial email 

Without repeating the multitude of commentary that already exists regarding emailing, it still remains a very important introductory tool in our opinion, as even if it is not responded to directly itself it gives you permission to follow-up via telephone soon afterwards.  In our experience, if an email follows the following rules and is targeting appropriate people then it will have success

  • Have a very compelling title which encourages the reader to open the mail. The importance of this is often overlooked by many writers and yet it is the first thing that the recipient will read along with your name and is the primary factor which they will use to determine whether to read further or not
  • Have a strong opening sentence which introduces who you are, where you sourced their details from and why you feel you are of relevance to the recipient. This will determine if they read any further having opened your mail.
  • Use headers in the body of your email. Your recipient is being inundated with emails, is probably reading your mail on the go or during a meeting and is more than likely using a mobile device, so make it easy for them to speed read and navigate through your email.  This will help them digest your message and make a decision as to whether they are interested in meeting you or not.
  • Finish strongly with a request to meet. Ideally, suggest some specific times or dates rather than making an open ended request to meet as the former will encourage them to accept if they are interested or to suggest alternative dates if those suggested do not work.
  • Also make a note that you will be following up in the next few days if you do not hear back. This will encourage recipients to reply yay or nay quickly and part of our objective is to drive out the uninterested targets early so that we do not waste time chasing them.
  • A final important factor is when to send your emails. We have found that sending emails on a Tuesday or Wednesday morning or Thursday afternoon works better than sending on a Monday morning or on a Friday.  This makes sense when you think about it.  How many of us look forward to reading through a bunch of emails on a Monday morning while on a Friday we are looking to wrap-up any outstanding tasks before the week’s end as opposed to initiating new dialogues.

 

Conducting a quick follow-up

After 3-4 days follow-up with those non respondents with a short but polite follow-up email.  Request that if they are not interested that you would be very grateful if they could indicate so.  This is a great way to avoid wasted energy chasing hard to reach contacts who will ultimately prove to be uninterested in our offering.

We have found that it is this second email that resulted in many of our most interesting meetings as those who replied positively to this email were usually in need of support and had been delayed in initially replying because of their workload but once they were re-prompted we moved up in priority in their to-do list.

In our example this approach resulted in securing a first meeting with 65% of those companies that we targeted in our two waves.

 

 Securing the first meeting is only the beginning

Once you have secured that first meeting there are two things that you want to understand so that you can progress the lead to the next stage in the sales process.  The first is to identify their needs prior to the first meeting or to have them laid out by the target during that first meeting so that you can demonstrate how you can meet them.  The second is to understand their buying process and to see how that aligns with your sales process.  This will allow you to prioritise amongst live opportunities and to progress those that align best with your process and offer the quickest route to achieving your stated objective(s).

Now it’s time to demonstrate the substance behind your communications.

 

Strategy Matters: Part II

As I was saying at the end of Part I, strategy is important.

This is particularly true of early stage businesses which are often constrained by limited resources, and can find themselves in precarious situations if those resources are squandered. Consequently, each hour of work and each pound to be spent should be allocated in line with the business strategy that the company has elected to pursue. In this way, developing a strategy is all about reducing risk.

For a technology startup, risk presents itself in many ways:

  • Competition – How are you going to compete, and will the competition put you out of business before you really get started?
  • Technology – Does yours stand up to being scrutinised and for how long can you maintain any technological advantage?
  • Route to market – Do you have the channels in place to get to market, and how long will this take?
  • Financial runway – Do you have the adequate resources to sustain your business until it becomes funded and/or self sufficient

One way of developing a strategy is to go through a process of internal and external analysis, before implementing the now widely recognised SWOT (strength, weakness, opportunity, threat) matrix. By simultaneously identifying these internal and external factors, a business can develop a strategy which leverages its greatest strengths in the biggest area of opportunity, and therefore generate the highest chance of success.

Although there are many ways of coming up with a strategy, the important thing is to make sure that you actually have one. It aligns all of your business’ activities and creates a focus within the company which helps to drive efficiency. However, Paul Wiefels (Managing Director, The Chasm Group) notes that it is important not to spend too much time on strategy planning and that businesses should move towards strategy doing once a clear and coherent strategy has been developed and committed to.

Strategy Matters: Part I

During every football season, I like to indulge in a spot of fantasy football. Being fairly competitive, I tend to take the whole thing rather seriously, much to the amusement of my friends.

Ahead of Wednesday’s string of mid-week matches, I elected to make Sergio Aguero captain (double points), believing that I could rely on his brilliant recent form to deliver plenty of goals. In doing so, I overlooked the possibility of captaining Luis Suarez (despite being a Liverpool supporter) and therefore threw away the opportunity to benefit from the four goals which he would subsequently score against Norwich. Bad strategy.

Why was this a bad strategy? Luis Suarez had grabbed two hat-tricks as well as a single goal against Norwich during the two clubs’ last three meetings. There was clearly a trend here which I failed to identify. I missed an opportunity because I did not capitalise on the fact that Liverpool would be applying their greatest strength to a proven area of weakness (Norwich’s defence).

And so to my point: strategy matters. Whether you’re picking your fantasy football team for the weekend, or trying to ensure that your business will ‘win’, strategy is important.

To be continued…

Accessing expertise beyond your company: A practical guide to building an advisory panel

There are many points in an entrepreneur’s journey where they will want to access specific, targeted guidance and experience beyond that of their employees, investors and professional advisors.

At RIG, we work with technology entrepreneurs to build the environments that will help them succeed, and this includes accessing strategically valuable external expertise.

There are a number of ways to do this. What comes into many people’s minds is going the Non-Executive Director route. While this can be done, the strategic advice that the entrepreneur needs can be separated from the fiduciary duties that go with being a director of a company. And in fact, many people that would volunteer to provide strategic advice would not want the responsibility of being a board member.

Our suggestion is to create an advisory panel. I say ‘panel’ rather than ‘board’ advisedly – in the research for our process, we spoke to many people who had set up advisory boards, and learned that in practice the word ‘Board’ can carry connotations, both internally and externally, of governance and decision-making responsibility.

The principal we follow is to design the best advisory panel that we can. Rather than working from who the entrepreneur knows, we work out what the objectives and requirements are and then find the best people we can to fill those roles.

Our starting point is to work with the entrepreneur to analyse the strategic needs and weaknesses of her company. By setting this against the vision of where she wants the company to get to, we can identify the areas where external advisors can add the most value. Some of these areas will be appropriate for an advisory panel to address, while some – such as coaching of senior management – are better kept out of scope and addressed by other means.

This analysis also prepares the ground for articulating a set of objectives to be given to the advisory panel. This shapes what the panel members will be asked to work on and what will be expected of them.

With the objectives clearly understood, the next step is to identify the ‘required’ versus ‘desired’ skills and experience for panel members. Knowing what these are, it is possible to think about where we might find the right people.

It’s important to remember that in building the panel, we are looking people not only with the right kind of experience; they will need to be able to identify with the entrepreneur and the journey that they are taking.

How large should an advisory panel be? It’s a trade-off between being large enough to provide a breadth of input, and small enough that all of the members are very involved. We have found that a panel of three or four is a good size to work with.

Knowing how many people you will have, it is then a question of finding the required mix of skills and experience. No one will have all the elements of experience, but the group should do overall. Importantly, they should work together well as a group, and this will be an important factor in determining which people are ultimately selected from the shortlist.

Are financial models for early stage businesses of any value?

It’s not a surprise that CEOs of early-stage companies can have little regard for financial models. Possibly made by someone not full-time in their business, the financial model is viewed as being of limited value in decision-making; as something that is created predominantly to satisfy investors.

Business models for early-stage companies that I have seen frequently have one or more of the following characteristics:

  • It’s not easy to see what the key assumptions and drivers underpinning the business model are
  • Costs and revenues are not linked, which means you can’t see what happens to the business if the revenue assumptions are changed
  • They fudge the answer to ‘but when do we get the money?’
  • They are not at all easy to read through
  • They’re over-elaborate: there’s too much conjectural detail relating to revenue streams that might happen some time in the future

Above all, I see models that are not aligned to the business narrative and objectives. It is no wonder that management don’t feel like their models are relevant in how they understand their own business.

So what then should a good model for an early stage business be/do?

Much is uncertain in an early-stage business. To quote Steve Blank, ‘the primary objective of a startup is to validate its business model hypotheses’ – i.e. they are just that, hypotheses. Yet it can feel to CEOs like they have to depict certainty in a financial model in order to give investors assurance.

An early stage business model should contain just enough detail to represent the central cash-generating dynamics and dependencies of the business.

At a minimum (and probably a maximum!), the model should set down and link:

  • What the key revenue and cost drivers are for the business
  • What needs to be true for the business to succeed – i.e. the key assumptions
  • What determines the timing of money into and out of the business

If the model does this, then it can help the management to understand the relative magnitude of the different drivers and assumptions on the development of business, see what scale they need to be as cash-generative as they aspire to be, and understand how long their cash runway is.

Above all, a financial model should mirror the way that management describes its business and objectives and better enable the management to articulate – for both internal and external consumption – the flow of their business model.

In my next post, I will start to set out some fundamental steps for building such a model.

Every first time CEO does it differently

There is no one way of being a start-up CEO. There is no single template or standard job description. Rather, think of the role as a jigsaw with each piece representing a particular area of competence. When correctly assembled, the pieces come together to present a complete picture.

Yet no individual, however brilliant, has the ability or the desire to cover all the pieces. Each apprentice CEO – and that is surely what most first time CEOs are – will by inclination or design select those pieces that best reflect their abilities.

To be sure, there are some ‘corner pieces’ that must carry their imprint. The oft-quoted Fred Wilson puts it well when he says that, ‘A CEO does only three things. Sets the overall vision and strategy of the company and communicates it to all stakeholders. Recruits, hires, and retains the very best talent for the company. Makes sure there is always enough cash in the bank‘.

But no two CEOs execute the job in the same way. All CEOs have their own character, their own respective passions, idiosyncrasies, and limitations. And it is awareness of these qualities, gained through self-reflection or feedback from trusted parties, that stands at the core of becoming an effective CEO and building a team of managers that can augment and compensate their leader’s strength and weakness.

But there is a constant quality that stands at the heart of effective start-up CEO competence. A start-up is by definition a company capable of hyper growth. Fast growth companies are characterised by the speed at which things change: by the need to make redundant structures, processes, systems and people that have may have only recently proven successful . The challenge is to manage change as a constant rather than a periodic exercise in realigning a company to changes in its environment. It is why leadership, which is about creating movement, is a more important quality in a start-up CEO than management, which is about nailing things down and optimising operations.

So being a start-up CEO is about negotiating successive transitions. Most founding CEOs excel at the product development stage when the company comprises a committed band of product developers. Fewer and fewer excel as the company grows. This is not purely a matter of ability. I have worked with several CEOs who I believed harboured the ability to evolve their competence to match the changing nature of their role but they simply didn’t want to.

Desire is ultimately what drives learning. And desire has a lot to do with enjoyment. When desire and enjoyment fade and the gap grows between the demands of the role and their skillset, then the job becomes more stressful and the CEO more ineffectual. In my experience, it is a situation that is implicitly understood by employees. It affects morale and engagement as employees know (always earlier than the board) when a CEO is no longer the right person to lead them.

The right thing for the CEO to do in these circumstances is to stand down and slot into a role that restores the alignment between their motivation and preferences. Too often they will persevere and run the inherent risk of the company losing momentum. Or perhaps, they realise that they have taken the company as far as they can and will look to cash in on their investment. The company is sold and the adventure is at an end.