It is important for the teams of early-stage companies to keep a razor-sharp focus on the customers and market they are hoping to address in the context of the product or service that they are developing. Validating the opportunity with potential customers as quickly as possible ensures that the team’s efforts and limited funds are being applied effectively. If this is not the case, the team can adapt or pivot their idea, or recognize the idea as a fast failure and move on. Validation is achieved by developing, demonstrating and discussing successive prototypes, and the so-called Minimally Viable Product (MVP) to an increasingly larger number of the target customers.
This urgency to validate opportunities at an early stage has a key operational implication: The initial plans should “niche down.” What is meant by this term is that efforts should be initially confined to a single, focused and limited offering, addressing a small niche market within an easily addressable and serviceable territory. In effect, this focus should be on the “minimal” of the minimally viable product (MVP). Like a patent application, the focus should be on demonstrating the novel, inventive step and little else. In doing so, the team can expedite an initial proof of concept (POC) i.e. validate the feasibility and desirability on a small scale and/or small, focused market and then expand the offering from there. Developing and launching a novel product or service is an experiment as one cannot determine the customer response in advance.
Despite such a strong initial focus on the core offering, innovation and differentiator, success will still require that the longer-term market potential be huge. Often the term used is that the product or service must be scalable. Scalability means that with additional resources (cash, staffing, partnerships, and manufacturing capability) and proper execution (marketing, sales, distribution, integration and service) significant growth and revenues can be generated. This combination of a proof of concept (POC) with a plan to scale is what will attract early-stage investors. For them, risk reduction and market potential are far more important than a feature-packed offering. Additional features and benefits can be added as the offering evolves.
On the other hand, it is easy for teams to overextend or become distracted by all the possibilities while building out their initial business plans. Efforts to show strong future revenues and profits as well as a significant competitive position help drive this tendency. Common examples of overextension are plans to become: a one-stop shop, the low-cost producer, a global presence or all-things-to-all-people. These things may indeed come to pass, think about the wide offerings of the FAANG companies (Facebook, Amazon, Apple, Netflix and Google) and Microsoft, but even these businesses started much smaller and focused: Harvard student connector, Online book sales, Home built personal computers, DVD rentals by mail, Improved search engine, and Operating system for early personal computers respectively.
Having evaluated numerous business opportunities, 5 key aspects of the planning process were identified that warrant special emphasis. These 5 aspects are: Thorough research, Product/service differentiation, Experimentation, Marketing efforts and Financial modelling. Failure to adequately address any one of these aspects early on, often results in opportunities being passed up by potential investors, the need for significant redesign or outright business failure.
Bill T. Gross is the founder of Idealab (https://www.idealab.com/), a Pasedena-based start-up incubator that has created over 150 companies and 45 exits. In 2015, he gave a 7' TEDxVancouver talk entitled, "The single biggest reason why start-ups succeed."
After surveying a large number of start-up successes and failures, he determined to his surprise that timing was the most important factor, not the idea or team as many believe.
CRASH – My 6 Tenets! Relating this to my own experience and teaching: The idea underlying the opportunity is what I term the "Magic."It is that vital creative, differentiated and defensible idea for a product or service. Without it, strong competitive offerings will arise rapidly. The team is often seen as even more important, because they must execute on the plans and without execution there is nothing. The old venture capitalist adage is, "I'd rather invest in an A team with a B product, than a B team with an A product." Business models are indeed all the rage, especially as facilitated by the excellent Business Model Canvas construct (BMC). However, start-ups are often defined as good opportunities still searching for the appropriate business model. At the early stage, the team and firm are often required to "pivot" or shift the offering, business model or both. As far as obtaining financing is concerned, it is always a tough slog. However, as another adage goes, "The best deals always get funding." To be one of these best deals you need a good team, a good idea, and perhaps even a business model, priced at the appropriate level for the degree of risk and expected return involved.
So where does timing come in? Why did Bill Gross’ research find it be the most important? And more importantly can it be managed? What have we forgotten? The above-mentioned items were primarily focused on value creation. What about the customer and value capture? What is the customer pain or more importantly how big is that pain? Timing is a reflection of the size of the pain. In discussing examples of perfect timing, Bill Gross uses examples like AirBnB and Uber which launched in 2008 and 2009, right in the recession when people were looking to earn some extra money. They became sellers, renting rooms or driving people around as part of these multi-sided platforms (the other customer group being the buyers or users). This need for some extra money, i.e. these customers' pain was high enough to overcome past objections to the idea. The first of my 6 tenets is “Strategic” and four of the twelve prompts for entrepreneurs focus directly on the customer:
- What is the customer/industry pain?
- What is the job-to-be-done?
- What is the value proposition?
- What are the industry (i.e. macroeconomic) drivers?
In the case of Facebook, LinkedIn and Youtube, these technologies flourished just as broadband usage surpassed dial-up improving speed and increasing internet participation in 2005. Netflix streaming service success, launched in 2007 occurred right after large LCD TV prices dropped, driving sales growth and just before the 2008 recession which pushed people to watch TV at home as opposed to going to the movies. These successes leveraged the timing of major advances in technology, providing customers value while addressing existing pains of wanting to connect and share on a global scale.
Timing is generally considered retrospectively and hence it is attributed to luck. Not that there isn’t a significant amount of luck in the success of a start-up, but when viewed this way timing is not actionable. Instead, timing must be viewed prospectively and prescriptively. Microbiologist Louis Pasteur (1822-1895) said it best, “Le hasard ne favorise que les esprits préparés" or “Chance favours the prepared mind.” Thus to increase awareness and take advantage of timing in a start-up, you need to look beyond your own business. This is achieved by actively and continuously monitoring the various specific as well as macroeconomic factors influencing the pain level of your potential customers. Employing a macroeconomic framework like PEST analysis or the variant STEEPLED, which is an acronym for social, technological, economic, environmental, political, legal, ethical and demographic, to carry out this so-called environmental scanning is a start. In many cases, participating in the appropriate associations and lobby groups as well as collaborating or partnering with related industries and companies can influence the timing in your favour by accelerating advantageous STEEPLED changes. Perhaps not a recession, but environmental and social opinions and norms, tax and regulatory frameworks, and technological advances can be influenced.
The efforts of Elon Musk and Tesla to encourage competitive electric car manufacturers as a means to further encourage the building out of electric highways is an example of attempts to shift timing in their favour. In doing so, they hope to address the existing environmental customer pain of polluting and contributing to climate change. However, they are also addressing the prevailing technological pain of the limited range of an electric car in the absence of ubiquitous charge stations. This hampers widespread customer adoption as well as the potential and the timing of Tesla’s desired success.
CRASH – Geoffrey Moore’s Crossing the Chasm which discusses the difficulty of increasing sales by shifting from early adopters to mainstream customers!
CRASH – Pitching! When pitching a business opportunity, it is best to start with a pain statement. An example of a pain statement for Tesla, that illustrates their efforts to influence timing, might go like this:
 Jones, D.V. (2013) Enhancing your strategic innovation efforts [Blog] Retrieved from https://www.scribd.com/doc/138666088/enhance-strat-innov
 Jones, D.V. (2015, April) No magic = no business opportunity [Blog] Retrieved from http://hexagoninnovating.weebly.com/1/post/2015/04/no-magic-no-business-opportunity.html
 Osterwalder, A. and Pigneur, Y. (2013) Business Model Generation. Hoboken, NJ: Wiley.
 Steve Blank (2010, January) What’s a startup? First Principles [Blog] Retrieved from https://steveblank.com/2010/01/25/whats-a-startup-first-principles/
 Murphy, M. (2019, October) From dial-up to 5G: a complete guide to logging on to the internet [Blog] Retrieved from https://qz.com/1705375/a-complete-guide-to-the-evolution-of-the-internet/
 Sams, G. (2019, February) The reasons behind Netflix’s success [Blog] Retrieved from https://www.filmink.com.au/reasons-behind-netflixs-success/
 Thickstun, P (2018, July) Chance favours the prepared mind [Blog] Retrieved from https://translationjournal.net/journal/54prof.htm
 PEST analysis (2020, April) In Wikipedia. Retrieved April 24, 2020, from https://en.wikipedia.org/wiki/PEST_analysis
 Moore, G. A. (1991). Crossing the chasm: Marketing and selling technology products to mainstream customers. New York, N.Y.: HarperBusiness.
 Erica Swallow (2012, June) How to craft a winning startup pitch [Blog] Retrieved from https://www.forbes.com/sites/ericaswallow/2012/06/27/elevator-pitch/#45172df4b571
 1l of gasoline x 750 gm/l density x 1 mole/93 gm average C6.5H15 = 8.1 moles of gasoline
8.1 moles of gasoline x 6.5 carbons/mole of gasoline x 44 gm/mole CO2 = 2.3 kg of CO2
5.18 x1012 km driven/year x ~½ cars x 1l gas/10km x 2.3 kg of CO2/l of gasoline = 0.6 x1012 kg of CO2
5.9 x1012 kg of CO2/year in NA /0.6 x1012 kg of CO2 = 9.9%
5.18 x1012 km driven/year /280 x 106 vehicles = 18,500 km/vehicle-year
Schaper, D. (2017, February) Record number of miles driven in the U.S. last year Retrieved from https://www.npr.org/sections/thetwo-way/2017/02/21/516512439/record-number-of-miles-driven-in-u-s-last-year
Ritchie, H. and Roser, M. (2019, Dec) CO2 and greenhouse gas emissions Retrieved from https://ourworldindata.org/co2-and-other-greenhouse-gas-emissions#how-have-global-co2-emissions-changed-over-time
Statista (2020) Vehicle miles for registered passenger cars in U.S. from 1975 to 2017 Retrieved from
U.S. Department of Transportation, Office of Highway Policy Information (2019, March) Highway Statistic 2017 Retrieved from https://www.fhwa.dot.gov/policyinformation/statistics/2017/vm1.cfm
 Better Meets Reality (2019, Oct) Which form of transportation pollutes most” (CO2 Emissions) Retrieved from https://www.bettermeetsreality.com/which-form-of-transport-pollutes-the-most-co2-emissions/
Bubbers, M. (2019, August) How much do cars really pollute Retrieved from https://www.theglobeandmail.com/drive/mobility/article-how-much-do-cars-really-pollute/
National Resources Canada (2014) Learn the facts: fuel consumption and CO2 Retrieved from https://www.nrcan.gc.ca/sites/www.nrcan.gc.ca/files/oee/pdf/transportation/fuel-efficient-technologies/autosmart_factsheet_6_e.pdf
 Fred Lambert (2019, December) Tesla Supercharger network reaches 15,000 chargers - still one of its best assets [Blog] Retrieved from https://electrek.co/2019/12/19/tesls-supercharger-reaches-15000-chargers-best-assets/
The following link will take you to a 5-part series online version of my "Intro to patents" presentation. I have taught similar versions a number of times at the University of Toronto. The full series is 60 minutes long. However, I encourage you to read the following 3 articles first and take the 6 question pre-read quiz at app.gosoapbox.com and enter the access code 399-824-326.
The articles are:
■https://simple.wikipedia.org/wiki/Patent 2 pages
■https://en.wikipedia.org/wiki/Patent 10 pages
■https://en.wikipedia.org/wiki/United_States_patent_law 4 pages
The videos can be found at:
1.Assets and IP 10’
2.Patentability and the process 19’
3.The patent 9’
4.More on the patent 10’
5.Patent strategies 12’
Enjoy the course.
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