Preventing Start-Up Failures
Most startups fail when a significant group of potential clients cannot be found for what is believed to be a well-designed solution to an existing market need. To successfully introduce such a product, four pillars must exist: a product, a market, a viable business model, and a go-to-market strategy. This document emphasizes using a structured go-to-market strategy to determine the proper target market and assure success when introducing a new product into that market.
A go-to-market defines how to deliver a product proposition to a target market. Traditionally, however, everything started with the product; this meant all actions were keyed to product capability. The target market was finalized after the product had been fully designed, then the channels were selected, a sales force was hired and penetration was expected. Unfortunately, the internet has significantly changed how buyers buy and new process is required.
Within the traditional methodology, a huge product risk exists – as the entire strategy is based on assumptions; and if what is believed proves to be incorrect, failure results. The strategy we recommend is a combination of Eric Ries’s lean start-up methodology with a flexible but structured go-to-market strategy – one designed to validate all the assumptions before the product is completed.
Ours is a three-step approach:
1. Product validation – validate problem and solution
2. Early market validation – validate product and market
3. End optimize channels – select and optimize channels
At the same time, we integrate customer development:
1. Customer discovery – problem to be solved/product fit
2. Customer validation – who will pay
3. Building customer base – full implementation
This approach relies on identifying potential customers, identifying their actual need through interactions with them, and determining what they will pay for by testing an MVP (Minimal Viable Product) before a final product is brought to market. This process minimizes both market risk and product risk. This (lean startup) methodology is an iterative process for the development of a product that when fully introduced into the market, has proven to solve a market need that customers will pay to have solved. The go-to-market strategy should likewise be iterative; as we begin to develop a business model that integrates all the complementary activities we will need for a successful market penetration:
1. Direct Contact
3. Referral Building
4. Social Media
5. Public Speaking
6. Writing Articles/Blogging
8. Traditional Advertising
A go-to-market thus evolves and expands through iterations of product, customer, and channel validation – all taking place in front of potential clients.
During the initial phases, we are determining:
1. Who we must target to be successful
2. What our value proposition will be
3. How we will engage
Who to target breaks into three categories:
1. Buying persona
2. Company profile
3. Market segment
To answer the question, “Who must we target to be successful?” start with the personas that benefit from your proposition and will be willing to pay for it. At the same time define all the stakeholders who will be involved in making a buyer decision – include them all as routes toward engagement with the decision maker, not as stumbling blocks. Personas are bundled into companies that share common profiles and become the ideal target prospect for campaign targeting.
When you step in front of your target prospect, you have 30 seconds to get a person’s attention and stimulate interest; in that time you must explain what your proposition means to him and why it is worth buying.
A good value proposition includes:
1. What you do
2. Why you do it
3. The benefits to the user
4. Why the user would need this product
6. Why they should care
7. A credible reference
8. Who you are
Our intent is to answer the questions:
1. Why does the business exist?
2. How does the business deliver?
3. What does the business do to deliver?
What the customer wants to hear can be summed up as follows:
1. What can you do for me?
2. Why should I care?
3. Why should I believe you?
A good value proposition is well thought out and practiced.
As you can see, establishing early market validation and traction can be tough. It depends on the customer understanding the problem and desiring a solution. We must be very pro-active at this point; Ad words and bulk email campaigns are unlikely to be the answer. The fastest way to success is often to hire a solidly connected business development rainmaker; expensive, maybe, but you cannot sell through alternate channels or partners until the end-user demand is proven and end-users at this stage are very difficult to engage.
New products and new companies have a high failure rate from market and product risk; by connecting product and market validation with a customer centric go-to-market strategy such risk can be minimized.