The Right Idea
A startup doesn’t start with an idea.
Ideas are wonderful. If you live life thoughfully, you’ll probably have at least a half-dozen ideas that change the business habits of people you never even worked with. Maybe you mention a new product idea to an artist at a craft show, maybe you discuss the shortcomings of a business process at your kid’s hockey game, and maybe you actually respond to one of those web surveys and mention a good idea.
Febreeze removes scents. But it only became a successful product because of one customer who would spray it as part of her routine, even when there was no smell for it to cover up. She gave Procter and Gamble the idea to make it part of the everyday cleaning process, rather than to market it as a way to remove scents. It turns out that people become desensitized to their own scents, so all attempts at marketing it had failed utterly. Hundreds or Thousands of customers had been studied, but only one showed how the product could be successful.
For the six ideas you have that change the world, there are hundreds and thousands more that will be forgotten, or unexplored, or impractical. Ideas are easy. Vetting ideas is hard. Startups don’t have the marketing budget of P&G, and they need the idea that will sell without finding a magic customer.
Before we begin working on an idea, we need to discard a lot of others. It’s critical to have a vision and be excited about it, but part of turning it into a real business is accepting that your vision can be wrong, and exploring all of the ideas you can think of and asking which ones have a real chance, and why.
The Right Product
Once you have that one great idea, you still don’t know what your product is. Products change in response to the market–entrepreneurs pivot when they learn that they are chasing the wrong market or that they are not doing what the market demands. An app that lets customers pay to stare at a rotating ball will find no customers, while a free app that lets manufacturers advertise their logos on a rotating ball on consumers’ phones may find lots of customers. An ability to rethink a product, its uses, its customers, and its markets is critical to the early stages of a company’s life. Most new businesses fail–some because of employee fraud, but many because they are not adapting to the market but are expecting the market to adapt to them.
Prioritize Business-Facing Markets
First-time entrepreneurs frequently make the mistake of targeting the consumer market instead of the business-to-business market.
The consumer market is great in some ways. All of our friends are consumers, and they all know consumer products and the consumer market, and success in the consumer market brings a certain real-world prestige to it that success in the business market brings only when you are speaking with certain sets of people. Success in the consumer market also lets a company achieve very different things–Starbucks improves the world by making people cheerful in the morning and having great employee training that affects far more people’s lives than a business-oriented startup is ever likely to reach. For a social entrepreneur, the consumer market is a really interesting space.
But ultimately, it is much, much harder to be successful in the consumer space. Fundamentally, transaction costs are bigger when you are dealing with a large number of people. Businesses have more money to spend on improving their operations than people do, and they have people whose job it is to improve those operations. If you can create a product or business that helps that decision-maker in another business do their job better, it is a much easier sell than if you have to make that sale to a million people.
This is why, over the last few years, there have been a greater number of successful exits by business-facing startups than by consumer-facing startups. And beginning a company isn’t only about building a business, it’s about understanding your vision and your exit strategy.
I hope this has been helpful to your thought process as you decide where to focus your business.