By Bill Rossi
Nearly 300 million people attempt to start about 150 million businesses worldwide every year. This results in about 137,000 startups launching every day. At the same time, about 120,000 startups die every day, too. Every CEO who has ever launched a new company, or stepped in to drive the next phase of growth or enter a new market or product category, understands the complexity and challenges of the journey. For young and seasoned entrepreneurs alike, it’s important to remember the most common mistakes to avoid when developing a business…and embarking on a new category.
- Going for the sharks…and ignoring the minnows. Since what you’re building is something new, most people won’t acknowledge what you’re doing. You must find those early adopters and that doesn’t always mean the big Fortune 500 companies. Too often, CEOs focus on the sexy industries or big corporations to get validation, but experts agree that it’s more important to seek out “bowling alleys.” There might not be anything sexy about them but they can often become the early adopters that shape your product and offering for the major leagues.
- Sinking money and resources into traditional marketing. If your product thinks outside of the box, then your marketing should too. And traditional marketing generally doesn’t work when you’re trying to build a new category. One of the problems with start-up investing these days is founders can get too much money too early and because they know little about marketing, often times, they spend it in unproductive ways. As an example, if you have a B2B product, you might be better off with field marketing efforts than advertising. Field marketing can be far more effective for the dollars spent because hosting a CIO summit with a thought leader who can influence their decision is more effective than a sexy new ad that impresses your friends but doesn’t reach the right audience.
- Focusing too much on your competitors. Your competitors won’t be focused on you, so why waste your energy focusing on them? Instead focus on the customer. As a start-up, there is no shortage of competitors (big and small), so keep your attention focused on your customer and position yourself favorably in their eyes versus spending your time focused on what you can do that competitors can’t do. As an example, Salesforce didn’t try to complete feature-for-feature against Siebel, but instead intimately understood that sales teams wanted an easier way to access customer information on the road and that steered them to embracing the cloud.
- Building a large sales force. It’s easy to convince yourself that the best way to build a category is build a salesforce. Like traditional marketing, it will be expensive and ineffective. There have been lots of startups that have built amazing companies without large sales teams – I.e., billion dollar unicorns, Slack and Github. The first hires should be evangelists who can make your product sing in the market. That can be individuals in Sales, Marketing, Product or Engineering. If you hire sales people too early they can get frustrated as the product shifts and morphs as you make adjustments to find the right product-market fit. Sales people join to sell and make money and anything that gets in the way of that makes them miserable, and the people around them miserable too. That can bleed into your company culture that causes bigger problems and affects teamwork.
- Telling investors you’re building a new category. When investors hear “new category,” they’ll hear “long road and expensive.” It seems every blockbuster company is a new product and category, so how do they ultimately get investors to invest you might you ask? Most of these companies had early customer evangelists who loved what they were doing and convinced investors that they should pay attention. Using Salesforce as an example again, they built a new category of product that would use the “cloud” as the repository for customer data. Investors thought they were nuts. Who would put valuable customer data somewhere in the “cloud?” But Salesforce got an early following of SMB users that convinced investors that they had something, and momentum was building.
- Assuming your target will “just get it when they see or experience the product.” Customers have to first understand and buy into why they need this new solution that they have been living without. At my first networking startup, we thought the value would be so obvious to our customers when they saw it in action. Wrong. Because of the use of our proprietary technology in our solution and lack of interoperability, the value was lost on the market. In the world of networking, products get adopted because they meet or create new standards, end of story. Once we moved away from proprietary and shifted toward creating a standard, the adoption took off.
- Turning what you have into a Swiss Army Knife. You can’t be everything to everyone. Creating a new category requires commitment and courage. Too often startups lose faith and they have contingency plans already set in place before they start. This is why it’s so important to find your bowling alley early in the process. There’s nothing like customers voting with their dollars to give you courage and confidence. Too many startups spend too much time perfecting the product and not enough time perfecting the go-to-market strategy, the messaging, the pricing and the positioning. Once you master the latter, the sooner you’ll know that what you have is a sharp dagger with a purpose and not a Swiss Army Knife.
Bill Rossi is the CEO of Metabiota, a pioneer in epidemic risk analytics.
