While it is a challenge to find the right gap in the market, it is also a challenge to find the right model to monetize the opportunity and make it into a viable business.
Very often, opportunities do not translate into viable businesses due a lot of hidden costs, unforeseen obstables, regulations, team issues etc.
Here are some of the things that I've seen working in trying to find the right model:
1. Define the canvas: Define the scope of your market and the outer limits. That makes it easier to take yes/no decisions when presented with an immediate opportunity that is not in the line of business you decided to start.
2. Talk to customers: Spend time talking to your customers about their experiences with your product/service and how you can improve. You might find that the reason they are buying your product/service is very different from the reason you made it in the first place!
3. Try multiple models: Don't overspec the product. Create quickly. Release in the market. Listen really hard to customers. Improve. Release again. A quick turnaround will help improve the product faster. It is important to fail quickly if it is not working and focus your energies on a new model.
4. Talk to the ecosystem: Lot of other players in the ecosystem (not necessarily competitors) have a lot of knowledge about how things work in this space. Talk to them. Pick their brains.
5. Talk to experts/advisors: Reach out to folks that have the experience of building businesses as well as folks that have functional expertise. Grasp the prevailing knowledge and wisdom.
6. Follow your instinct: Finally, filter all of this with your judgement. If you dont feel good about it, dont do it. If you feel it is right, go ahead even if everyone else thinks it is a waste of time.
And if it doesn't work, go back to Step 1.
Thursday, September 16, 2010
The Scalability Factor
If there is one factor that adds a lot of oomph to your business plan, it is the famous "S" word: Scalability.
Investors across the world are hunting for the business plan that requires a one-time product development (read: one-time risktaking) and then once it works, you just replicate the product and get busy counting the dollars. Makes complete sense. For the investors.
As an entrepreneur, how does this word pan out?
At one level, the same benefit that an investor reaps is reaped by the entrepreneur - once the business scales; is extremely valuable and provides an exit and hence wealth creation for all stakeholders.
At another level, things are not that clear.
Scalable businesses are "Winner-take-all" businesses. So, you better be number 1 or 2 if you are in a scalable business. Else the returns decline exponentially with your market share to an extent that you might as well give up. Unless of course, you use this base to try a new model/market and become number 1 or 2 in another scalable business opportunity.
While the scalable business is part of a portfolio for any fund; for an entrepreneur, that is the only "play" in the portfolio! So, while accessing money is relatively easier with scalable business plans, it is equally easy to end up with nothing at the end of a few of the best years of your life! Or to put a positive spin on it: you better win if you have a scalable business. There is no prize for coming second - or having tried really hard. Tough.
Scalable business typically require a lot of money up-front. And then again some more to keep the product on the cutting-edge; to acquire new customers; to retain existing ones; to build monetisation mechanisms etc. By definition, such businesses also push-out the break-even stage due to the burn-rate required to stay ahead of the market. To recover this kind of money, you have to capture the lion's share of the market. And if you don't, refer earlier paragraph. :)
As an entprepreneur, you can only invest so much and then are committed to 1 idea. No portfolio for you.
Scalable businesses, very often, are successful because of an inflexion point in the market. When you study how some of the most successful and scalable businesses today started, it seems like they just tried something new - and before they knew it, the market responded in a fantastic manner. Right place, right time - in addition to a lot of smarts, hardwork, toil, sacrifice etc. Can any entrepreneur predict an inflexion point? Tough. Works easier if you have a portfolio of "bets" and one of them works.
But then, every entrepreneur believes that he can take on the world (competition, inflexion points, changing customer behaviour etc) - with one hand tied behind his back.
"All of this is fine - but I am different"
So, none of the points above will make a lot of impact, i guess.
And the S factor will continue to seduce all entrepreneurs. :)
Investors across the world are hunting for the business plan that requires a one-time product development (read: one-time risktaking) and then once it works, you just replicate the product and get busy counting the dollars. Makes complete sense. For the investors.
As an entrepreneur, how does this word pan out?
At one level, the same benefit that an investor reaps is reaped by the entrepreneur - once the business scales; is extremely valuable and provides an exit and hence wealth creation for all stakeholders.
At another level, things are not that clear.
Scalable businesses are "Winner-take-all" businesses. So, you better be number 1 or 2 if you are in a scalable business. Else the returns decline exponentially with your market share to an extent that you might as well give up. Unless of course, you use this base to try a new model/market and become number 1 or 2 in another scalable business opportunity.
While the scalable business is part of a portfolio for any fund; for an entrepreneur, that is the only "play" in the portfolio! So, while accessing money is relatively easier with scalable business plans, it is equally easy to end up with nothing at the end of a few of the best years of your life! Or to put a positive spin on it: you better win if you have a scalable business. There is no prize for coming second - or having tried really hard. Tough.
Scalable business typically require a lot of money up-front. And then again some more to keep the product on the cutting-edge; to acquire new customers; to retain existing ones; to build monetisation mechanisms etc. By definition, such businesses also push-out the break-even stage due to the burn-rate required to stay ahead of the market. To recover this kind of money, you have to capture the lion's share of the market. And if you don't, refer earlier paragraph. :)
As an entprepreneur, you can only invest so much and then are committed to 1 idea. No portfolio for you.
Scalable businesses, very often, are successful because of an inflexion point in the market. When you study how some of the most successful and scalable businesses today started, it seems like they just tried something new - and before they knew it, the market responded in a fantastic manner. Right place, right time - in addition to a lot of smarts, hardwork, toil, sacrifice etc. Can any entrepreneur predict an inflexion point? Tough. Works easier if you have a portfolio of "bets" and one of them works.
But then, every entrepreneur believes that he can take on the world (competition, inflexion points, changing customer behaviour etc) - with one hand tied behind his back.
"All of this is fine - but I am different"
So, none of the points above will make a lot of impact, i guess.
And the S factor will continue to seduce all entrepreneurs. :)
Friday, June 25, 2010
What is your leverage?
"Give me a place to stand and I will move the Earth" - said Archimedes to King Hiero of Syracuse.
Archimedes was trying to present the concept of "leverage" and moving the Earth was a great way to do it.
When you start a venture, it is important to be clear about what your leverage is - and play to it.
Most middle-class, well-educated entrepreneurs typically dont have the leverage of land, political connections or even cash - to be able to play the game with those as the key starting premises. The only leverage they have is their "smarts", their credibility in their social circle and their ability to work hard.
When you meet people of different backgrounds, you notice that some of them have very different leverages: a significant last name, acres of prime property, government relationships, a very comfortable bank balance etc.
In some cases, people act as if they have some of these - while in fact they don't.
You also notice that their approach to any opportunity is very different from yours. And that's because their leverages are different. They do not need to do the same things a middle-class guy has to do in order to capitalise on an opportunity.
So, here's my view: Identify your leverage. Play to your leverage. Do not try to copy or ape other people's behaviour because they will have leverages very different from yours (and in some cases, they might just be acting!)
Your leverage will change over time. When you are a 1-man startup, its just you and your background and your contacts. Over time, its your product, your team, your investors, your customers. Over time, its a "system" that exists in your company - and therefore your ability to make a large impact changes.
This is also the time to be careful. Every small movement you make has a very high change impact on the organisation.
It's like Archimedes finding a place to stand (finally!) and a lever long enough - and therefore being able to move the Earth!
Archimedes was trying to present the concept of "leverage" and moving the Earth was a great way to do it.
When you start a venture, it is important to be clear about what your leverage is - and play to it.
Most middle-class, well-educated entrepreneurs typically dont have the leverage of land, political connections or even cash - to be able to play the game with those as the key starting premises. The only leverage they have is their "smarts", their credibility in their social circle and their ability to work hard.
When you meet people of different backgrounds, you notice that some of them have very different leverages: a significant last name, acres of prime property, government relationships, a very comfortable bank balance etc.
In some cases, people act as if they have some of these - while in fact they don't.
You also notice that their approach to any opportunity is very different from yours. And that's because their leverages are different. They do not need to do the same things a middle-class guy has to do in order to capitalise on an opportunity.
So, here's my view: Identify your leverage. Play to your leverage. Do not try to copy or ape other people's behaviour because they will have leverages very different from yours (and in some cases, they might just be acting!)
Your leverage will change over time. When you are a 1-man startup, its just you and your background and your contacts. Over time, its your product, your team, your investors, your customers. Over time, its a "system" that exists in your company - and therefore your ability to make a large impact changes.
This is also the time to be careful. Every small movement you make has a very high change impact on the organisation.
It's like Archimedes finding a place to stand (finally!) and a lever long enough - and therefore being able to move the Earth!
Tuesday, March 23, 2010
Networking: Should you?
Networking, very often, is seen as a "not-so-good" word - if not a bad word. Almost like "sales". Everyone wants to be in "marketing". Sales seems to imply a smooth-talking, sell-anything-you can-and-run-away kind of person. In fact, in my last job (long ago), sales guys were called "Marketing Executives". In hindsight, i think it was to make them feel better. :)
But sales is really what keeps a business going - and real sales involves real people interacting over a real way to solve a very real problem. No amount of smooth talking will keep sustainable sales going.
In my view, in the short-term, markets might be inefficient. But in the long-term, it tends to recognize value (but thats a topic for another post)
Like sales, networking has these connotations of a lot of superficial interactions and parties - but no real substance.
However, if you ask any mid-to-senior level executive about how they got their most recent job or their new deal, a significant part of the answer lies in how their "network" helped out. Network in this context could mean alumni, friends, former colleagues, family etc.
Business communities throughout history have embraced the networking concept - without probably every calling it that. Weddings conducted over days are clear avenues for networking - be it for business deals or prospective partners for your child! Most business communities also clearly embrace the values of supporting their other community members - and seeking their assistance in building their business.
So, why should you network?
- Its a competitive world out there: Competition is not betwee companies or individuals. Its between networks. Network of Company A v/s Network of Company B. Network as defined as the entire set of well-wishers, employees, investors, customers, partners, suppliers etc. All those that can reduce the transaction cost of doing business and hence make the business more competitive.
- Leverages the real value of YOU: You are the sum of your skills, experience and the network of interactions you have had in the past. Only if you actively network, will you bring the real value to the table.
The important thing to remember is that the network that works positively for your recommendation will also work negatively if you don't deliver on your promise.
Next time: How do you go about building a network?
cheers! :)
But sales is really what keeps a business going - and real sales involves real people interacting over a real way to solve a very real problem. No amount of smooth talking will keep sustainable sales going.
In my view, in the short-term, markets might be inefficient. But in the long-term, it tends to recognize value (but thats a topic for another post)
Like sales, networking has these connotations of a lot of superficial interactions and parties - but no real substance.
However, if you ask any mid-to-senior level executive about how they got their most recent job or their new deal, a significant part of the answer lies in how their "network" helped out. Network in this context could mean alumni, friends, former colleagues, family etc.
Business communities throughout history have embraced the networking concept - without probably every calling it that. Weddings conducted over days are clear avenues for networking - be it for business deals or prospective partners for your child! Most business communities also clearly embrace the values of supporting their other community members - and seeking their assistance in building their business.
So, why should you network?
- Its a competitive world out there: Competition is not betwee companies or individuals. Its between networks. Network of Company A v/s Network of Company B. Network as defined as the entire set of well-wishers, employees, investors, customers, partners, suppliers etc. All those that can reduce the transaction cost of doing business and hence make the business more competitive.
- Leverages the real value of YOU: You are the sum of your skills, experience and the network of interactions you have had in the past. Only if you actively network, will you bring the real value to the table.
The important thing to remember is that the network that works positively for your recommendation will also work negatively if you don't deliver on your promise.
Next time: How do you go about building a network?
cheers! :)
Subscribe to:
Comments (Atom)
