I was on holiday at the time so I'm a bit late onto it, but this piece in
The Economist chimes a lot with my experience:
Firstly, "market research" for new technology startups is nothing like what usually works for more tradtional start up businesses:
Anyone who has tried a hand at starting a high-tech business—seeking to turn a clever research idea into something customers will pay good money for—quickly learns that everything taught in business school is next to useless. The mistake is to think of start-ups as just smaller versions of established businesses. They are nothing of the sort.
Existing enterprises, even so-called SMEs (small-to-medium establishments), usually have no shortage of marketing and financial data. Their success depends on how well they execute their data-driven plans. Start-ups, by contrast, are faith-based organisations that survive on passion and belief—with nothing to go on but a bunch of hunches.
Our experience is its far more about modelling scenarios, what-ifs, probabilities etc and laying down "marker stones" to know where you are, so you can tell which scenarios are probably playing out. For this reason I was very interested that Silicon Valley Entrepreneur Steve Blank has come to similar conclusions, but with a lot more data and experience, and has set up his own accelerator - i-Corps - to do this (I know, I know re Accelerators* - but read on, there is some interesting stuff here):
What distinguishes an I-Corps start-up from a typical university spin-out is the way it forces researchers to stop fixating on the technology they have developed. New ventures, they are taught, are all about finding customers, what distribution channels to adopt, how to price the product, who to partner with, and more. From day one, the mantra is “get out of the lab”. Participating academics have to make countless cold calls to potential customers—something few research scientists and engineers have ever done in their professional lives and most initially find awkward.
The I-Corps programme is based on the premise that all new ventures are little more than a series of untested hypotheses—in other words, optimistic guesses about market size, customer needs, product pricing and sales channels. With so many unknowns, the programme teaches participants to treat their start-up as if it were a typical research project, amenable to the same iterative process of hypothesis testing and experimentation.
Stopping Technology Fixation is IMO one of the absolutely critical issues for Technology startups, the problem is its virtually impossible for techies who are in love with their technology to do - so the second bit, on treating the startup dispassionately as a live project, seems like a very clever way of forcing that dissociation. Anyone who has studied innovation and startups will know that which technology/company/method succeeds is highly unpredictable in the initial stages, and all sorts of factors come into play - exactly because all sorts of factors are untested.
But I was also impressed with the following, because in my experience turning around tech companies, these are usually the most critical issues - making sales and making profits:
Mr Blank’s blueprint draws on two complementary techniques—“business-model design” and “customer-development process”. The first uses a technique pioneered by the authors Alexander Osterwalder and Yves Pigneur in their book “Business Model Generation”. This provides a handy graphical template (called a "canvas") that helps fledgling start-up teams envisage their most likely customers. With the canvas' nine separate blocks covering such things as resources, value propositions, customer relations, cost structure and revenue streams, it captures the complete essence of a business plan. By filling in the individual blocks, the hopeful entrepreneurs are forced into the sort of business brainstorming many are unfamiliar with.
Customer-development process, meanwhile, provides a real-world way of testing the business plan's various hypotheses, as written in the canvas' nine blocks. The testing is done by getting potential customers, suppliers, partners and channel operators to challenge the assumptions. If invalidated, the I-Corps team has to pivot, and revise the entry in that particular block of the canvas. The process is repeated until all reiterations, in all nine blocks, are finally exhausted and the business plan emerges robust enough to be realistic.
There are other methodologies than those suggested here of course, but in my experience the "80/20" impact is the act of focussing on the business model (how you will make money) and the customer model (who will buy). Its damned hard to do, especially for the techies who are struggling with making the new wotsits work, but absolutely critical. You don't have to have the "right" business model initially (just look at Google) but you have to know what a "wrong" one looks like, and what the envelope of success looks like.
Also, they emphasise that there
will be significant twists and turns in the business (or "pivots", as the fashion is to call it these days), its a given not a failure
The I-Corps curriculum emphasises that failures which force participants to pivot and change their assumptions are an integral part of the learning process. That can mean rethinking the market, changing the price, even altering the product itself. During the eight-week programme, I-Corps teams repaint their business-model canvases literally dozens of times. The average team confronts 100 or more potential customers while honing its business plan and tweaking its product.
Re: pivoting, I increasingly think of a startup as a bit like a new genetic algorithm, so it has to go through a number of self winnowing cycles before it can navigate the ecosystem its launched into. Another analogy may be a new species that has emerged blinking onto the landscape and has to adapt to its niche.
Its too early to say whether this particular program will work, after all execution is 9/10 ths of the lore, but I think the proposed areas of focus are in the right direction. The one thing this piece does not say, of course, is that for any startup taking money from an accellerator, incubator, seed investors etc - Cave Contract! Get a lawyer to look it over.
*Yes, in the Bubbletime we are also
sceptical of any New New Accelerator story, but this piece has some interesting points.
