This is Part 3/18 in the series “How to Build an Innovative New Product or Company” on the topic of over-investing in the “4 Steps to Develop a Strategy”
I was introduced to a medical device company recently. They have created a product that allows you to do blood analysis faster and simpler than any other product out there. The product is a piece of paper that has six testing areas on it, each of which can test for something different. It’s relatively cheap to make, can be easily carried “in the field”, and is disposable. They’re starting to think about how to sell and market it. Sounds like a winner, right? Perhaps, but what’s incredible to me is how commonplace this type of company is. They have a technology that, to the founders, is self-evident as a game changer. They just haven’t figured out yet whose game it’s going to change.
A company like this has a product and a unique technical insight. But they don’t yet have a strategy. Who is their customer? What is their need? Why can’t two kids in a dorm room build this product?
There’s nothing wrong with starting a company this way.
A great strategy and path to market may well exist. But things go don’t go well when you start with a technical insight and proceed forward, without pausing to do the hard work of developing a strategy.
For this company, they could now begin to enumerate all of the potential customers and their needs. For example, they could go and talk to hospital labs. What are their main needs? How big of an opportunity can be unlocked by the product? The potential buyers might say, “well, your product is as good as our $50,000 analysis equipment, but we’ve already bought it so a cheaper option won’t save us anything until we need to replace it”.
They could talk to EMTs and mobile labs. How much faster or cheaper would their test be than what potential customers currently use? How much value do they unlock by providing faster or cheaper results? Do EMTs wait to do any blood testing until the patient is stabilized in an ambulance and have no need for faster results?
In short, the story I see so often is a group of technically-oriented founders pushing headlong into a product without knowing who is going to be the first customer segment to use it, why they’re going to use it, and how badly that customer needs the solution.
Many product ideas have a customer identified… but not a fact-based understanding of their most urgent pain points and the under-leveraged root causes
Mistakes I’ve made … story #1
A couple of years ago, I had a need in my job. As a strategy leader in a prior company, I was looking for companies that were potential competitors or acquisition targets for us. I had found a few, largely in an ad hoc way, as colleagues pointed them out to us. How could I find others?
I inferred that M&A leaders in large companies and venture capital firms must have the same challenges. And I saw an opportunity to build a unique analytics solution. I built a tool that web-scraped the websites of over a million corporate websites and compared the terms that they used to speak about themselves. The site was called LogoSleuth. I’ve since taken it down, but at the time, you could go to it, search for a company URL (such as your own) and it would report back to you the other corporate websites that used similar wording about themselves as the one you were searching for.
It was a nice piece of technology. And I had a type of customer who could be a buyer: those who were in a similar role as I was. But I hadn’t spoken to them. I hadn’t gone through the hard work of determining who they were and where they worked. I hadn’t talked to them about their largest, table-pounding challenges. And I hadn’t then investigated the causes and current solutions to those challenges. If I had, I would have discovered that the need I had was a bit unique; that for those who faced it regularly, there were other tools. And overall, it wasn’t one of their top three needs.
Would it have been better to find out what those top three needs were and try to build a unique solution to them, even if the solution was a bit less perfect than the “solution” I had created? Yes … there’s no question. But sometimes you need to learn your own lessons yourself.
Mistakes I’ve made … story #2
About ten years ago, I led product development for an analytics startup. We had great technology that could identify areas of cost reduction opportunity and revenue growth opportunity for hospitals. The products were quite good—but we had about a dozen of these products. Our sales team had a tough time selling the individual components (they were too niche to get executives’ attention) and so our sales team embarked on a process of bundling products to create a complete solution that was defined entirely in terms of a buyer’s need. It was successful but painful. There’s nothing wrong with going through the “4 Steps to Develop a Strategy” backwards (start with a technology and areas of competitive advantage and look for buyers who are best served by the product) but doing so after we had launched and scaled up a sales team was a misstep.
Sure, strategy should be an organic, evolving construct inside of a company, but having a strategy in advance that meets the criteria of the four steps (even if it’s not quite right) really helps with the journey later on.
I included this (the importance of having a strategy based on customer need) as step #3 in a series on the process of developing a company or product for all of the above reasons.
If you don’t have a strategy yet, you might find the articles I’ve written on creating one (referenced below) helpful.