Thursday, January 16, 2014

Customer: Choosing a right customer when possible...

If there is a first point in the journey of any startup which I believe is worth celebrating, it is - when a customer sale has happens.

If one is to make an analogy of startups to plants and their growth - this is comparable to the appearance of the first roots from the seed and penetrating the soil - there by enabling the plant to potentially grow utilizing the nutrients from the environment. Everything else, like raising an investment or finding a supportive supplier etc only enhance the likelihood of the possibility of growth - akin to application of fertilizers or support fences etc. The first positive sign a start up venture surviving the harsh environment and growing into a viable initiative is when the first customer sale happens.
The start-up environment is extremely dynamic, and with many different growth avenues available, it is possible that start-ups could easily be confused about the way ahead. The newness of the start-ups enable them be easily mold them for good into a position they might not like to be in. While one could rationalize these as being defined by the market, I also believe there is a sequence which the entrepreneur could try before accepting being molded by market consequences than by organizational choice. I would love to believe that start-ups though liable to these are not as helpless in this pursuit, and there could be a better logic that product start-ups could benefit from.
[A word of caution before I move further: what I say here might be most relevant to the high - technology focused product start up than others. But, I am confident that, over period as startups mature, they would like to get in to a position of advantage, and these suggestions would still hold at that point.]

Quick and relevant learning is what I would call the Swiss knife that entrepreneurs should possess when they intend to build their venture. The skillful application of the Swiss knife and its various knives plays an important role in the start up's survival. Given the relevance of learning, it is most apt to focus the start up's customer acquisition and growth plans with a very strong base of learning embedded in it. This is also the underlying theme that I suggest in this blog, and also forms the source of some of the suggestions I make here. I also assume that most of the companies here are relatively growth oriented and building global products.
Suggestion 1: Customers from a Developed/Advanced Nations
High-tech product companies from developing countries who are interested in creating global products are better off focusing their efforts on acquiring customers from developed nations like the United States or the European Countries. This approach gets multiple benefits; some of them are listed below:
a. Most developing countries have an ecosystem that is not completely ready for the products that these high tech start ups are offering. In such scenario, the growth oriented entrepreneur who often attempts to create something innovative, could be satisfied by making a product that satisfies the local need. (It is almost like believing that local maxima could possibly be the global maxima!)
Move beyond the boundaries of the developing market and focus on competing in an international market. (Yes! I hear many start ups cry that they are constrained by the funding issues. But that need not be a limitation - you got to take the risk if you intend to really stay ahead of what is going to come). This could mean finding partner for the company in these advanced nations who could potentially make the product that is user ready!
b. You could lead the change in the local market once you have a good base established - thanks to the difference in the exchange rates between the developed and developing nations. This could give you a head start and resources that help obtain a leadership position in the local market.
One could often be blinded that, what worked in the developed countries could be easily applicable for the home market of the entrepreneur in a developing nation. Often, this assumption is way off mark - and being open to customization for the local market at that stage would be essential.
Suggestion 2: Customers as co-producers

Product development in most startups follows the vision of the entrepreneur, and if this doesn’t get aligned with to the realities of the commercial world - the focus could easily shift from having a useful product to just developing a product none could use for years.

Involving the customer early is definitely a key to being able to break this potential trap and anchor the product development with the active involvement by the customer - almost like a co-producer! (At least some end user inputs would be available and thus provide some of the feedback necessary to develop the product further).
The caveat in here is to realize when you are being completely held hostage to a single client. The startup would do well to being engaging with more clients of similar appetite and need once the product has reached a presentable stage.
Suggestion 3: Create a good lead pipeline
Quantify your customer goals in numeric terms. Goal setting plays a major part in actively pushing the teams towards listening and inculcating the actionable feedback into the development of the enterprise. 

Creating a good pipeline that helps you reach the target set for the firm is a crucial for the survival of the firm. The dispersion in the kind of customers too plays an important role - else the experimentation that forms and important role in the early stages to find the apt customer segment and the value offering to the segment could be way off target and potentially lead to the demise of the firm. 

The mix of leads in the pipeline in some ways should also be reflective of the product - features that you intend to test and validate. Focusing on the most active customer segment, and building a predictable cycle for the segment with good processes and delivery timeliness is the second major milestone after the first mentioned earlier in the blog.
Last but not the least - always be open to change. At the beginning of this blog, we began by saying entrepreneurs need not be reactive always, they could possibly seek a clear advantage if they are proactive in their pursuit of opportunities - It is always possible that in spite of the efforts one would need to change the plans and get back to what could help survive. 

Remember: The warrior who survives the day's war - lives to fight another day!

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