Avoiding Startup mistakes

Running a startup can be a total mess, with tons of projects, tasks, and priorities that are all crucial, but never seem to get done. It would be helpful to have a compass to guide you through the chaos and prioritize what’s important, right? So, here it is.Learn how to prioritize from the start and what approaches just won’t cut it. With this knowledge, you can steer clear of the mistakes that have caused other startups to go bust.


One common mistake that many business people make is assuming that startups are just miniature versions of large companies. This couldn’t be further from the truth, as startups face unique challenges that big businesses do not. Unlike established companies, startups cannot usually introduce new products to the mainstream market. They lack a pre-existing customer base and have limited knowledge of their competitors, so they must take a different approach to succeed.


Startups must first understand their market environment and get to know their potential customers before developing a new product. This is known as the customer development process. By building a customer base and then creating a suitable product, startups can ensure they are meeting a real need in the market. The failure of Webvan, an innovative start-up that founded the first online grocery business in 1996, serves as a prime example of the importance of the customer development approach. Instead of researching their customers and their needs, the company focused solely on product development and failed miserably.


Another significant difference between startups and large companies is that entrepreneurs have no idea whether their business idea will actually work. Unlike established companies that know their market and how to sell to it profitably, startups must prove that their vision is viable. This can be a daunting task.. Entrepreneurs must undertake a quest into the unknown, facing obstacles and difficulties along the way. But with a powerful initial calling, they persist and become heroes when they reach their goal.


Ultimately, startups must find a path to turning their vision into a reality. They learn as they go, discovering who their best potential customers are and how they should conduct business. By taking a customer-centric approach and embracing the unknown, startups can differentiate themselves from established businesses and achieve success.


The Importance of Prioritization for Startups

Startups face a lot of uncertainty, and setting the right course early on is critical for success. One way to do this is by establishing a set of core values and a written mission statement.


Core values are fundamental beliefs that guide a company’s decisions and actions. They define what a company stands for and what it believes in. For a startup, it’s essential to establish these values early on to ensure that everyone is aligned and working towards a common goal. The core values should be authentic, reflecting the company’s personality and culture, and should be consistently upheld.


The mission statement, on the other hand, is a written declaration of a company’s purpose and its reason for existing. It answers fundamental questions such as why the company’s staff comes to work, what its goals for growth and profit are, and how it will know when it’s doing good work. A good mission statement should be concise, memorable, and inspiring. It should capture the company’s essence and differentiate it from its competitors.


A mission statement can change over time, reflecting the company’s evolution as it launches new products, enters new markets, or grows its team. However, it should always remain true to the company’s core values and purpose.


In the early stages of a startup, when there is often a lot of turmoil and uncertainty, a written mission statement and core values can provide much-needed guidance and direction. By referring to these foundational documents, a startup can ensure that it stays on course and maintains its focus on what’s truly important. With authentic core values and a compelling mission statement, a startup has a much better chance of achieving its goals and staying on the path to success.


Choosing The Right Strategy


Choosing the Right Strategy for Your Startup Based on Market Type

Startups’ strategies should be determined by the type of market they operate in. The appropriate approach varies from one startup to another and depends largely on the environment or market type in which the startup operates. The most crucial aspect to consider is whether the startup is facing an existing or new market.


An existing market is where it’s clear who the customers and competitors are. For such a market, the startup won’t need to spend time gathering information on potential customers, but it will face established competitors that it needs to outperform to enter the market. Transmeta, a microprocessor startup, faced this situation when it wanted to challenge Intel’s dominance with a new, Intel-compatible chip that had far superior energy efficiency. Although Transmeta saved time and money because it already knew its potential customers and competitors, Intel developed its own low-power chip, which put Transmeta out of business.


On the other hand, a new market is one that a startup creates by finding users. Although it’s not an easy task, the advantage is that there are no competitors yet. PhotosToYou, a company that printed high-quality photos from digital cameras in the late 1990s, focused most of its resources on branding instead of researching potential customers, and as a result, struggled to reach prospective customers.


Startups can also resegment an existing market by offering a cheaper version of an existing product or a niche product. Resegmenting can open up a new customer base of people who couldn’t afford the product before or who didn’t find the product that suited their needs. For instance, In-N-Out Burger captured a portion of the fast-food market despite fierce competition from established players like McDonald’s by offering higher quality hamburgers for the same price.


While every startup is bound to make mistakes, it is crucial to catch them early on and reduce their impact by collecting feedback from users as soon as possible. By finding out if there is a market for the product before it is even launched, startups can avoid costly mistakes and tailor their product to better suit customer needs. To optimize their product, startups should continuously collect feedback and make changes accordingly.


Additionally, startups need to be responsive and agile to keep up with the ever-changing market environment. They cannot afford to be slow and unresponsive, and stiff hierarchies and organizational structures that hinder fluidity are out of the question. Every team member needs to have the authority to make urgent decisions in response to feedback and changing market conditions.


While adhering to these principles can improve the chances of startup success, it is important to note that even with all the right strategies in place, startups may still fail. 


Customer Development vs. Product Development

Startups must focus on the customer development process rather than relying solely on product development, which can lead to disaster. The product development process used by large companies cannot be replicated by startups as it involves building a great product and expecting customers to appear, which rarely works. Instead, startups must synchronize product development with the customer development process, which focuses on external factors such as customers to create products that people will buy.


The customer development process requires building a customer base and ensuring that products suit their needs. The process is dependent on the market type and feedback from customers. Startups should learn from Furniture.com, an online furniture retailer that focused on building an expensive website, recognized brand, and large-scale shipping system before researching market demand, only to find out that customers were not ready for online furniture shopping yet. In contrast, Design Within Reach, a designer product retailer, adjusted every catalog it published according to customer feedback from the previous catalog, resulting in an increasing number of customers and larger average order size.


For startups, it’s important to sell their product to enthusiastic early adopters who have a pressing problem, rather than spending too much time and money building a perfectly engineered product for the mainstream market. These early adopters are willing to pay a premium for a solution to their problem, even if the solution isn’t perfect. By catering to this group, startups can gather valuable feedback for future product development.


Many startups make the mistake of not looking for early adopters and instead focus on engineering a perfect product for the mainstream market. This can lead to a lack of funds to respond to customer feedback, or an outdated product by the time it hits the market. An example of such a mistake is FastOffice, which raised $8 million in funding to offer a new home office device with email, fax, and phone functionalities. Despite the product being engineered perfectly, sales were disappointing and there was little money left to alter the product in response to customer feedback.


Startups should learn from this mistake and aim to get the product out as soon as possible to get real customer feedback. 


Strategies for Targeting Mainstream Customers

To achieve growth, startups must continually build their customer base. This is done by targeting different groups of customers over time. The first stage of this process is the customer creation phase. During this phase, startups must decide whether to continue targeting customers similar to their early adopters, to enter a specific niche market, or to approach a broader range of customers. The answer depends on the market type and the startup’s understanding of its customers.


Once a startup has refined its product to appeal to early adopters, it can enter the company building phase. During this phase, the startup’s sales grow, and it begins to target mainstream customers. However, startups cannot target mainstream customers until they have a deep understanding of how and why these customers would buy the product. Startups must refine their product and adapt their strategy before targeting mainstream customers.


There are two primary ways to target mainstream customers. First, startups can use their early adopters as cheerleaders. Early adopters are typically enthusiastic about the product, and they can promote it to mainstream customers through word-of-mouth or reviews. Second, startups can use positioning to define and describe their product so that target customers recognize its characteristics and appeal. For example, Starbucks positioned itself as the number one place for coffee. Regardless of the approach, startups must adapt their strategy to appeal to mainstream customers and build their customer base.


Importance of Understanding Consumer Behavior in Marketing

In today’s world, consumers are constantly bombarded with advertisements and messages from companies. For startups, it’s important to craft and send the right messages as they can influence the perception of the company in the consumers’ mind. The messaging includes product naming, advertising and more.


For instance, in 1981, Santa Clara County in California used Malathion, a pest control chemical, to deal with a fruit fly infestation. However, had it been named something less threatening, such as Bugs Away or Summer Dew, it may have been perceived differently by residents.


Apart from creating the right message, it’s important for startups to convey the message through the right media. While early adopters and industry experts can be effective unpaid messengers, paid media like ads in magazines, billboards, or websites should also be considered.


To determine the appropriate media to use, startups can ask early adopters which sources they use to inform themselves before making a purchase, and conduct market research to determine the media used by potential mainstream customers, experts, and opinion leaders. Once the media is identified, it’s important to target the sources that get the most attention from the customers, for example, advertising in prestigious newspapers instead of obscure trade magazines with cheaper ad rates.


Startups are not small versions of large companies, as they are still figuring out their market and strategy. To be successful, startups need to listen to their customers and be flexible in their approach. It is important to define the soul of their company, including core values and a mission statement.


Dealing with uncertainty is inevitable in any industry, and having a clear set of values and a mission statement can guide startups and keep them on the right track. Core values should reflect the company’s morals and differentiate it from competitors, such as in the way it treats customers. A mission statement should outline the company’s goals, the steps needed to achieve them, and why employees come to work each day. By defining these key components, startups can establish a foundation for their business and stay focused on their objectives.

Inspired by a book “The Four Steps to the Epiphany”; Steve Blank

8 minutes read

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