All companies start somewhere. Facebook, AirBnB, Amazon. They began with something new – a dream, a concept, a necessity. Through hard work and perseverance, these companies transformed the way we live.
So, what is a startup company?
The term ‘startup’ is used frequently in the business world and by creatives. Startups are companies that solve existing problems in an innovative way, by creating disruptive solutions which shift paradigms. These companies are commonly technology driven and the nature of the problems they address lead to exponential growth. Startups need to be agile as they are constantly pivoting to find the best solution.
Building a startup may sound exciting; however, there are also risks involved. From experience in dealing with a variety of startups, the Ingenuity team have brainstormed 7 startup ‘stoppers’. These are tips startup founders should consider when designing their business to boost growth and success.
#1 Know where the problem is
You have an idea for a product. Great!
Do people need it? Do they want it? How will it help them? What will it solve?
Humans by nature are creative machines pumping out brilliant-sounding ideas daily. However, sometimes ideas look better on paper, and in reality, are not what real users want or need.
This why it is important to put assumptions about the customers’ needs aside and simply ask them. The role of a startup is to fill a hole in the market – yet that is impossible without knowing where the hole is. Startups need to identify where the problem lies and determine the value of their proposed solution.
Firstly – who is the target market? Once this is identified, startups can present their initial solution to the potential market. Talk to people, ask questions, run surveys and show them the concept. Get to know the users and be ready to adapt the product to their needs.
#2 Filling the market hole
Once a market hole has been identified, startup companies should analyse their ability to fill that hole.
Be realistic. Understand the size of the market opportunity you are trying to reach, then review the company’s capability and constraints to do so. Do you have the right resources and finances to fill that hole?
Startups need to determine what resources they need to provide the solution and where they can access these. The availability and amount of these resources is determined by the nature of the market opportunity.
For example, let’s compare two potential startup companies. One is striving to build recreational rockets to Mars, and the other, smart coffee machines. Both of these companies face vastly different technological challenges and market opportunities. Therefore, the resources needed to provide solutions are different.
It is vital that startup founders are aware of these differences, as their success is contingent on their ability to find the correct resources. Both under and over-estimating the amount of resources needed to fill the market hole can be detrimental for the startup company.
#3 Find a niche
At this point, startups should know who their product is geared towards and why their solution is necessary. It is now time for startup founders to ask themselves: what makes us special?
Startups need to have a niche. They need to be innovative. They need to be different.
Startups must first understand who their competitors are and what they are doing. Conduct a competitor analysis. From this, startups can determine what makes them different and valuable.
If the product has been done before, startups should consider changing their approach. There may be ways to re-brand or adapt the product to make it different from others. Come back to the original problem and think about how to solve it in a new or better way. Through this, startups can explore what their niche is and what makes them special.
#4 Prepare a strong business case
Businesses should plan for all aspects of their business. This is vital for having realistic expectations, clear direction, achievable targets and ultimately, success.
Some startups do not have a clear business case. These companies are underpinned by unfounded assumptions about how to reach the market, product sales forecasts, and their ultimate profitability. Startup founders should strive to find a basis for all assumptions.
Here are some things to consider when preparing a business case:
- The target market
- Value proposition
- Sales and marketing plan
- Distribution strategy
- Sales projections
- Financial projections
- Risks and mitigations
- Level of investment required
- An exit strategy
Creating a business case is an area where startups could benefit from the mentoring of experienced entrepreneurs and innovators. There are many opportunities for startups to learn and receive advice. Some of these include workshops, traineeships, personal mentoring, seminars and other programs. Do some research to find out what is available and suitable.
#5 Validate the idea
Once there is a clear product idea and a viable business case in place, startups need to once again, bring their ideas back to the people.
It is time to develop prototypes for usability testing. Use concept models, pictures, renders, app mock-ups, or anything that will help the user to see and feel how the product functions.
Startups should observe how users interact with the product and talk to them about their experience. Ask users what they value and what they are struggling with. Then, adapt your product to their feedback.
#6 Address the commercial risks
Founding a startup does involve risks – but does it have to be a leap into the unknown?
Startup companies should take the time to explore all possible commercial risks which have the potential to undermine the products’ success.
This involves determining what the product will do and its technical feasibility. Consider the products performance, size, cost, appearance, usability and anything else that is essential to the product viability. From this, it should be possible to estimate the development costs and time-frame.
Further, changes to product design become exponentially more expensive during the course of development. Strive to answer key commercial questions early to minimise mistakes and the cost of changes.
For example, the Ingenuity team met a company that had spent ~$2 million to complete the development of a new medical analysis tool. After research, the company realised a crucial issue: the product itself would cost $600 to manufacture, but the market would only pay $200 for it. The issue was that they had not costed the product prior to development – a key parameter for commercial success. In the end, the medical company could not sell their product and it was shelved.
#7 Define and Deliver the MVP
Some people think that more features equals more success. This is a common mistake made by many startups when developing their products. However, the truth is that less is more.
It is crucial that startups develop a Minimum Viable Product (MVP). This is a version of the product which contains the minimum number of features possible for the problem to be solved. It can be surprisingly challenging to define the MVP. As startups are resource constrained, its important not to waste time and money on developing unnecessary features, thereby reducing the time to market.
“I am continuously trying to persuade clients to minimise their offering and to stay focused. While this may result in a smaller project for our business, I firmly believe that the greatest long-term benefit for everyone is achieved when our clients succeed”.
Paul Moutzouris, CEO of Ingenuity
The Ingenuity team has helped numerous startups bring their solutions to life. We provide product design services to those seeking to develop innovative products and systems. Our expert team can support startups to design the right product, which is relevant, usable and commercially viable. The Ingenuity team can guide startups to avoid these startup stoppers, maximising their chance of success.