Find out how to avoid deadly mistakes for your startups
Did you know that a startup has the most chaotic operation? This is because there are dozen and hundred projects, tasks and focus areas that are vital to a startup success but all in some degree of incompletion.
In this jungle, it is useful to have your compass that clearly outline your priorities. Use the compass to create the direction of your startup. With a clear direction, you will know what to prioritize in the beginning, and which direction will simply not work out. It will help you avoid the same mistakes other startups have made which led to unsuccessful businesses.
Startups need to create their customers and test their visions, unlike large companies
A majority of business people has the wrong perception of business thinking: they mistakenly believe that startups are a small version of large established companies and to succeed they just need to use the same methods as established companies. Unfortunately, this is not the case for startups.
Firstly, startups cannot easily introduce a new product into the mainstream market like a large established business.
Large established companies have an existing customer base and know all their competitors in the market, so they use a product development process to create a new product. They first design a product and then find the potential customers for it.
On the other hand, startups do not clear understand their market environment, and they need first to build their potential customer before they develop a new product. So, they use a customer development process - build a customer base firstly and create a suitable product for them.
For instance, the innovative startup Webvan that established the first online grocery business in 1996, proved that the customer development approach is crucial in startups. The company failed because they focused on product development process instead of researching its customers and their needs.
Secondly, startup founders are unsure whether or not their business ideas will be successful, unlike established companies that know their market and know how best to sell profitably. It is up to startup entrepreneurs to prove the viability of their visions.
For this, entrepreneurs are vivid risk takers, who take risk quest, and must take the journey into the jungle of uncertainty, facing life-threatening obstacles and difficulties. But because of their entrepreneurial calling, they tiredly work toward achieving their goals.
Entrepreneurs should find ways to bring their vision into reality. They learn through on the job process by discovering their potential customers and how they should run their business.
Startups need a written mission statement and key values to keep them on the path to success
As we learned previously, a startup may not know what path to follow to fulfill its visions. For this reason, they need to outline the path right from the beginning clearly.
A startup needs to define their fundamental and long-term key values to guide them in the journey they are about to embark.
For instance, a key value for a pharmaceutical company could be defined as "making drugs that help people." This value translates that when a company needs to decide between profits versus helping people, it already knows that their fundamental key values are to help people.
Whatever the key values the company chooses, they should be authentic, and every member in the company should stand behind them.
Besides having key values, a startup should also have a written mission statement.
Why is this?
If you look into your personal life, you probably noticed that it is easier to achieve something when you have written it down. The same applies to startups. To achieve their aims and objectives, they need to write them into a mission statement visible.
Every startup goes through a period of uncertainty in the early stage of operations, and it is during this time that a mission statement will ensure they way forward.
It is important to note that unlike the key values, the mission statement changes over time as the business grows and develops, for instance, launching a new product and entering a new market.
So how do you outline all these key parts of the company?
A mission statement should cover areas like - What motivates your staff at work? How do you measure your company success, what are your goals for growth and profit?
Having an authentic key value and a strong mission statement, a startup has wider chance to succeed.
Pick a strategy based on the market model your business finds itself
Each startup is different, and so each startup should follow a unique strategy approach. Mostly this depends on the environment or type of market.
A startup has two strategy approach options to follow - either face an existing or new market.
During an existing market, the startup clearly knows who their customers and competitors are in the market. The benefit is that you will not need to spend the time to gather information about your potential customers and the downside is that you will be head-on facing well-established competitors, by whom you need to outperform them to enter the market successfully.
An example of a company that faced an existing market was Transmeta a microprocessor startup. It challenges the Intel's dominance with a new, Intel-compatible chip that had superior energy efficiency capabilities. Transmeta did not have to compile expensive market research as they already knew its potential customers - everyone with an Intel processor and whom they were going to compete against - Intel. But eventually, they were put out of business as the established giant developed its low-power chip.
The second option is the new market, where the startup creates by finding its potential users. Well, it is not easy, but the benefits are that there are no competitors yet in this market.
PhotosToYou is a typical startup which failed to create a new market. It was the first company to print high-quality photos from the digital camera during the 1990s. Instead of researching for who will be their potential customer, they focused their resources on branding and consequently struggled to reach prospective customers.
In addition to the above strategies, a startup has a third alternative option: re-segmenting an existing market by selling a cheaper version of an existing product. Re-segmenting has the possibility to open up new customer base consisting of people who could not afford the product before and those that did not have a product that satisfied their needs.
For instance, In-N-Out Burger, a fast-food company managed to successfully enter the fast food market despite major competition from McDonald's and other large established business, just because they focused their mission statement to offer higher quality hamburgers at the same price.
Startups need to learn from errors
In business, everyone does make a mistake. A startup has no exception to this.
It is not impossible to avoid all mistakes, but it is always advisable to detect them at the early stage. The best and most cost effective ways for a startup to reduce mistakes and the effects is by continuously collecting feedback reviews from their customers. This could also be done before the product is made available in the market.
Every startup's primary goal is to find out if there is a market for their intent product - potential people who will buy the product. If there is no market, then save yourself a costly mistake, and by reviewing customer feedbacks, you will be able to tweak the product to meet the customer needs. You should constantly collect feedback and use them to optimize your product offering. At this stage, the goal is to gather as much information as possible rather than to sell.
For instance, your new product is a plastic protector that protects cell phone screens from scratches and cracks. You will need to find out how inconvenient people feel about broken screens and how much they spend to repair the screen along with a better suggestion to solve this problem.
A startup cannot afford mistakes just as they cannot afford to be slow and unresponsive as the environment they operate is constantly changing.
Do not let rigid hierarchies and organizational structure hinder our startup business. If for example, feedback indicates that a product needs a new design or a new opportunity has arisen, the startup cannot afford to wait for someone high up in the chain of command to make a decision - competitors will certainly not.
All startup member should be able to authorize crucial decisions in the business, according to the urgency of the matter.
We have now learned some keys to a startup's success. But even if we follow these steps, some startup may still fail. So, what is the final key to a successful startup?