Lets imagine youve got a great product idea. You act on it right away, and your clients contribute to its improvement. You put money and effort into it attempting to accelerate your business development. But then, your business unexpectedly plummets the size of your clientele does not meet your expectations.
Unsuccessful start-ups, including the ones with outstanding ideas, are commonplace. Businesspeople fail to pay attention to their clients needs, seize favorable opportunities, or find right managers for their business.
However, what way is the one to a successful business?
This article talks about various stages of starting your business and developing it: product innovation, market targeting, the establishment of proper customer communication, and improving your product to scale your business.
Thriving businesses are not founded solely on money and great ideas.
Imagine receiving a million bucks: would you be able to build a profitable start-up?
The majority would have some doubt obviously, there is more to a successful product than money. In fact, money may affect your business development by creating unfounded contentment and sense of security; in the end, difficulties inspire ingeniousness.
Consequently, new businesses with little money usually have a clear idea about what their product requires. In contrast, those with more than sufficient time and resources often produce little or no result since they dont think about sensible managing of their supplies.
For instance, in 1996, 3D Realms, the developer of video games, presented Duke Nukem 3D, which became widely popular. It took them little money and a year and four months to finish the game development. In turn, they received millions to spend to its sequel, Duke Nukem Forever.
However, the income they received provided more than enough time, which led to delays in making any decisions. All in all, 3D Realms spent 12 years developing the game, the final version of which never came out.
Thus, we can see that money doesnt solve all problems, which is also true of outstanding ideas. Those supposedly remarkable concepts were often associated with blind faith and the belief that the end justified the means, which is a dangerous combination in business.
A number of businesspeople decide to act on their idea as quickly as possible believing in its certain success. They create and introduce their product spending much money on it and think that they would be able to adapt it in accordance with the clients needs later in the future.
Obviously, this approach usually results in failure; thats how unnecessary innovations appear, such as Manhattans lawn mower rental. Such inability to consider peoples needs leads to businesspeople losing money and going in the red.
So what is the secret of creating a profitable start-up if not big ideas and money?
Good businesses identify problems and then solve them.
We encounter minor irritations as well as the major ones on a daily basis, from stepping on sticky gum to difficulties with software.
Despite them being annoying, every one of them presents an opportunity. Each can potentially result in a highly profitable business. So in order to turn a nuisance into a booming enterprise, you need to figure out what impact these problems have on potential clients and afterward propose a suitable solution.
For instance, Steve Jobs noticed the difficulties with loading music on MP3s. So, he created the easy-to-use iPod and iTunes software to allow the customers to synchronize their music on their devices effortlessly.
Another example is Intuit, the American software company. They became aware of the trouble that small business owners had to go through because of the necessity to sit through 125 screens to set up standard accounting software. The majority of them werent computer professionals and didnt have time for tech matters.
Therefore, Intuit came up with Quicken, accounting software for small business owners that had a setup process of only three screens. Such a simple solution resulted in the enterprises annual income grow by 20%.
Obviously, your product has to solve some issues that potential clients encounter on both small and big scale.
Take for example Recyclebanks founder Patrick Fitzgerald, who realized that some American cities spend lots of money to dump trash because many residents did not recycle. In fact, recycling can produce revenue for the city.
In 2014, Fitzgerald introduced a plan whereby the residents received discounts on OneTwine (Recyclebanks online store) based on the amounts they recycled. As a result of his solution, one Philadelphia suburb went from 7 to 90 percent in terms of their recycling rate; nowadays, Recyclebank is spread throughout the country.
You are now aware of the significance of addressing issues for creating profitable start-ups. Yet, what do you do when your competitors are already working on solving the same issue as you?
Innovation isnt invention and you can solve problems by building on existing products.
Why did Apple achieve such great success in the technology market despite not inventing the computer, the MP3 player, or the smartphone?
The thing is, they applied new vision to the already existing inventions. Thats what allows successful businesspeople to make remarkable achievements.
In other words, innovation is about building upon an existing invention to gain an advantage. For example, solar panels have been sold for years, and the production of solar-powered cars dates back to 1962.
However, they became popular only when engineers made them domestically usable. Nowadays, solar panels industry is worth billions of dollars.
Kawasaki, a once leader in Jet Ski manufacture, is another example. Their Jet Skis came with no seats, which obviously made them uncomfortable to ride. Thus, when their competitors, including Sea-Doo, solved the problem, customers turned to them, which resulted in Kawasakis leaving the market.
Thus, innovation concerns gaining new understanding or vision, which can be achieved through the observation of your target audience, their tastes and leisure activities, and eventually their needs. Take for example Sam Walton, a founder of Wal-Mart. In 1962, he didnt create the concept of self-service shopping, but he did realize that was the future of commerce.
Walton saw right away how much could be saved by placing clerks at checkouts only, instead of the whole store.
He talked to customers and observed them at his competitors shops, which allowed him to see the ways to improve customer experience obviously, he achieved his goal. Everything was closely watched in the store, from the clients reaction upon entering to the distance between checkouts and front door.
Study the market you operate in and adapt your marketing strategy to your target demographic.
When buying big, people usually look for information from different sources, from a trusted friend to online customer reviews. The method is unimportant as long as you realize how you and your customers come to know about products, which is integral to understanding customer preferences.
In the end, to succeed in business, you need to appreciate all elements of your market, particularly your clients.
For example, where do people get information on your product? What do they find out regarding it? Such questions are instrumental when you develop and adjust your marketing strategy.
For instance, in 1989, SuperMac, a manufacturer of exclusive auxiliary devices for Macintosh computers, was about to go bankrupt. So, two venture companies spent $8 million to revive it. Steven Blank, a new VP of marketing decided to address the customers to acquire a better understanding of their behavior.
Thus, they found that it wasnt price or technical specifications of the products that mattered to the customers the most as the company believed. In fact, it was the reviews that people based their choices on.
When you determine what impacts the decisions of your customers, whether its a friends recommendation or media, then you can adjust your communication strategies.
For SuperMac, the knowledge that its clients decisions depended on reviews allowed the company to alter its marketing strategy and overcome bankruptcy.
As far as their communication strategy went, the company developed its own industry benchmarks to monitor the hardware performance, which later became the standards for the entire industry.
Shortly after, technology magazines adopted the Potrero benchmarks (SuperMacs offices were located on Potrero Ave, hence the name). Being the ones to establish these standards, SuperMac received an opportunity to control the market.
Build a strategy based on your customers, then use it to refine your business model.
How do you beat someone at their game? The answer is with the help of a smart strategy. Similarly, thats how you beat your competitors.
If you want to achieve success, you need to base your strategy on the definite knowledge of your customers wants. For example, Webvan, an online grocery service, didnt study the market sufficiently before launching. Consequently, it miscalculated the number of people willing to buy groceries online.
The company invested a lot in infrastructure, warehouses, and trucks only to find 40% of predicted purchasing. In 2001, they went bankrupt losing $1 billion.
To avoid the same outcome, you need to observe your customers purchasing habits and determine the best way to adjust your product to their needs. After transforming this knowledge into a strategy, you adjust your business model with its help and make it reproducible.
The last aspect is essential since successful business models need to be repeatable on a regular basis. Early on, a business model undergoes big changes, but it should allow a steadier strategy that needs only insignificant adjustments to succeed.
Take Apple for instance: at first, all they produced was a kit for customers to assemble computers on their own. Today, they rarely present new products and mainly make small improvements to their existing ones as hardware capabilities grow.
Finally, to improve your business model, look for opportunities to corner your market, carry out mergers or takeovers. For example, Yahoo once refused to buy a new tech company Google, which was clearly a valuable lesson.
At the time, Yahoo was focusing on the markets for online media, sports, and finance, so they couldnt see the remarkably profitable opportunity when it presented itself. Today, Google is the leader in the Internet search market; it frequently acquires competitors and continues to improve its products in order to become an easily repeated business model.
Scale your business by bringing in outside talent and building from a proven business model.
When your company starts to become successful, it may become something else compared to what it has been before. It is natural, but you might want outside managers help to complete control and power to scale your company.
It may be quite difficult since some CEOs of start-ups cannot let go of their creations. Yet remember, business managers are way more experienced in managing large businesses than beginning businesspeople.
For instance, Craigslist, a classified advertisements website has everything from jobs to furniture. Its creator, Craig Newmark didnt consider himself sufficiently experienced to manage a large company. Therefore, in 2000, he let a Virginia Tech graduate, Jim Buckmaster, who was already an employee at Craigslist, to take care of management. While Buckmaster did his thing, Newmark was able to concentrate on customer service, which he did best.
Buckmaster continued to occupy his position, and Newmarks move made Craigslist worth billions.
However, giving up control isnt everything that you need to scale. Paying users who back up an established business model are another factor. In the end, scaling your business without building a strong customer base is irresponsible; growing cannot happen unless your business can sustain itself.
For example, in the 1990s, dotcoms hurried to scale as fast as possible. Their unproven business models and appraisals were based solely on extensive publicity, which was the issue there. Consequently, the majority of dotcoms faced resource burnouts before establishing in the market.
In contrast, eBay, an e-commerce site, was steadily expanding increasing the number of its users. It started to scale only after the Internet service providers could charge depending on the sites generated traffic. Such a move allowed eBay to become the largest e-commerce platform on the planet receiving over $8 billion of revenue each year.
Final Summary
Successful businesspeople are aware that clients needs should determine the direction of their product development, but not vice versa. Therefore, avoid putting all your money in a supposedly amazing idea, study your customers and the market, and try out your business strategy before scaling.
A piece of advice:
Use A/B testing to determine what your customers want and need.
Quantitative data provides you with a coherent, statistical picture of your customers wants. A/B testing is a common method of acquiring such information.
It presupposes offering one product (A) to one group of consumers and another one (B) to the other group. Afterward, the participants of both groups are asked to share their opinions regarding the product they received. The comparison of the answers shows which product is generally more popular.