Entrepreneurship is full of risk and unknowns; so how do people successfully start businesses? Is there a thought process or recipe for success?
When I start to reflect on discussions, interactions and business dealings with entrepreneurs over the past years they all seem to have some things in common. Typically, they have a good appetite for risk, but more importantly is that they are able to think quickly and make changes in their business that allow for adaptation as they realise what it is the market wants.
Many entrepreneurial businesses begin with what is called a Minimum Viable Product (MVP). This is simply what it is called, a basic product that is good enough to take to market, test their theory of market demand, pricing point and delivery mechanisms. Once their MVP is launched, they then begin to gather data and use this to make adjustments to product attributes. By being able to garner feedback from their market early, they are able to continue to adapt to market wants and needs. The action steps become “Ready, Fire, Aim”
Contrast this with more risk adverse business practices. Other business owners spend considerable time developing their end product. Generally, if the product is an innovation, the business is based on a hunch or idea that the market wants something. Finances are spent on design, developing prototypes, tooling and manufacture prior to garnering any market commitment or support. If a small business, it’s even unlikely that any independent focus groups are run. What occurs is a financial commitment prior to an idea being tested with the market. With a generally large financial outlay already being made, there often isn’t room to adapt the product to market feedback. Furthermore, the business owner may feel so emotionally attached to the product they have designed that they deflect market feedback and are unwilling to adjust their offering. In summary, the thought process is the typical “Ready, Aim, Fire”.
So why do some people prefer the second option over the first? Perhaps they feel that they have to “get it right the first time” or want to “line all the ducks up” or maybe they aren’t even aware that there is another way. The first option (MVP) is a way to test ideas, outlay minimal upfront capital and “fail fast”. The key is to be willing to fail, get your idea out into the marketplace quickly and most importantly be capable of adjusting to market feedback.
The Ready, Fire, Aim approach also has similarities to how firms disrupt a market. Typically, this is through releasing a “bare bones” offering and adding features as market share grows. Check out our previous blog on disruptive innovation for further insight.
So, what are you waiting for? If you’ve got a business idea, get your MVP launched quickly and start gathering market data.