Why my first startup failed
(and why yours doesn’t have to!)
Consumers loved the idea… but they weren’t the ones who were paying.
It was 2003 and my business partner and I had seen how email SPAM had started becoming a serious problem for both consumers and for brands. It was also about this time that SMS started to open up and we saw our first SMS marketing campaigns. What if SMS SPAM became a problem as big as email SPAM? It was one thing for you to get some SPAM email — but to have your phone buzz in your pocket every time you got a SPAM SMS — that would be a real problem.
SMS SPAM could be a big problem that would annoy consumers and frustrate marketers trying to SMS as a marketing channel.
And thus we started PocketChoice.
PocketChoice was a kite mark for advertising that promoted an opt-in for an SMS marketing or subscription service. And it was a web and SMS based portal that allowed consumers to see all of their SMS campaigns, where the opt-in occurred and also to give them the control to turn every campaign on or off.
The value proposition was simple:
- For consumers it gave them control (removed pain). They could opt-out easily and find the source of their opt-ins, including 3rd party opt-ins
- For marketers it gave them more leads and extended their brand value through trust and transparency (make money)
Even with compelling value propositions — there were problems.
Consumers loved it, but wouldn’t pay for it.
As for marketers, PocketChoice was a product for a problem they didn’t feel they had. SMS SPAM didn’t become the same runaway problem that Email SPAM had become. Marketers had more than enough subscribers to their campaigns.They didn’t need a kite mark and they didn’t want consumers to easily opt-out. They certainly didn’t want to disclose their list buying practices and sources.
We spoke to operators, aggregators, agencies, list brokers,industry associations or brands — none of them were willing to pay for it even if they could pass the cost along to the brand.
I had started a business without fully understanding the market I was playing in, the stakeholders, the values and the value flows.
Today I have a methodology for looking at any market as an ecosystem and predicting how the ecosystem will react when you add a product or service. I call it the Business Ecosystem Plan (BEP).
Recently I created a BEP for PocketChoice so that I could go back and look at exactly who were the players, where was their value, where did the value flow? What could I learn from looking at my own startup with a BEP?
Business Ecosystem Plan (BEP) for SMS Messaging Market
PocketChoice was adding value to the consumer, but not enough value that they would pay for it and even if they did, I had no commercial relationship with the consumer so they had no way to pay me. PocketChoice added value to the brand — but big brands didn’t need a kite mark and smaller brands actually wanted to spam people and so they didn’t want a kite mark. The rest of the stakeholders — I was nothing more than a cost and I offered them no value. And the list brokers I was actually removing value by exposing their business of selling people’s mobile numbers.
PocketChoice had an inadequate value proposition
The cost of the value created and the value extracted were imbalanced to the point the business model failed. We had a value proposition, but the value exchange never worked and so there was no business model. #fail #learn
I have been using the Business Ecosystem Plan (BEP) tool for over 5 years now. Using this tool it has helped businesses to make sense of complex issues like AdBlocking and In Home Monitoring for the Elderly. I have created value propositions and business models for markets ranging from digital music to estate agent services. And had I been using the BEP thinking when I created PocketChoice I might have been able to identify sooner that the value proposition was right — but that the value exchange wasn’t sufficient to make a business.
Who Needs a BEP?
Making a BEP for a market and then watching/predicting how the BEP reacts is a great way to determine who are the stakeholders, what are the value propositions, what are the business models and what are the positioning statements and go to market strategies for a new product or service.
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