Routes to Market
Considering that I spend a lot of time at incubators and accelerators, I thought that it would be worthwhile talking about the different approaches that I see when people decide that they want to start a company. There are basically two ways to approach starting a company A) Idea first, or B) Audience first.
The most successful companies that I see are those that focus on the audience or problem first (B). They find customers that are willing to pay for their product as early as possible. Sometimes they are selling a product before they actually have anything to sell. I don’t mean that they are doing this unethically, they’re trying to justify the time that will be required to create something magical. Importantly, they use the sales process to identify that there is a meaningful problem that people are willing to pay to have solved.
This isn’t the approach that most companies that I speak to at accelerators use. They generally start with a preconceived notion of what they think the market will want (A). This is even more difficult when you’re creating a product for consumers because your paradigm likely reflects your background and preferences, a poor sample at best. You can create experiments to see whether your assumptions are grounded in reality but it could be preferable to start the way you intend to continue. The testing process for consumer products and platforms is a long and winding road, hardly something that can be solved in a month or two of iteration and not something that will be addressed in this newsletter.
Business-to-business (B2B) concepts can be incubated through simpler methods. The two ways that I’ve seen B2B businesses successfully created, is through 1) “External consultants” taking a solution and building it into a product, and 2) “Internal consultants” seeing an issue that exists in one situation that they directly have exposure to and realizing that a solution would be applicable to a broader market. To be able to solve a problem, you need to be able to get close enough to it. Unless you’re perceived as a trusted “consultant” then it will likely be difficult to grasp the problem sufficiently.
External consultants
The companies that take the “external consultant” route, typically have some broad vision of what they want to build and then go and find companies that have that specific problem to sell the solution to. They may or may not have built a Minimum Viable Product (MVP) when they start to pitch.
The first iteration of the solution will be tailormade for a specific client (this is when you’re doing things that don’t scale). As the start-up works through the process, solves the problem and builds the product, they’re able to ensure that there’s a direct product-market fit.
Once they have a working MVP in place with one client, the solution can then be replicated for other clients. As the client roster grows, the customizations increase and additional products are added. Eventually, you end up with a product suite that is able to appeal to an even broader range of clients.
Internal consultants
Companies that go the “internal consultant” route, have typically been working in a specific company or industry for an extended period of time. They will likely be domain experts who are probably well-known and regarded by their peers. They may possess an open secret — something that is knowable to all but only a few people can actually perceive.
Internal consultants have first-hand experience with the issue and might have even pitched the solution internally to their prior employer. This allows them to understand all of the features and quirks that customers would like to see in the finished product. They are able to start building a product before they have contracts in place because they know the right people to sell to when the time comes.
Conclusion
Neither External consultants or Internal consultants are taking a leap of faith or blindly believing in their mental constructs. Both architects are taking real world experiences and translating them into saleable solutions.
If you’re looking to build a successful B2B business, then you should focus on finding the audience and customers before building the product. If you’re going down this path, chances are that you’re either a domain expert (internal consultant) who has had intimate knowledge of the problem or you’re going to be transforming yourself into a trusted expert (external consultant) to solve the problem. Don’t focus on an intangible idea, solve a problem that people care about.
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