Thursday, June 26, 2008

The Two Biggest Pitfalls of Startups

We seem to find that our start-up clients are made up of two sorts. One where the business’ genesis was from a passion for a concept and a clear idea of what the product will be. The other is made up of those that find a hole in the marketplace or a window of opportunity but no real sense of the business itself. Either approach has advantages and disadvantages for creating a web-based business.

Startup Type One: Driven by a passion
Companies founded on passion and clear concept have most of their strategy laid out as a factor of the thought they have already put into the product and how deeply they understand their audience. The problem being is that those that have the passion, but possibly not the business acumen have trouble finding ways to monetize their business.

We have found that many of these businesses will have a great concept with a clear decision process but end up retooling when the customer growth doesn’t come. Another issue that they face is that they are too close to the concept and see themselves as the customer, sometimes missing important opportunities.

Startup Type Two: Driven by dollars
On the other hand, those who have a get-rich idea usually have the income side figured out but not necessarily a viable product. A website alone -- no matter how great the idea is -- will not make a difference to your bottom line unless it is created based on a thought-through product strategy and a significant brand promise (with supporting elements) to which customers can react.

We find that these kinds of startups can spend months moving boxes around without the intuition for which are the best ways forward, since they have no real sense of what the desired user interaction by the target audience actually is.

Getting the best of both worlds
The answer is to meld both. If you are missing a subject matter expert, hire one and make them consult throughout the branding and product development exercises. If you are missing the business acumen, hire someone that can find opportunities to monetize and grow your market. No matter the amount of fiddling, you can’t get there without both.

Ensure you have a solid base to which you can refer when there are business decisions to be made. Companies who have skipped this step always come back to it (if there is any money left) because making decisions on the basis of “that sounds like a good idea” or “people will like that” (without testing) invariably cost a lot of money to develop. This is because multiple iterations are needed to get it right or the mark is missed entirely with one big, expensive push. When there is no core strategy or focus upon which decisions are made, money is burned.

It is imperative that a start-up develop appropriate strategies that involve understanding who the target audience is and what they are all about, as well as how the company is differentiated in the competitive space. This will fuel the Brand strategy and enable the company to present the right face to the customer from the start. The brand can then be fleshed out and a visual language can be created that speaks viscerally to the customer. From the brand identity, messaging can be created to communicate the product benefit, the company ethos, and to connect deeply with the customer. The best money-making idea in the world won’t be worth a dime if your site doesn’t speak to your user. She must know what it’s about, how to use it, and want to come back.

An example of these pitfalls (but made it through the other side) was a recent client of ours, HomeSavvi. When we began working with them, they saw an opportunity to create a market for advertisers who wanted access to people looking to remodel. They had a vague sense of the tools the user would need, but not the actual decision points for what a user would require in order to use their service. The original result before they came to us was a site called Alphabet Lane with a muddled navigation and a disconnected user experience.

We worked with them to help them find the core value of their brand and to create a feature-rich user experience that could grow with their user base. The painful part was that the process to get there because they had to rename, rebrand, rearchitect, and rebuild from scratch- throwing away a very large majority of their original product. To see examples of the process HomeSavvi undertook, you can view it here: