Platt Perspective on Business and Technology

Building a startup for what you want it to become 4: products and product portfolios, price points and building for repeat business 3

Posted in startups by Timothy Platt on June 21, 2015

This is my fourth installment to a series on building a business that can become an effective and even a leading participant in its industry and its business sector, and for its targeted marketplaces (see Startups and Early Stage Businesses, postings 186 and loosely following for Parts 1-3.)

I began discussing products, product portfolios and related issues as they apply in the startup and early business context in Part 2 and Part 3 of this series. And I continue that line of discussion here.

At the end of Part 3 I stated that I would turn here to discuss the role of track records and reputations in building a business and in validating it in its marketplace and for when it has to deal with supply chain and other partner businesses. And I added that when the business in question is a startup with no real organizational track record of its own, the bulk of its reputation is often to be found in the individual, personal track records and reputations of that startup’s founders and of any other individuals who they can bring into their new enterprise. And I also added that I would at least selectively discuss exit strategies and outside funding in this context – as a matter of framing this line of discussion in terms of that new business’ founder’s and owner’s goals for it as a new venture.

I will at least start a more detailed discussion of those issues here. But before I do so I want to step back to my Part 2 and Part 3 discussion of product portfolios per se, to challenge a basic assumption that I made there:

• That essentially any business would need to be able to offer a more complex and adaptive product portfolio, at least over time,
• If it is to remain competitive in a diverse and changing marketplace and in the face of innovative pressures,
• And both from its business competition, and from its markets and consumer demand.

That is usually the case, and for most types of businesses in most markets and in most business verticals and industries. But there are exceptions – businesses that would succeed best if they remained a single product enterprise, and ones that offer what is absolutely supreme in their field for the quality and value of their business defining products. Certain largely customized, artisanal businesses come to mind for me there, and a single, if individualized and individually build product can be their best path forward for remaining a vital, competitively strong business enterprise in their chosen field of endeavor. I only assume here that the single product in question remain in sufficient demand for a sufficiently large enough marketplace of actively engaged customers, to be able to remain viable as a business offering and long-term. But I cite these specialty, custom production businesses here as the exceptions that in effect prove the rule for all other businesses, where adaptive diversity in what is offered is one of their defining strengths.

That said, I turn to consider startups and early stage businesses again,

• And how they would meet the quality assurance and related concerns of individual consumers making purchases for themselves or their families,
• And how they would satisfy the more formally stated and process-driven due diligence concerns of wholesale buyers and other business-to-business risk management agents.

Established businesses have customer bases that are familiar with their products and services, and who are both familiar with and comfortable with their customer support follow-through. Just focusing here on sales as one point in these overall transaction processes, the competitive value-creating strength that this business familiarity creates can come from any or all of a variety of directions. So it can mean direct experience from using these businesses’ marketable offerings, it can mean trusted recommendations from others who a prospective buyer or purchasing agent knows and trusts, or it can mean the sales momentum of more open-ended and source-anonymous viral marketing, to cite three possibilities here.

A true startup, by contrast, begins with a clean slate and with neither good nor bad reputation to have to deal with – at least as an organization. So if it is to build from any track record or reputation-based starting point, that has to mean building from the reputations of the people who are founding this new enterprise, combined with the reputations of anyone who might be brought in early to help make that succeed.

• Reputation and track record here, are all about marketing and certainly as these sources of potential value would be turned into realized sources of business strength.
• An established business takes on a life of its own, where a startup begins as an expression of the people who are most responsible for creating that new enterprise.

This is important. I wrote my series: Understanding and Navigating Burn Rate: a startup primer, at least in part with a goal of framing what constitutes a startup or early stage business in financial terms (see Startups and Early Stage Businesses, postings 67-78). A new business venture that has successfully completed its startup and early stages of development, at least according to that series’ perspective, is one that has reached a point in its development where it has begun to consistently bring in sufficient revenue as measured against expenses, so as to create ongoing profits and reliable profitability. Here, a business can be seen as having successfully passed through its startup and early business stages when it has reached a point in its development where it has taken on a life of its own, and has its own organizational reputation for what it can do and from what it has accomplished and how – that is independent of the track records or reputations of its founders per se, even if it still benefits from them. Its organizational reputation would not disappear if the owner of record and founder were to leave.

And this brings me to exit strategies. I briefly discussed exit strategies in my above cited series on startup finances and burn rates, and particularly in its Part 11 and Part 12. When a founder’s exit strategy for a new business venture means their divesting themselves of it for a profit and moving on, that usually means their new venture has reached this point in its development as stated from an organizational reputation development viewpoint – where they can leave without their business’s reputation leaving with them – and without it losing its position in its industry or in its markets.

Much of what I have been discussing here applies to both new businesses that seek to enter into established markets with established types of offerings, and to more innovative and disruptively new and novel businesses. I am going to further discuss exit strategies in my next series installment, and the issues of outside funding as noted upon above, delving further into both as general startup and early stage issues. And after that I will switch directions to more specifically discuss startups and early stage businesses that would seek to offer the disruptively, innovatively new and novel, rather than simply breaking into more established markets. And as a part of that, I will discuss what innovation means in this context. Meanwhile, you can find this and related material at my Startups and Early Stage Businesses directory.

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