Platt Perspective on Business and Technology

Building a startup for what you want it to become 6: adding in disruptively innovative products and product portfolios 1

Posted in startups by Timothy Platt on August 24, 2015

This is my sixth 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 1-5.)

I focused in Part 5 of this series on exit strategies, and to be more specific here on strategically planned out goals for exiting the startup and early stage of a business. And as a part of that discussion, I only assumed that a new business venture have marketable product and/or service offerings that would hold significant realistic value for making it competitively successful as it develops and moves forward from its initial stages.

In principle that can mean essentially any type of product or service, and as measured from an innovation perspective as much as from any other. So that could mean completely standardized and consumer and marketplace-familiar offerings, where value offered largely means addressing underserved needs in a community that this business would be built in. For retail businesses, by way of example, that might mean building a new automotive service station in an area that does not already offer conveniently located gasoline sales availability, or simple, basic auto repair services. Or it might mean opening a dry cleaning business, or a convenience store for simple, basic food and household supplies purchases in an underserved area.

But this can also mean building a new business venture that would offer innovatively new products and services, and even blue ocean strategy-supportive, disruptively new and novel types of products and services. My goal for this series installment is to focus on the innovative and disruptively innovative end of that spectrum and address the impact that innovation and novelty have on new business ventures. And I begin that line of inquiry by at least briefly stating one of my core points of conclusion that I would at least begin building a case for here:

• Effectively building an innovation-oriented new business is very largely about identifying and strategically and operationally reaching an effective balance point between risk and uncertainty from the new and unproven on the one hand, and value potential and revenue generating opportunity on the other.

So this posting is all about thinking through and preparing for risk and uncertainty, and for value creation and profitability so as to operationally achieve a positive bookkeeping balance there, and overall ongoing business success. And I begin addressing that goal and what goes into achieving it with the fundamentals, and with an at least brief and selective consideration of how newly emerging innovation diffuses out into the marketplace and into what eventually becomes widespread marketplace and consumer acceptance, and even widespread consumer demand.

Standard, already familiar and at least generally available products and services tend to attract consumer interest from a more wide-spread community, and from a wider range of consumer demographics, and certainly for marketable offerings that would qualify as basic essentials for a large portion of any overall community. Not everyone might want to purchase and use the newest cutting edge electronic entertainment equipment as soon as it becomes available, to cite one possible example. But most everyone buys and uses basic, essential groceries as they would define them. And in that, most of us primarily, routinely define what “basic and essential” means for us in that context, according to general broad-demographic criteria (e.g. according to ethnicity and related considerations, or whether we as buyers are primarily looking for heart-healthy selections.) So I offer this example: grocery and supermarket staple supply purchases as representing one end of the innovation spectrum here, with much of what we purchase falling on the less innovative or even entirely non-innovative end of it and certainly in our own eyes.

New and in particular, highly disruptively new and innovative electronics equipment, such as completely new technology and format recording and playback equipment for video and multimedia content, represents the other end of that spectrum. And I chose this working example with care, as new equipment and certainly disruptively new equipment of this type, enters the market as a novel unknown as to whether it in fact would offer significantly improved viewing quality and special consumer value. And when a new content presentation format comes out, as has happened with the progressive development and release of video tape cassettes, digital versatile disks (DVD), Blu-ray and streaming media, there is at least initially a paucity of content available in each new format. So buying into a new technology of this sort is all about accepting and buying into risk, that an investment might not pay off.

• A new technology offering might not offer a level of increased value of product received to merit its costs.
• And even if a new technology product works very well as far as its own performance quality it concerned, it still might never achieve the widespread acceptance that would lead, for example, to large numbers of movies coming out in its new format. Consumers might find a new technology’s products to be good, but others – here content providers and often software programmers and others, have to reach this conclusion too, and be willing to make the investment to develop their offerings to work in these new systems too.
• Not all new formats, to keep with this example, achieve that dual and even multiple buy-in, and even just for ones that offer technical excellence at the hardware implementation level. And if a new format fails significantly in gaining the support of any one key required class of participants, the equipment that runs on this new format will never take off and neither will the new format itself.
• This really does represent a gauntlet of acceptance that would have to be run by any new product offering business.

Video tape cassette, DVD, Blu-ray and streaming media players all have taken off successfully, and relatively quickly after they each in turn first came out – even if more viewers still buy and use DVD format recordings than the newer Blu-ray recordings. But some recording formats have never taken off and never will as mainstream-favored options and even if their technical quality is excellent. And I have glossed over some very important points in the above quickly sketched narrative, some of which I at least briefly acknowledge in these bullet point addendums to it:

• First, let’s consider those video tape cassettes. The VHS formatted version of them took off and succeeded, but others came and went, never succeeding in the marketplace – and largely because movie producers and distributors were unwilling for whatever reason to make the risk-accepting investment of formatting and offering content according to their specifications too. So the hardware that ran content on these formats might have been very good as far as viewing and audio quality are concerned but very few people, and then essentially no one was willing to buy into them.
• Sony lost out in the earlier technology race to bring out a widely accepted and used video cassette format with their Betamax format, but they learned essential lessons from that. Video cassette players were all limited to single cassette formats so if a format did not take off as being widely accepted and used, the hardware that played it died in the marketplace too. So when they brought out their first model Blu-ray player, they made sure that it played both their new Blu-ray formatted diskettes and the more market-standard DVDs already out there, and that it played DVDs with the highest quality of display resolution that could be achieved from those recordings. As noted above, more people still view movies and other video content in DVD format than they do in Blu-ray, but they buy inexpensive, high quality Blu-ray players to do so, and as a large enough market share for video players that it has become close to impossible to buy a new DVD-only player, and certainly a new model DVD player. So Blu-ray as a format can develop more slowly as a matter of gaining acceptance and support and still succeed. And it is slowly taking hold.

I am going to continue this discussion in a next series installment, where I will discuss more general principles that enter into the diffusion of innovation into a marketplace, with its growing acceptance and success there, or its failure to thrive and disappearance there. And as part of that, I will pick up on two key disruptive technology transitions, that I noted in passing in this installment: the transition from tape format storage to disk format, and from disk format to cloud storage based streaming media. And I will at least briefly discuss the issues of format and hardware in presenting content, and content ownership and licensing control over that, as content owner’s become key stakeholders in determining which formats and the technology they play on, succeed or fail. And looking further ahead, I am leading up to a discussion of product portfolios here, and of how product portfolios can help balance risk and benefit as a core due diligence requirement. My focus there will be on development of effective product portfolios in a beginning business context as it goes through its startup and early business stages.

Meanwhile, you can find this and related material at my Startups and Early Stage Businesses directory.

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