Platt Perspective on Business and Technology

Building a startup for what you want it to become 13: adding in disruptively innovative products and product portfolios 8

Posted in startups by Timothy Platt on March 23, 2016

This is my 13th 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 and its continuation Page 2, postings 186 and loosely following for Parts 1-12.)

I focused primarily on single innovative products as business offerings in Parts 6-11 of this series, and then turned in Part 12 to begin to address the added complexities of developing and offering product portfolios.

I began that discussion there by conceptually dividing product portfolios into two loosely organized types:

Innovatively simple product portfolios, that might offer a range of product models and types but that collectively include in them at most just one innovative development that is repeatedly used. This, as noted in Part 12 can mean multiple distinct model variations on some single basic innovation, and even with essentially zero real difference in the underlying technology that goes into them.
• And innovatively complex product portfolios that are built around a succession of innovations that are coordinately developed or acquired and then offered in the same product line portfolio.

I begin this posting and its continuation discussion by noting a specific and intentional change in detail that I just offered in describing innovatively simple product portfolios, that is different than what I stated in Part 12. I wrote in Part 12 of these product collections as having within them one distinct innovation that might appear in all of the product variations that are offered. Then when I recapped this here in Part 13, I stated that these portfolios “include in them at most just one innovative development that is repeatedly used.” And this means they might in fact not show any real innovation at all in any of their products and product versions.

Innovation as such is ephemeral. And in rapidly changing industries and rapidly changing marketplaces, products that start out as innovative, and even as disruptively so can very quickly become commonplace and even mundane.

• An innovatively simple product portfolio might start out deserving that qualifying term: innovative. But if a business seeks to be innovative long-term, they will have to keep innovating and they have to keep their product offerings innovatively fresh.
• They will have to become a business that offers more of an innovatively complex product portfolio – at least with time.

Let’s consider this from a startup and early stage business perspective. I have repeatedly noted the need for new businesses to build and operate lean and agile, and to focus at least at first on doing and offering one or at most a few closely related things very, very well. Most newly formed business ventures are fairly tightly constrained to develop one key innovation starting out, in order to keep their cash flow within bounds and their doors open, and even if their goal is to develop as a game changing source of the new and innovative in general (see my series: Understanding and Navigating Burn Rate: a startup primer, at Startups and Early Stage Businesses, postings 67-78 for a basic discussion of relevant startup finances issues.) But at the same time that fiscal prudence dictates taking a slower and more careful approach to business building, the nature and timeframes of innovation per se dictate that any startup or early stage business that seeks to innovate, and any business that seeks to become known for that, has to keep actively innovating. And they have to be ready to keep bringing those innovations to market as well.

• So building an innovative new business, and one that the public can come to see as being innovative, means finding and building to an effective balance between these two at times starkly conflicting needs.
• Calibrating the pace of innovation pursued, and setting the right time table for realizing it in marketable products has to be dynamically balanced against the actual level of liquidity that is going to be available, and cash flow limitations in expending it and other fundamental resource-limited constraints.
• And this means, among other things, being able to keep any innovations currently offered as fresh and new – and as innovative, as long as possible in the eyes and minds of consumers and end-users and the marketplace that they collectively comprise.
• And it means bringing that next great new thing out as its development and release become financially possible, and at least ideally before the most recent already-marketed and sold innovative offerings have lost their glow of market approval.

And this briefly sketched line of reasoning brings me to some fundamental questions that would go into virtually any detailed analysis as to how and when to bring new innovations into the product development pipeline, and from there into the product portfolio offered.

• What is the level of novelty of an innovation under consideration, on a scale ranging from minor cosmetic, to game changing disruptively new and innovative? This is fundamentally a question of how consumers and the marketplace would view these offerings, so ultimately this has to be answered as objectively as possible and from their perspective.
• The more novel and distinctive a new innovative offering is, the harder it would be for a competitor to match it and particularly if protection against such infringement is sought through processes such as patent filing or in-house trade secret protection. How long realistically, could one of these approaches increase the delay time before the competition can come up with and market a similar enough product offering, from the consumer perspective, to take away any advantage from offering this type of product first? And how long would it most likely take for at least one significant competitor to come up with a comparable innovative product anyway, when they see the proof of principle evidence of such items going to market?
• What are the anticipated development and production costs that might arise in developing these new innovative products and bringing them to market, initially and before any competitors can begin to erode first mover exclusivity, when production systems might still need streamlining and improvement?
• What is the anticipated revenue generating potential from selling products with this innovation, during this same early production period?
• Note here, that the more innovative a new product or product type, the longer it might take for any competitors to move into this new area of marketplace opportunity. But at the same time, the more novel it is and the more unfamiliar the marketplace is with what is now being offered to them, the more skewed the initial buying audience will be towards just pioneer and early adaptors, when you consider the overall marketplace in terms of innovation diffusion and acceptance models. Who realistically can your business successfully market this new innovation to, and how big is that more realistically considered initial active marketplace for your innovation likely to be? And what is the revenue potential that might be realized from them?
• What types of word of mouth and viral marketing might you be able to tap into for this innovation and for products built around it, and what are the cash flow implications of this? This is among other things, a question of how rapidly interest in and acceptance of a new innovation might diffuse out to the wider marketplace community, and to consumers who would be slower to accept and purchase novelty and the new.
• Up to here I have focused for the most part on the period immediately after the initial release of a new innovative product or product line, and the introduction of that innovation to the marketplace and world, at least insofar as I have noted timeframes at all. Let’s specifically look past that initial production and sales period to the longer term. What type of longevity might an innovation and its products have in the marketplace, where it can be expected to bring in ongoing positive cash flow? A truly innovative offering might be viewed by the public and the markets they comprise, as more of a fad than anything else and fade quickly. While a less innovative item might become what amounts to an essential for large numbers of consumers and end-users and remain widely profitable to the business that produces it, long term. So the level of innovation displayed at the start does not necessarily correlate all that closely with the length of the timeframe in which a business can profitably bring it to market.

This is only a partial starter list of questions and issues that would need careful consideration, and to note one obvious gap in it, all of these questions are essentially entirely generic and would apply to virtually any type of product as sold at essentially any price point. A more realistic inventory of such questions would only begin with the generic, and would move on to address much more business and innovation context-specific questions and issues. So I only offer this to provoke further thought and deeper due diligence analysis.

I have only briefly touched on innovatively complex product portfolios and the businesses that offer them in this posting, and will delve more deeply into them in my next series installment, where I will consider liquidity and reserves, and the development and offering of several or even many distinct innovations simultaneously, or at least in very rapid, overlapping succession. Meanwhile, you can find this and related material at my Startups and Early Stage Businesses directory and at its Page 2 continuation.

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