The most common mistake I see in new tech startups is when a team believes that success is mainly about building a great technology product.
Success actually lies in creating a great company, which requires much more than just a great product. It takes a world-class team, addressing a highly-valuable problem experienced by customers who are ready to pay to have that problem solved in a better way.
That team needs to find a way to build that product by learning from the customer, develop marketing, sales and distribution channels… it’s about so much more than just building a new bit of tech.
Is your product your identity?
Tech startups are often founded by technologists, people for whom creating a new tech product is their means of self-expression — it’s as tied up with their own identity as a musician is in their music, or a painter their paintings.
Like other creative artists, technologists sometimes forget that they are making the product that customers want, and instead build a product that they themselves dream of.
We reinforce that pattern every time a creative technologist like a Steve Jobs or a Mark Zuckerberg almost incidentally discovers that pursuing their own dream of what the customer should want coincides exactly with what the customer actually wants.
Those origin stories inspire whole generations of technologists to go out and create their own dream product, in which the odds of commercial success are about the same as a first-time music artist releasing a single — it happens, but it’s extremely unlikely.
It also leads to way too much work on ‘polishing’ the product — going way beyond basic functionality and into trying to surprise and delight the customer with the product experience. If you haven’t tested whether the customer will pay to use the basic functionality of the product yet, you don’t know whether that extra time is wasted.
No amount of polish will make the customer keep paying for long, if it’s something they don’t really need.
Q: If just building a product is a common mistake, where would you prefer a startup prioritise their resources?
In the past few decades a number of innovations (such as the open source movement, the cloud, the app store, the cost-per-click online advertising model and social media) have dramatically reduced the cost and time required to develop a product and get it in the hands of customers to see if they will pay.
Now the much bigger challenge lies in finding ways to scale marketing, sales and distribution, the cost and time of which are still largely in the hands of monopolists making a lot of money out of controlling the access to markets.
- Facebook, AdWords, Instagram and Twitter are the monopolists of advertising — the cost of online advertising is going up for most keywords each decade, not down.
- The App Store owners and the big API owners are the monopolists of distribution channels.
- The big online/physical retailers and the big system integrators and consulting firms are the monopolists of sales channels.
- And the big venture capital funds are the monopolists of R&D and growth capital.
You need to find ways to gain leverage in an otherwise unequal negotiation in each case, or find an unguarded port of entry, or an end-run around them entirely.
Begin marketing and sales the very same day you begin coding, because you can build the best smartphone app the world has ever seen, but you can’t rely on word-of-mouth to build a billion dollar business.
It’ll take time to find solutions for marketing, distribution, sales and growth capital, just as much (or more) time than building your product. If you can’t afford to keep going long enough to find viable solutions, you’ll fail to grow fast enough to sustain your business.