It’s all about breaking the old business model and innovating new models. In with the new, out with the old is every innovator’s mantra. The perfect example is Dean Kamen. You remember Dean, don’t you? He had this product called the Segway that was ready to revolutionize the way we traveled in cities. However, it failed to do much of anything other than become a great innovation. Remember, The Delorean Motor Company? I think they make money selling garment bags now more than cars. There are many that we could list, most forgotten.
These products are just examples of great innovations that were slightly ahead of their time and maybe even still ahead of it. I attribute by saying maybe they thought too far out of the box. I sometimes liken this to the fact that when you take Blue Ocean thinking:
- Raise: Which factors should be raised above the industry standard?
- Create: Which factors should be created that the industry has never offered?
- Reduce: Which factors should be reduced well below the industry’s standard?
- Eliminate: Which factors that the industry has long competed on should be eliminated?
You might just build a value proposition that customers cannot associate to other products. It becomes just too large of a step or too much risk taking for them. Even a simple thing like marketing; Customers will always ask for out of the box thinking and that new creative idea. In the same breath, they ask, where has this worked before. They want evidence.
I seldom go a day that I am not in contact or see a request about a product ready to be launched, and all that is needed is a marketing plan. The newer a product is; the more work that needs to be done before launch. The work is not about events and marketing collateral; it is about understanding the behaviors of your target market. In a podcast with Bill Aulet (author of Disciplined Entrepreneurship: 24 Steps to a Successful Startup.) Not 4-Hours but 24 Steps to Successful Entrepreneurship, I asked:
Joe: Another part I enjoyed about your book, and it was in the later stages, is that you actually start putting numbers and quantifying things for people – calculating lifetime value, acquisition costs. I can say you’re one of the very, very few books about entrepreneurship that start addressing those issues.
Bill: In our class when you get a paper back, “this isn’t specific”, “this is too general” – this is some kind of MBA BS, we want numbers and give us numbers, relevant numbers, because, at the end of the day, business is about numbers that you need to make. If you don’t make it economically, you don’t have oxygen and can have all these other things. Now that doesn’t mean that those should drive the business – you can be a mission driven business, a customer driven business, but at the end of the day the numbers have to work. You think this obvious, Joe, and people talk about it but what we’ve found was that people didn’t know how to calculate the cost of customer acquisition. One of the character’s in the book you’ll see, and he’s got wine and seems a little bit tipsy and that’s because he is tipsy because entrepreneurs pathologically lose their rationality when it comes to cost of customer acquisition; how much does it cost for me to acquire a new customer? They just think “oh, if I build it, they will come”, that’s not how it works.
There’s a whole process that customers have to go through to buy a product and entrepreneurs need to understand that process and understand whether the sales cycle is three weeks, three months, six months, nine months, a year and a half because that very data right there could absolutely kill a company. If you’re sale cycle is a year and a half it’s very, very hard, but if it is a year and a half it might be possible but you need to know that and not think that it’s three months and then you need to make sure that your lifetime value of the customer is very, very high to support such a high cost of customer acquisition.
Understanding the existing behaviors of your customer’s markets is imperative in product launches and extending markets. You must be able to pull upon examples that the customer’s understand and can relate to. If you distance yourself to far away from competitors (which you may think is a perfect strategy); you create a barrier to purchase. You may remember for Edison to sell a light bulb, he had to build a power plant. Are you prepared?