Problem 1: Nobody Wants the Product You’re Building
The reality is that there is a strong possibility that no one wants your product (in the form it’s built or at the price point required to deliver it). In the bubble that is pre-product release, it’s easy to fool yourself into believing otherwise. Until you can force customers to pay for your product - whether that payment be in the form of attention (minutes spent on a website) or the payment comes in cash form - it’s impossible to know for certain how many people value your product.
The most extreme example of the delusion that can exist inside the pre-release bubble can be seen in the Segway. When Dean Kamen designed the “personal transportation device that would revolutionize the world,” hundreds of investors were willing to believe that Kamen’s self balancing scooter would change the world. They saw a big market, a novel technology, and simply heard the cash register ring. After years of setting expectations high, the market spoke for itself. No one wanted the product.
Unless you have the consumer intuition of Akio Morita or Steve Jobs, odds are the only way of knowing that you’re not wasting your time building something that customers don’t want. Hence, it is key to get early product out there in the hand of customers. And if no one wants your core offering, a beautiful strategy matters for nothing.
Problem 2: The Solution Won’t Scale
For innovators (especially in enterprise software) it can pose a severe challenge if the solution isn’t scalable. It’s immensely easy to think of a complex product that can solve an intractable problem. If you can only crack the technical challenge, customers would pay enormous sums of cash for the solution. “Wouldn’t it be great if I could provide the perfect advertisement for a Big Mac directly to an Apple Watch as you pass by a new location?” Sure. And McDonald’s would likely pay handsomely for such a solution.
This becomes the trap. Too often, innovators turn towards these initial customers as validation that a market exists and can be penetrated. But much of the challenge of building a business becomes repeatability and scale as technical feasibility. In the early days of Netflix’s operations, Reed Hastings envisioned distributing streaming media via the internet. Today, it’s clear that was the future. At the time, it was insanity. Hastings quickly learned that only the Silicon Valley elite had enough bandwidth to stream a movie. He had to abandon that plan for nearly a decade and turn to mailing physical DVDs in order to build a business with enough scale to be viable.
One customer does not make a business. Regardless of how much that customer is willing to pay.
For companies looking to avoid this problem, getting out the door fast helps ensure a few things. First, it forces them to focus on things that many people value. It might take 3 years to build the perfect product for Walmart. When you take it to the next customer, you might find that 95% of the features Walmart required aren’t needed. Second, it forces you to sell the dream instead of the solution. Invariably, if you’re moving to market fast, you’re going to sell the roadmap and vision - not what’s there. Having a hundred conversations about the vision will help you hone in on the features that are most important to solving customers problems. That way, when you do get out the door with a product, it will be with the right one.
Problem 3: The ‘Perfect Business Model’ is All Wrong
Modern business strategies often entail subsidizing one or more products or services in order to build a different revenue stream. This is the case with almost every multi-sided platform product. Facebook provides a free service to its users in order to build its advertising business for marketers. Box offers customers free storage for their personal data in order to make the value proposition of selling secure storage to its corporate customers more appealing. 23andMe subsidizes running DNA tests for individuals in order to build a vast database of genetic information that can be used to develop drugs.
These business models can serve as the foundation for wonderful businesses. Unfortunately, they presuppose a certain level of desirability of the underlying products by different constituents. For instance, if your business is based on reselling data that consumers opt to offer you; you better be certain that consumers value your product enough to agree to the terms and conditions. If they don’t, then your model has to evolve.
For many innovators, changing these strategies can be easy. It could just be a matter of offering cash incentives to a set of customers. It could turn a multi-sided platform strategy into an outright technology sales approach. But until you have product in the hand of customers, you can’t reasonably evaluate your strategy.
Core to determining which direction to move in, is getting out the door.