Investors spend a lot of time keeping young entrepreneurs focused on the critical tasks. Like a dog in a field full of rabbits, the inexperienced entrepreneur tends to run from one opportunity to another without closing any of them. That behaviour, and the techniques used by investors and Boards to keep the founders focused, are well known.
But sometimes the need for focus can be overemphasised, particularly in the seed and start-up phases of company development.
Typically, in the seed phase, the idea is still being turned into a marketable product. In the start-up phase a company is being organised to get that product to market. In each case, there are typically many variables which are unknown… these may include optional features which may be important, extent of functionality validation required, size of each potential market, specific customer needs, correct segments to target, and many other factors. Now that many companies are “born global” the variables are multiplied as geographic, cultural, and other issues become more immediate.
Some founders deal with all these variables by choosing a target customer group, designing the product for those customers, and marketing only to them, and for such companies ‘focus’ is very important.
But, increasingly, products are co-created with consumers, and markets evolve along with the product. A truly global product, particularly an internet product may have so many possible initial target segments, and so many final forms that predicting the winning combination up-front is unlikely.
In this situation, conventional wisdom says you should do more market research until you’ve narrowed your options, or give up on the idea because it’s too unfocused. But the big, game-changing, market disrupting opportunities will be realised by people who don’t wait. There are now a bunch of entrepreneurs who have embraced rapid development and redevelopment, in the interests of being the leaders of disruptive change. I am currently working with such an entrepreneur.
The Board were concerned at his apparent lack of focus. He was negotiating with potential strategic partners in vastly differing segments, had produced a demonstration product which had already been superceded by a second product, and was now working on his third product iteration… all without yet earning a dollar of revenue. It all looked like a typical entrepreneur-led disaster.
Yet, this company is not a standard product-driven business. The entrepreneur has technology which can disrupt an industry, and he is patiently probing the ‘soft spots’ to discover the best points of market entry. He has hundreds of people using his initial product (for free) and has learnt a great deal about the direction in which the market is evolving. Most importantly, he is discovering which of the thousands of organisations in the sector are really ready to be partners in rolling out the technology.
This last point is critical. Disruptive technologies are, by definition, unpalatable to many people entrenched in a sector. The entrepreneur is ensuring that he will be working with the right partners before he commits to either a particular segment, or to a particular partner.
This patient strategy requires close financial control to ensure cash doesn’t run out, and careful sales planning to ensure the company will get to sales in a reasonably short time. But that’s the beauty of an internet business; cash burn can be very low, and an extended, patient market development process is still much quicker than the time-to-market in most businesses. If the entrepreneurial founder had taken a traditional approach he’d have been selling hard a couple of months ago. His ‘unfocused’ strategy has only added six months to the whole business-building process, yet will reduce his risk of failure enormously.
I pointed out to the entrepreneur that his duty to his Board is to make sure they understand exactly what he’s doing. Unless his plan ties together all the threads of his business, the Board will have to assume he is simply unfocused. With the picture clear, the Board can help the founder to ensure his flexible, patient, strategy mitigates risk and ensures long term success, rather than fading into an unfocused failure.