You don't need an MBA to start a business, but you do need to get a few things right if you want to succeed. Whether you're opening a restaurant, starting a tech venture, or producing a Hollywood film, the fundamentals are the same. You need a product that meets market needs, a business model that works, a management team that can execute with precision, and lots of luck. This article is the first of my series on how to plan for a successful launch. I'll start with phase one: development.
Most entrepreneurs believe that when you have a great idea, "If you build it, they will come." This almost never happens. Great ideas are good starting points for a successful product, but need lots of trial and error to get right. And it always takes much longer to develop a market-ready product than you think it will.
In the tech world, few expect a new Microsoft (MSFT) software package to work just right until the third version hits the stores. Check out the history of Windows, Word, and Internet Explorer, and you'll see a familiar pattern. But it's not just Microsoft -- most technology is developed this way by companies big and small.
NOW YOU'VE GOT IT. Software is typically created by smart technicians with superior vision. They pick a problem to solve, have a revelation from the heavens, and work day and night to transform their idea into computer code. Customers are usually blown away by the first version of the program -- until they start using it. Then they discover the program's most obvious features are missing, it's buggy, and it's prone to performance problems.
Then about a year later, the techies come out with a second version, which is loaded with new features -- but customers can't figure out how to use them. So the product goes back to the drawing board. Eventually a third version appears -- and it works.
Marketing executives often say the best route to product development is to conduct surveys and hold focus groups to determine customer need. The problem with this method is that customers will tell you readily what they want, but it's not necessarily what they need. Customers know what they like and dislike and usually have good ideas on how to make a product better, but they can't tell you how to devise a product. It's entrepreneurs with vision who provide this missing link.
1. Great ideas are good starting points for a successful product launch. But it takes lots of trial and error to actually perfect a product. Few expect a Microsoft software program to work just right until the third version hits the market. Bottom line: Be prepared for it to take longer than you think to develop a market-ready product
2. Customers may have suggestions on how to make a product better. But they can’t tell you how to devise a different product that they actually need. It’s you, the entrepreneur, who provides the missing link.
Bottom line: Trust yourself.
3. Even though your product may function flawlessly for one client, another client’s needs may force you back to the drawing board.
Bottom line: Be patient and stay focused.
UPHILL BATTLE. It's often a treacherous path to version three. I learned this the hard way after transitioning from a software development role at investment bank Credit Suisse First Boston (CTN.X) to the startup world (see BW Online, 8/10/05, "When Life Hands You Lemons..."). Our startup, a software outfit called Seer Technologies, struggled to improve the second version of our software while simultaneously supporting unhappy customers.
I learned that when you develop in-house computer systems, you usually have the opportunity to perform regular upgrades, and there's some tolerance for error. But in the commercial software world, you're expected to deliver products that are flawless, perform well, and meet most customer needs. When we finally did achieve near perfection with a third version, we laid the groundwork to grow into a $100M public company.
But even having a version three product isn't enough to ensure success when you decide to broaden your market. Fellow software entrepreneur Marco Rengan's journey back to the drawing board is a good illustration of this reality.
HOLDING BACK. Rengan had worked 18 years at IBM (IBM) as a senior marketing manager when he saw an opportunity to break out on his own. Some of his close friends were restaurant owners who were tired of their antiquated restaurant-management software. Rengan founded RiverData Systems in an attempt to solve their problems. After spending months analyzing market needs and opportunities, he designed software which would increase a restaurant's operational efficiency. His team of four worked day and night for over a year to create the solution.
Despite the temptation to release the first version of the innovative software immediately, he treated it as a working prototype and spent another year refining it. By the time he was done, the software worked flawlessly at the Painted Horse Cafe in West Palm Beach, Fla., and the owner became an enthusiastic reference. Buoyed by his success, Rengan decided to expand his market and signed a retirement-community clubhouse as his second customer.
The problem there was that the new client required support for monthly accounts, integration with legacy software, and new features for customer management. It took 18 months to reach a point where the clubhouse customer was satisfied, and Rengan's assets were nearly depleted. But after four long years of climbing the development mountain, he now sees himself within reach of the summit.
CUT -- REWRITE. The struggle to bring a product to market isn't much different in other industries. I've written in depth about how I helped produce a movie starring Sex and the City's Jason Lewis (see BW Online, 10/3/04, "Adding a Hunk of Sex Appeal"). I found that business principles are the same, even in Hollywood.
In the film world, you have to develop a script that works, reshoot several times to get different angles and cuts, and go through endless edits until you get it right. And unlike the software industry, you only get one shot at releasing your product -- it's like a mission to Mars. There's no version two or three without essentially starting from scratch. In this case, I was producing a Hollywood film in India's Bollywood, so the film had to appeal to audiences in both the East and West (see BW Online, 1/21/04, "Bollywood, Here I Come").
After completing the first cut, we showed the film to private audiences in India and the U.S. To our surprise, the Indians wanted more Hollywood and the Americans wanted more Bollywood. Everyone's a critic. So we went back to the drawing board, added more Bollywood "masala" (spice), reshot parts of the film in Los Angeles, and spent a fortune in reediting the film and adding new background scores.
NEXT STEP. For the final test, we decided to release at film festivals to gauge audience response. After three sold-out screenings at a festival in Palm Springs, Calif., we won the "Best of Fest" award. Festivals in Sedona, Ariz., and Delray Beach, Fla., followed suit and garnered our actors and producers several awards. And the Reel Women International Film Festival voted us "Best Feature Film." So we knew we were ready for release.
So, you've got a great product that the market really wants. You're destined for success, right? Not so fast -- this is when the hard part starts. In my second article, I will take you through the steps to create a business model.