Tag Archives: strategy

When Better Isn’t Good Enough: An Entrepreneur’s Tale

By Karen Utgoff

2017-06-04 Mousetrap_patent_model_3_-_National_Museum_of_American_History_-_DSC00350

By Daderot (Own work) [CC0], via Wikimedia Commons. Exhibit in the National Museum of American History, Washington, DC, USA. Photography was permitted in the museum without restriction.

Many believe that if they build a better mousetrap customers will beat a path to their door, but it isn’t necessarily so. Inventors, small business owners, or startup teams confident that their vision of a better product, service, or technology will automatically lead to business success should balance that confidence with healthy skepticism. Testing product-market fit with potential customers, users, partners, influencers, and others could make the difference between success and failure. Consider this (made-up) cautionary tale.

Howie Ketchum, inventor and CEO of Ketchum Mousetraps, was in a somber mood after reviewing disappointing revenue numbers and similarly troubling web and mobile traffic statistics. Unique first-time visitors were plentiful and many made their way through all of the technical information detailing the advantages of his Internet-of-Things (IOT) enabled mousetrap with smartphone apps to enable monitoring from anywhere in the world. However, pitifully few signed up for more information, or even returned for a second visit let alone ordered the product.

The patented Ketchum IOT Mousetrap added an accelerometer and Wi-Fi connectivity to a traditional mousetrap. When a mouse triggered the trap the accelerometer determined its “status” and notified the owner via the IOT Mousetrap app. The company’s primary target market were home owners, who could buy traps directly from Ketchum. Companies with sensitive facilities could buy traps in bulk and monitor them with the app to provide a system that would be easily monitored by the maintenance staff. In this way, Ketchum planned to disrupt the pest control industry. Apps were available for all smartphones. In addition to notifications, apps kept statistics on all traps in use, allowed users to order new traps, and provided value-added tips on mouse control. If you find Howie Ketchum and his Internet-enabled, Wi-Fi connected mousetrap preposterous, check out this article or this one or this service.

Ketchum’s national product launch had been received with great fanfare including write-ups in top tech magazines and a national tour but did not result in sales. Efforts to improve the marketing and sales process had resulted in more visitors navigating through to the order page but nothing seemed to prompt more lookers to become buyers.

Six months later, Ketchum Mousetraps was out of money and closed for good; the 99,950 of the original 100,000 units of inventory Howie had stocked in anticipation of the product launch sold for 2% of the manufacturing cost. In his final act as CEO, Howie took down the “Build a better mousetrap and the world will beat a path to our door” banner from the reception area and left the office for the last time.

This fictional story illustrates what can happen when “better” isn’t good enough in the real world. Here are some of the (nonfiction) reasons “better” falls short:

Not “better” in the eyes of the customer:  A product or service is only better when it’s better in the eyes of enough customers to support a financially healthy business. Could Ketchum have been successful by offering a somewhat different product packages to the target customers? Or by targeting industrial customers directly? Or by concentrating exclusively on sales through established providers of pest control services? Or by aiming to be a rodent control business rather than mouse control solution?

Contrary to current practices, perceptions, or culture: When “better” involves a change in habits or violates the current culture, it raises rational and emotional objections that may have little to do with the problem the “better” solution solves. For the example of an IOT mousetrap, concerns might include users preferring not to have a phone app declaring they had a mouse problem.

Not invented here: When a customer has a homegrown solution that is already in place, there can be considerable resistance to adopting a new one, especially from a stranger. Whether this resistance is the result of ego or a more objective reason, it’s often impossible to overcome. If Ketchum had talked to  pest control companies, he might have found they already offered low-tech versions mouse control services that allowed for routine operations with well planned, efficient servicing schedules and routes rather than creating a need for immediate, unpredictable service calls as the app might have.

Not a high priority: When the problem is relatively unimportant compared to other issues and/or current situations are pretty good, users often will not take the time to seriously consider “better” offerings. In Ketchum’s situation, most potential customers may see their problem as the occasional mouse rather than a serious infestation.

Switching cost: Any additional burden — even a short term one — imposed by a new solution can easily derail consideration of a “better” product, especially for a low priority situation or where “better” does not result in a measurable financial improvement. For the cautionary case, Ketchum’s app adds a number of costs to the low-tech mousetraps, including giving up personal information, time spent on initial configuration, and the cost of buying new traps.

Switching risk: An unproven solution always carries with it the risk of disappointment. Perhaps it will not work or lead to unintended consequences that cause harm. Will an IOT mousetrap be plagued with false positives or false negatives? Will the app distract users from more important matters? What happens to pest control companies using their system if Ketchum goes out of business?

Too far ahead of its time: One of the most frustrating reasons for “better” falling short is when the improvement is too far ahead of its time. It may be that the time will be right for an IOT-enabled mousetrap when home automation systems controlled by smartphone apps become common.

Refusing to be seduced by the myth of the better mousetrap does not guarantee success but can help both established small businesses and new ventures minimize the cost of failure and live to try another way. My next post will offer thoughts on testing and validating assumed value propositions as a way to do this.

Related links:

Listen to the NPR interview with Professor Bill Hammack of the University of Illinois on “When technology bets fail” and watch his  videos on “How the Sony the Betamax lost to JVC’s VHS recorder” and on “Why the DVORAK keyboard didn’t take over the world.”

Read Nicholas Jackson’s March 28, 2011 article in The Atlantic on “Mousetraps: A Symbol of the American Entrepreneurial Experience

 

© Copyright 2017 Karen Utgoff. All rights reserved.

Want to Have Your Cake and Equity Too? Consider Non-dilutive Funding

By Karen Utgoff

2016-08-24 Non-dilutive fundingRather than taking a piece of your pie, non-dilutive funding sources offer outside funding and/or in-kind resources that let you have your cake and equity too. While it will never take the place of equity investment, secured debt, or bootstrapping, the right non-dilutive resource can be a great precursor, gap filler, supplement, or complement at critical stages. It’s easy to overlook this category of funding but it’s worth considering whether and how it can add value your new or established business.

The right non-dilutive funding at the right time can help finish a product, validate a market, prepare employees for new challenges, or otherwise advance your efforts.

Non-dilutive resources include:

  • Highly competitive grants programs for technology-driven ventures;
  • Small grants open to any business located in a specific state, city or business district;
  • Crowdfunding to build an initial customer-base complete with pre-orders;
  • Training or internship grants to strengthen the workforce;
  • Innovative foundations with grant programs open to for-profit companies with (or occasionally without) non-profit partners;
  • Accelerators, incubators, and competitions; and
  • In-kind resources that provide expertise, tools or connections that would have otherwise required funding.

Non-dilutive resources aren’t free and come with non-financial burdens similar to equity and debt financing.

  • Resources that don’t meet your needs can take your business seriously off course.
  • Non-financial obligations such as administrative, performance, recognition, audit or reporting requirements may apply.
  • Non-dilutive funding takes time and effort to find and use effectively.

Non-dilutive sources offer benefits beyond immediate support.

  • Success with competitive grants or crowdfunding can help you build the technical and business credibility necessary to secure the right investors.
  • Crowdfunding can prime the pump for future interest in your products.
  • Participation may position you for other opportunities in the future.

This post was inspired by my recent MassChallenge talk on the subject. A big thank you to the MC team for inviting me! See the slides from this talk for web links and additional ideas.

© Copyright Karen Utgoff. All rights reserved.

Keep Your Business on Track and Growing: Measure What Matters

By Laurie Breitner and Karen Utgoff

There is more to keeping your business going in the right direction than looking at standard reports from QuickBooks or other accounting tools on a regular basis. While these reports can give you numbers, determining and appropriately tracking what matters — which numbers are important, how they are derived and what else you need to watch — is an essential responsibility of the owner(s) and management team.

In assessing current operations, it’s often useful to compare today’s results with past performance — prior period (year, quarter, month, or week) or effort (job run, project, or program) depending on your industry and particulars of your business. While this isn’t always possible for newer ventures, be assured that if you are diligent, ultimately these measurements will help reveal your company’s strengths and weaknesses, opportunities and threats, as well as performance.

For example, after one year in business you can only guess how seasonal factors will affect your cash flow. However, if you keep track, with five years experience you will be confident in anticipating how seasonal ups and downs might impact your business. When you hire a second employee in a particular role, you have some idea of how long it will take them to come up to speed; by the time you make your fifth such hire, you have a much better idea of how long it should take, as well as what it takes, to be productive.

For new initiatives, measuring is tied closely to looking forward (planning) for likely and intended outcomes. What will initial success look like? What events (milestones) are critical to track progress? How much will it likely cost? Are there gaps in your capabilities or resources that need to be filled before you can realize the potential of the new initiative? How much revenue and/or profit is the project expected to add and when?

What initial operational measures should be monitored? Here’s where it’s helpful to look at assumptions you made in making predictions. Did you assume that if you opened a second location in a nearby town that your strong positive reputation would automatically give a boost to the new site? Did your plan hinge on getting speedy municipal approval for a larger parking lot at the next planning board meeting? What key assumptions do you need to track?

Add to the standard routine of just reviewing (daily, weekly, monthly, quarterly, and annual) results with the following specific approaches that are critically important to measuring what matters:

Assess profitability and the fully allocated cost of goods sold from an operational perspective: For background review pages 8 and 9 of Laurie’s Thriving: Get and keep your business on track. Also, check out Karen’s Succeeding in Small Business post on Four tips for putting your business plan to work for your small business.

Project results for new initiatives with limited or no experience: For background, read Four steps to help small business owners evaluate the financial wisdom of new business-building initiatives and Small business management and entrepreneurship: Two key ingredients for sustaining success.

For additional information read Josh Patrick’s article on Every Business Has a Special Number, or Metric. Do You Know Yours? in the NY Times’ “You’re the Boss” blog and A Winning Culture Keeps Score by John Case and Bill Fotsch in the HBR Blog Network.

Here’s how to get started: On a single page, document the (up to) five most important measures, metrics, milestones, and/or numbers that you follow (or plan to track) to gauge whether you are on the right road, moving into the fast lane, or facing an unwanted detour. Review these metrics with your management team, board of advisers, mentors, and/or appropriate professional services providers. Evaluate them regularly to make sure they remain relevant guides for growing your business. Plan to fine tune them over time as your needs and business landscape change and you learn more.

© 2015 Laurie Breitner and Karen Utgoff. All rights reserved.

Put More Value into Your Product’s Value Proposition

By Karen Utgoff

Many business owners, entrepreneurs, executives, marketers, and product managers are hard pressed to express a value proposition crisply or craft one that holds up well in the real world.

Can you? If you aren’t sure, read on.

What is a value proposition? In short, it’s the answer to why customers buy and why they buy from you. Strong value propositions reflect a deep understanding of your customers and serve to unify and align marketing — promotion, packaging, pricing, distribution, product, etc. — efforts.

Sound value propositions address customers’ operational, economic, or emotional concerns.

Operational value propositions appeal to customers who need to solve, ease, or prevent problems, that is, change the conditions under which they operate. For example, a new drug might cure a previously incurable disease, slow its progress better than existing treatments, or prevent those at risk from contracting it. When a breakthrough technology is at the core of the product, an operational value proposition typically appeals to visionaries — early adopters who are most likely to be open to and excited by the promise of a new, relatively unproven offering.

Economic value propositions resonate with customers who are cost-driven. But cost can be measured in a number of ways. Customers may seek the lowest purchase price, more predictable total cost of ownership, or some other cost-related benefit. Economic value propositions can be powerful or painful depending on how low-cost is defined and achieved. Wal-Mart achieves every day low prices through superior logistics and supply chain management forcing others to lower prices or find some other way to compete.

Emotional value propositions appeal to customers’ feelings, attitudes, ethics, and/or self-image. Designer labels command a premium price from customers who see themselves as fashionable and perhaps affluent, even as others fail to see any significant difference with a no-name version that may be from the same contract manufacturer. Products branded as “all natural” or “low fat” may draw the interest of health conscious customers even when the only change is relabeling to accentuate product attributes that were already present. Fad products such as the legendary pet rock may offer fun, frivolity, or the cool factor to customers. Clothing associated with a school, club, or team offers a sense of belonging.

Multidimensional value propositions mix operational, economic, and emotional appeals and are especially powerful. Customers buy for different reasons in response to evolving conditions, public opinion, marketplace developments, and even modes. One-dimensional value propositions can lose their relevance in the face of short-term changes and it can be very challenging to adjust without abandoning long-term focus. By recognizing the inevitability of evolving customer needs and market uncertainty, multidimensional value propositions enable leaders in product, marketing, and sales to effectively maneuver while maintaining long-term focus. In addition, such value propositions can more easily address the needs of different individuals involved in product selection and purchase decisions.

Hybrid and electric car manufacturers put forth an economic value proposition based upon their lower long-term operating costs and strong value on the used car market. In addition, they include an emotional element that aligns with owners’ self-image as environmentally responsible as well as an operational element based upon the distance that can be traveled between fill-ups. Recently, the drop in gasoline prices has devalued their economic benefits which may cause marketers to put more emphasis on emotional components of their value propositions and/or their vehicles’ potential to go further on a single tank than conventional models.

As products and markets mature, competition often intensifies pressure to focus on an economic value proposition and commoditization leads to a complete focus on lowest price. Businesses that commit to operational and/or emotional elements as part of their overall value proposition create potent tools to resist commoditization. Apple is an example of a company that uses this approach effectively in the personal computer market.

Organizations that take a nuanced approach to defining value propositions are better able to use them to maneuver in the marketplace while maintaining strategic focus for the long run and providing a benchmark for alignment of product development, pricing, marketing communication, sales and other key market/customer-related activities.

In a future post, I’ll get into some good practices for crafting multidimensional value propositions.

© Copyright 2015 Karen Utgoff. All rights reserved.

What’s your SWOT Spot?

By Laurie Breitner

In real estate the old saw is that the three most important things are location, location, location. In business — especially a small business — it’s focus, focus, focus. My colleague Karen Utgoff and I have been encouraging business owners to think this way for years, each from our own perspective.

Karen is a market strategist and often looks at businesses through that lens. That is, what are the opportunities and threats that could impact a business? As an operations person, I have a different viewpoint. I consider a business’ strengths and weaknesses. Of course each of us does that within the context of the business’ specific mission and target market. When we work together, we joke that I handle the S-W while she deals with the O-T. It’s our effort to bring a little humor to the topic and it usually gets a laugh.SWOT spot

So, expect to read about ways to determine and operate within your organizations’ SWOT spot — the place in your market where you can take advantage opportunities, mitigate threats, utilize your strengths and minimize your weaknesses.

 

© Copyright 2013 Laurie Breitner. All rights reserved.

Minding the Gaps

By Karen Utgoff

There are many definitions of entrepreneurship. This one is my favorite because it is confirmed completely by my experience:

“Entrepreneurship is the process by which individuals — either on their own or inside organizations — pursue opportunities without regard to resources they currently control” (Stevenson, Roberts, and Grousbeck, 1989)

When a business is in a stable phase of its life cycle, management seeks to optimize expected results within the resources available. In contrast, entrepreneurs, as well as company-based intrapreneurs, seek to overcome or work around gaps in resources, customers, and knowledge to get something new off the ground.

As an operations person, Laurie is especially aware of gaps that could interfere with making the important transition from the entrepreneurial (startup or significant growth mode) to a more stable phase. Putting systems in place to attract, retain and manage employees that consistently and efficiently produce quality goods and services is key.

From a market-oriented business strategy perspective, I’m concerned with gaps in the business model, resources, and reputation that interfere with the ability to start up and grow (new or existing opportunities). A sound approach to developing well-aligned value propositions, competitive differentiators, product/market fit, and marketing/sales tools is key.Gap Files 2

So, expect to read more in The Gap Files about how entrepreneurs leading startup companies or innovation-driven growth initiatives within existing organizations can overcome obstacles, find help, and make do in the face of scarce or nonexistent resources.

© Copyright 2013 Karen Utgoff. All rights reserved.