Is It The Right Time To Scale?

The goal of every executive is that moment when you have product-market fit and you are ready to scale the business,

But understanding when that moment has arrived is difficult.

May companies jump the gun and begin to scale the product or the company too quickly and end up just burning cash.

Net; getting the timing right is critical.

If you have discovered a pathway to repeatable revenues, and you are beginning to get or have organic revenues (proving product-market fit), or have revenues

and are convinced you are ready to scale.

In general, you are correct about product-market fit, But these early sales are most likely from innovators and early adopters.

These early adopters represent about 16 percent of your targeted market.

And, are the easiest market to reach. They are looking for and want to be first with new products.

Introducing a new product in a new market

You still have one or two obstacles to get over before you are ready to scale.

If you are introducing a new product in a new market, according to Steve Blank, professor, author, and entrepreneur, www.steveblank.com

you do not have a ready market. You have to create this new market. So, as you run out of early adopters, you will have to educate buyers who are unfamiliar with you,

your product, and its benefits. That will take time, effort, and money to accomplish.

Therefore, after that early revenue peak, you will get new revenues, but revenues will likely begin slowing down rather than speeding up

until you have the mainstream market educated. You have to cross the chasm, the gap between the early adopters and the early mainstream market.

This chasm is well documented in the book by Geoffrey Moore, “Crossing The Chasm”, author and consultant.

How long this “education phase” takes depends on the product or service type and how technical or complex the product is.

So timing is critical because marketing costs from scaling up are rising, and revenues are not.

A lot of companies have been caught in this trap.

Introducing a new product into an existing market

If you are introducing a new product into an existing market, your goal is to take sales away from your competitors.

Therefore, the market exists. Therefore, you should be able to keep revenues growing incrementally with your better value proposition or lower cost.

However, you still have to cross the chasm from early adopters to mainstream customers,

and they are more skeptical of your product or service and you than the early adopters.

It still takes time to educate and convince current users of a competitive product or service and switch over to your solution.

Therefore, you need to keep your revenue scaling more in sync with your revenue growth. Unless, of course, money is no object.

Scaling operations is also very difficult. We will tackle that problem/opportunity in another blog post.

Conclusion

Timing for a new product in a new market or an existing product in an existing market is a sensitive issue.

It depends on your development stage, type of market, and resources.

If you know someone with a timing issue, pass this on.

You might also be interested in our blog post, Transform Your Competitive Market Into An Uncontested Market.

You might also be interested in checking our website Harbor Capital Group, The Proven Secrets Of Successful Startups.

Jim Zitek

Innovation Strategies That Create More Profits

How To Break Free From A Competitive Market

Many companies today face a very competitive market and are looking for a way to break out.

When every competitor focuses on short-term tactics (i.e., special sales, drawing for a prize, etc.),

the solution only lasts until one of the competitors comes up with a new tactic. Then, you have to dream up another short-term tactic.

This kind of competition is self-destructive. Each competitor is destroying their margins.

This kind of self-destructive competition is one of the problems W. Chen Kim and Ranee Mauborgo take on with their book, “Blue Ocean Strategy.”

Their strategy is to create new demand by eliminating costs for features customers don’t value

and using that money to add features and benefits they do value. This allows you to add value at no additional cost.

Stop Benchmarketing The Competition

Too many companies focus their strategic thinking on the competition, which puts the competition, not the customer, at the core of their strategy.

Stop benchmarking the competition and responding to their strategic moves because it means you look more like the competition.

Instead, put your strategic focus on the buyer and innovate new ways to deliver more value.

Note: just because a competitor is doing something, doesn’t mean it’s of value to buyers.

For example, if your company is experiencing:

1. Margins shrinking

2. Competition is growing more intense

3. Competition driving commoditization

4. Rising costs

One way to reimagine your market is to take the features each competitor competes on for the X-axis,

and the value the customer puts on that feature on the Y-axis.

Then draw a horizontal line for each competitor, and you will see the differences between competitors.

You should be able to add value at no additional cost.

A quick example would be Cirque du Soleil.

They combined traditional circus acts with modern acrobatics and then put then the performance in a theatre,

which increased value, the price of the tickets, and significantly improved margins.

Focus On The Buyer

Put your strategic focus on the buyer and innovate new ways to deliver more value.

Note: just because a competitor is doing something, doesn’t mean it is of value to buyers.

In summary, you have to re-think or re-frame how you approach the market.

Then compare and contrast your offering with what competitors are offering (your x- and y-axis analysis).

Then introduce the first product to a market with lots of pain -they will be more eager to buy.

Then, finally, you expand your product offering to the bigger market and build revenues.

Think about these questions:

1. Which features of your product or service could you eliminate because the buyer does not value them?

2. How much would this reduce your costs?

3. What products or services could you add with those savings that would have value to the customer?

4. Which market segment can you enter to establish your base?

Conclusion

If you are looking for ways to break free from competitors, examine what your competitors are doing.

Which elements (features, functions, benefits) of their offer due the customers find of value

and which elements contribute little value. Each of the elements has a cost.

If you eliminate the elements that have little value, you can use those funds to add to or create new benefits that customers want.

Again think of what Cirque du Soleil was able to do.

If you know someone struggling in an overly competitive market, tell them about this post. Maybe it will help.

You might also be interested in our blog post, How Do You Know When It’s The Right Time To Scale?

You might also be interested in checking our website Harbor Capital Group, The Proven Secrets Of Successful Startups.

Jim Zitek