If an entrepreneur wishes to create a truly successful product and company, their key task is to reduce various risks. Entrepreneurship is a risky business, and as such one of the key missions of entrepreneurs is to gradually and systematically eliminate risks. The key in this is that when developing a product, the entrepreneur focuses on the biggest risks first.
As mentioned before, the biggest risk in newly founded companies is rarely the manufacture of the product or solution. In today’s times of cheap manufacture, the entrepreneur can very quickly create a product with enough time, money and effort.
The biggest risk for entrepreneurs is that they’ll create a product that absolutely no one wants to buy. When the entrepreneur is in the beginning, they only have a hunch about the problem that potential customers face, a suitable solution and maybe even the most logical customer segment.
Exactly because they are only entrepreneur’s hunches, developing the solution too quickly, choosing the customer segment or even the entire business model too early can most often lead to failure.
A good plan, solid strategy and implementation of a marketing plan seem like the right strategy at the first glance, because these are the things that successful big companies have. But applying these traditional tools to newly created companies doesn’t make sense, because the latter face too much uncertainty.
The bigger the uncertainty, the more difficult it is to predict the future. This is why planning can be exact only when it’s based on a long, stable history of the company in a relatively stable environment, which doesn’t apply to newly created companies.
If entrepreneurs build a product that no one will want to buy, it makes absolutely no difference if it’s made on schedule and with planned resources. This statement clearly indicates the fact that the fundamental task of the entrepreneur is to learn which product to make at all – that is the product for which customers are prepared to pay, and in the shortest possible time.
As an answer to complex and quick changes in the environment, the so-called new methodology of building a new company developed, called the lean startup.
The lean startup is a new look on the development of innovative products, emphasizing quick iterations of product development based on new insights into the customers’ wishes, and simultaneously including big visions and high ambitions of the business team.
In modern economy, the question “Can this be built?” isn’t important anymore, because nearly any product can be built, since enough means of production are available.
Significantly more important questions in the modern economy are whether a certain product should be built and whether it is possible to build a long-term sustainable business model around the product.
Manufacture capacities of developed countries are significantly bigger and more developed than the knowledge of what exactly the markets want. With manufacturing capacities reaching the point where we can manufacture nearly anything we can think of, the question of whether we can make a new product or service isn’t in the foreground anymore, but rather whether it makes sense to build it and if it is profitable.
For all lean startups, it is thus of necessary that they let go, as soon as possible, of the wrong assumption that they can exactly describe history, even more exactly predict or plan the future and thus co-create it.
What should come to the forefront is the realization that the assumptions of the entrepreneur or the business team about the market, customers and their problems are wrong at first, and only by trying, measuring and discovering patterns with a scientific method can they become true.
The history of successful startups in modern times teaches us that by far the most important factor for the business success of new as well as established companies is a desire for testing, verifying assumptions on the market, learning based on small failures, and looking for the right combination of a problem, solution and market, which brings the final big success.
Customers are what makes the product into a success story. Without customers who are prepared to buy the product, it isn’t important how innovative an idea is or how affordable a product is, because the company will fail.
In this, there is the important realization that bigger uncertainty doesn’t only bring disadvantages and challenges to long-term business planning. Bigger uncertainty is also an opportunity, because uncertainty and innovation go hand in hand.
Without the first, there is no opportunity for the second. Disruptive innovations can happen in an environment where the final product, value offer, marketing, sales channels and (most importantly) price are at most informed guesswork, but more likely a complete unknown.