The vast majority of new businesses fail. Research shows that as many as 50 per cent of small businesses fail within their first year, with 80 per cent failing before year five.
Often it boils down to a delay in shipping a product because of unnecessary analysis and guesswork.
With any product launch or upgrade, there is a very real element of uncertainty. While analysis and focus groups can help to understand customer preferences, they don’t uncover actual behaviour.
In 2011, the social entertainment website Imvu made $50 million in revenue, but the company didn’t start out that way. Formed in 2004 with a team of high-tech entrepreneurs, it spent six months researching and forming its product. The company speculated and predicted how customers would use the site and built their product accordingly.
When the big launch came, its fear of low customer uptake was realised. Their first and second months of sales amounted to $300 and $350 respectively, coming mostly from their friends and family.
In follow-up tests with users, the fact their avatars couldn’t move around their virtual environments as fluidly and intelligently as competing software products was a worry for Imvu.
Feedback was consistent – customers wanted the ability to move their avatars. But before Imvu committed to that path, it tried a low-budget shortcut, changing the product so that customers could click where they wanted their avatar to go, teleporting it there instantly.
While the developers were embarrassed about the teleporting feature, customers listed it one of the software’s best characteristics.
Risk and uncertainty can be reduced significantly, as identified in Eric Reis’s book The Lean Startup. Many businesses fail when they ask: “Can this product be built?” as opposed to “Should this product be built?” According to Reis, the best way is to develop what he calls an MVP or Minimum Viable Product. This is a basic form of the product that customers can interact with.
Your business can then assess if customers would want it (and more importantly, pay for it). This minimises the risk of the unknown.
A friend opened a retail store three weeks ago. I asked him what he learnt in the process. He replied: “I’ve learnt more in the last three weeks than in the one year it took to set up the business. I wish we launched sooner.”
A successful launch is about confronting the unknown, in a low-risk way. This can be done in three simple steps:
• Take action: even if you don’t go in exactly the right direction at first, at least get started. You move forward, with eyes wide open to any looming dangers and possibilities
• Learn: by sharing features of what you want to sell, rather than the finished product, you gather valuable feedback
• Build: repeat steps 1 and 2 until you accomplish your goal, realise you can’t, or opt to change direction on the basis of new information
To see how this process works, here’s an example from Mary Jo Cook and Suzanne Sengelmann, vice presidents at Clorox’s laundry and home care division. As committed environmentalists and mothers, they wanted to change their company’s involvement in natural, greener products.
Their goal: to produce an effective green cleaner. They first played around with products, reaching out to other working mums.
They went to work with their R&D team and produced a formula that was 99 per cent free of petrochemicals and worked as well as the company’s chemical-based products. But instead of investing heavily in market research, they opted to prototype the product with a small group of consumers.
Many rated the product highly effective. While it didn’t change opinion of the company’s other chemical-rich offerings it did change their views on the efficacy of natural products: if Clorox was behind an environmentally friendly brand, it must work. Ms Cook and Ms Sengelmann now had early results on which to build. This led to Green Works, which in 2012 was a $60 million brand for Clorox.
Launching a new product or business does not need to be a high-risk venture. The key is to learn as fast and as early as you can. Customers don’t care how long it takes, they care only if it serves their needs.
Ahmed Al Akber is the author of Smart Marketing and the managing director of Ack Solutions, a revenue growth firm based in Dubai
