This post makes sense when you read the previous three vertical markets posts first.
(As a reminder, the Customer Development process says your business plan is just a series of untested hypothesis (unless you’re a domain expert.) In contrast to simply executing your business plan, the Customer Development process is built on low-cost and continuous learning and iterating. You take your product vision and get out of your building to turn your hypothesis into facts. Ultimately you want to see if you can find customers and a market for the product as specified – as early as possible.
Execution by Vertical Market
As the class progressed, students asked how the activities/functions of a startup; (Sales, Marketing, Business Development, Product Development, etc.) would look in each of the verticals. For example, How does sales differ from one market to another? Is marketing different if you’re in the cleantech business versus medical devices? How does product development differ in communications hardware versus enterprise software, etc.
So we started by listing the basic startup activities/functions we thought that might differ by vertical market. Some of these are questions that would be addressed in a business plan. Others you need to know when you execute the plan.
Here is the list of basic startupactivities/functions our class discussion generated:
- Opportunity – How big? Where do the ideas come from?
- Innovation – Business Model? Technology?
- Customers – Who are the Users? Who are the economic buyers?
- Market Type – Existing/Sustaining? Niche? Low Cost? New/Disruptive?
- Competition – Who is the competitor? Who is the Complementor?
- Sales – What Channel to reach the customer?
- Marketing – How do you create end user demand? Brand?
- Business Development – What type of partnership or whole product is needed?
- Customer Development Steps – How do we iterate with customers?
- Business and Revenue Model – How do we organize to make money?
- Intellectual Property/Patents – Strategic or Tactical, timing?
- Regulatory Issues – What are they?
- Time to Market – How long?
- Product Development – How do you engineer it? Waterfall, Agile, Lean?
- Manufacturing – How do you build it? Where?
- Seed and Follow-on Financing – How do your finance it? How much? When?
- Liquidity – How? M&A, IPO?
(These are just my checklist list items for students, your list doesn’t have to look like this.)
Building a Chart
We realized that if we wrote the names of the vertical markets across the top of the board, and then the startup functions on the left of the board, we could make a chart that could visually compare what differs across the vertical markets. Then it would be to discuss the optimum strategy for each of these market segments.
Each week, as the students learned something new about their particular project (what sales channel they should use, who the customer were, what type of manufacturing was appropriate, etc.) we added what they learned to each cell under their market. (This chart is not complete, just representative of what I’m using to teach and will be filling in over time.)
But even with a partially filled-in chart, you can see what used to be disconnected information is now sorted by vertical market. At a glance, you can see how startup capital needs differ by markets, how distribution channels and demand creation activities differ by market, and even how VC’s assess risk and reward by market.
It seem evident that success in a startup requires:
- domain specific knowledge and/or hard won experience
- and a methodology to acquire that knowledge or experience.
As an exercise, try filling in the chart for your market.