Two and a Half Tips to Creating a New Business/Startup/Venture

May 20, 2016

I am not a startup guru, but I have created several products ground up and have built new businesses. Some have clearly failed, others have wallowed in mediocrity, but the last two have done well. Two in a row is definitely not a winning streak, but I am beginning to see a pattern that could potentially help entrepreneurs. Here is my simplified framework.

Solve a Tier-1 problem for your customers: It’s easy to identify Tier-1 problems. You don’t have to be a market maker or a clairvoyant. One way of doing this is to follow the disruptions and create businesses to support the incumbents who are being disrupted. For example, between 2008 and 2011, the adoption of mobile devices created a wee bit of panic in the printing industry. When I was employed by Hewlett-Packard (HP), we created Cloud Print (marketed as HP ePrint), the foundation for printing from mobile devices anywhere. There, we had direct access to C-level execs of printing companies (under threat) and the technology is now in over 50+ million devices. You can simply follow in the ‘wake turbulence’ caused by disruptors like the biggest tech company - that has disrupted Music, Phone, Watch, Television (in progress) and perhaps Automobile (in the future), etc. We did the same thing with the watch industry when the Apple Watch hit the market, supporting popular incumbents like Movado and Titan.

Take a targeted/segmented approach to start: With every major tech player coming out with a smartwatch and carpet bombing it through all their distribution channels, my colleagues and I at HP took a very different approach - call it, shooting with a rifle. For starters, we created products for specific target segments. For example, in the U.S. we picked ‘Urban Hipsters.’ And then worked with an amazing designer, Michael Bastian (popular in that segment), to design and brand the product. We then announced on Women’s Wear Daily (the Reuters of fashion), and had launch events in NY and LA focused on fashion and lifestyle press only (absolutely no tech press at that time). The products were then distributed via GILT.

The results were delightfully refreshing, the limited version was sold out in three hours and production could not keep up with sales throughout the holidays and we ended up with over 1.1 billion impressions with >95% positive sentiment on social media. The HP Michael Bastian smartwatch had more media impressions than any other internal brand for that year (and we signed up fashion brands and watch companies for more business for the next year). This is in sharp contrast to the other products, created by mainstream tech companies, marketed the traditional way and available in all popular distribution channels. Summary, be insanely focused on your target segment when you start. Learn and then grow.

The other half part of the tip is only for intrepreneurs - beware of organizational inertia: This is by far the biggest challenge when incubating and growing new businesses in a large company. This problem is exacerbated when there are little synergies among the mature businesses and get worse when the new business cannibalizes the mainstream. It is like the mainstream business has a hammer in its hand and every problem looks like a nail. The propensity of the system to force you to adopt existing processes and technologies relevant to a mature business to a new idea/startup can be catastrophic. (In the early days of the smartwatch business, Operations/Supply Chain kept bringing traditional PC and Tablet ODMs to build watches. We ultimately went with a real watch assembler, which was of course the right decision.)

There are good friends of mine in the startup world who firmly believe that big companies cannot innovate. There might be some truth to it, but you can definitely overcome ‘The biggest hurdle.’ In our case, the proof was in the pudding.

Use this framework to start your business

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