Blue Mine Group

Market challenges facing new ventures (part 4)

This is the last in a short series of posts on the challenges facing new ventures.

Challenge 4.      Established industry structures work to prevent the entry of new innovators. Most industries have evolved over many years, and have a clearly defined structure of established vendors at each stage of the supply chain, investors in the current industry structure, and an established communications structure of media, events, and trade organizations. The internet and other technologies have begun changing this, but in most cases new entrants to a market still encounter a large, established set of vested interests that are initially suspicious of, and likely to fight against, a new intruder.

The result of these market challenges is typically experienced by the venture most fundamentally as a lack of customers. Cumulatively these challenges often cause great stress for the venture’s founders, investors, employees and other stakeholders, including:

·         uncertainty of which markets to pursue

·         lack of clarity as to the right product features for the market

·         an inability to agree on or even express “who we are” and “what we do”

·         lack of visibility and awareness in the market

·         lack of a pipeline of sales opportunities.

Recognizing, and thinking through, these market challenges is the first critical step on the path to addressing them effectively.

Market challenges facing new ventures (part 3)

Challenge 3. Customers don’t know about the innovation and its benefits.

Even if the venture has a clearly identified customer, and a clearly superior offering, it needs to overcome significant problems in reaching and educating customers about its solutions. Everyone is extremely busy and has little time available to even consider their own needs, never mind look for a solution. In addition, everyone is constantly inundated with marketing messages (estimates are in excess of 2,000 per day) and communications of all sorts.

Rising above the noise, and getting people’s attention just to focus on the problem and how you can solve it, is very difficult, and getting harder all the time.   

Market challenges facing new ventures (part 2)

Let's continue looking at the challenges facing new ventures taking innovative products to market. In this post we'll examine the second of four key challenges.

Challenge 2.      Customers have a wide range of options. Almost all markets are by definition competitive. Monopolies, if they exist, do not last long. There are also nearly always multiple ways to solve any need or problem. So any new innovation must meet the customer’s compelling need better than all other options. Buyers will typically, consciously or unconsciously, consider three things when evaluating options:

a.      Benefits – to what extent does this solution meet my needs?

b.      Costs – what is the total cost to me of this solution versus others?   

c.      Risk – what risks am I exposed to, and how can I mitigate them, by considering this solution?

New innovations frequently focus on the first of these – product feature superiority over existing alternatives. Often, but not always, this is empirically true, and customers can understand the benefits. However, new ventures are often much weaker in terms of cost and risk. Because they are cash flow constrained, the venture frequently needs to sell at a premium, and cannot match incumbents with the economic ability to discount. In addition, the risks to a customer of a new, relatively untested product are high. 

The problem the venture faces is that most customers in most markets are conservative – so costs and risks are bigger considerations than benefits. In many markets, new innovations need to offer a 10x or better improvement in benefits to overcome customer inertia and offset the perceived costs and risks of trying something new.

Market challenges facing new ventures (part 1)

New ventures face at least four core challenges when taking new product or service innovations to market.  Over the next few days I will briefly discuss each of them.

Challenge 1.      It is not clear who would be the best customers for the innovation.

    One of the most central challenges facing any new venture is to figure out “who is the customer”? The innovative idea and the product subsequently developed is typically based on at least a notion of who the customer is, and what their need or problem is. However, new ventures commonly have not thought through in sufficient detail key issues about the target customer, including these central questions:

a.      Who specifically has the need or problem?

b.      How easy is it to identify and reach that person?

c.      How urgent is that problem for that person? How likely is he or she to spend time and energy looking for a solution? 

d.      Even if the person is convinced, does that person have the ability to purchase a solution at your price point?