Startup ecosystems are all the rage these days. It’s where entrepreneurs, venture capitalists, corporations, and incubators work together to innovate and disrupt industries. In fact, the pressure to develop and deliver new ideas is accelerating as businesses rapidly adapt to new ways of working out of necessity. As new ideas are developed for the marketplace, the developers and the sources of funding are probably looking at growth models that reference the familiar hockey stick. I’m sure you’ve seen the hockey stick countless times:
The hockey stick describes the desired revenue growth trajectory for startups. For the first few months of the startup’s existence, time and resources are devoted to investing in the business, the “blade” of the stick. Then after the new product gains traction, all that investment pays off, if things go right, with rapid and dramatic growth (the “shaft” part of the stick).
The hockey stick is a useful metaphor, and it is not going away. But too often, startups, VCs, and incubators become obsessed with the shaft at the expense of the blade.
In fact, you’re not going to achieve that growth unless you spend time and effort getting the “blade” right. Maybe it’s time to give that blade more attention on the hockey-stick chart.
The blade represents that crucial period leading up to growth, where you either run out of runway or catch traction — in other words, the make-or-break period. We know that “making it” isn’t a sure bet, so investors, be it external or internal to the firm, generally invest in a portfolio of ideas, in hopes that one of them will land. What makes a new venture more appealing and likely to be funded is either a quick return on investment or the soundness of an idea. How can a new product or service make the case for both?
The answer in part must be validating a new product or service across three dimensions of fit: solution, market, and growth. And it’s important to do that validation in a formal, iterative, and accelerated way. Here’s what those three dimensions look like:
- Solution (i.e. people) fit. Make sure the solution is solving a real problem for real people. Lead with a combination of research (user centric) and smart tinkering (e.g., prototypes, hackathons), to land on a possible solution; and pivot until your customers tell you whether or not you’re making a tangible impact on the problem. How do you measure that? A balance of generative and evaluative research to surface “must have” aspects of the experience.
- Market fit. Ensure the solution addresses a need for a meaningful market of users. Find out who would be really disappointed if the solution went away. From there, understand who those people are, and further revise your solution to tailor to their needs to drive up the percentage of people who would indeed, be really disappointed. Analyze who is on the fence and ensure the window shoppers are brought into the fold. Understand what keeps the rest from loving the product and solve, and disregard those who have no chance with your product. Market fit doesn’t mean you have to have a solution that works for everyone, just a meaningful size of people.
- Growth fit. Once the we’ve ensured the product is solving a real problem for real people, in a market that is meaningful in size, next it’s all about scale. Embed the solution in a profitable business model and test its viability by defining the KPIs and exit factors. Determine your minimum success criteria (think revenue, engagement, conversion) in a time boxed way, and see if they will scale well enough to keep your organization humming and allow for scale.
A lot the innovation can and should happen upfront, where the perfect solution/market/growth fit is established. But it takes work. The good news is that tools exist to test for fit in a way that mitigates against cost and risk. With fit sprints, businesses test and validate new product ideas quickly with a disciplined approach which can set itself for success during that make-or-break “blade” period. Get in touch if you want to learn more.