The new reality

Currently it’s not for the fainhearted to follow the developments on the worlds stock exchanges. 15 years of bull market has been replaced by an ugly bear which seems to send anything with an incling of tech down, down, DOWN in the market. Well, it pretty much sends everything down to an extend where it can resemble a stock massacre. 

The development in stock quotes is not interesting in itself – things go up, and they come down again. What’s interesting is the shift to a new reality that the movements are an indicator for; the end of ‘free’ money, rising inflation, rising costs of production and a shortage of both key components and talent. It is truly challenging times. 

In the face of such adversity, you can be forgiven for giving up and just wanting to bury your head in the sand until this whole things blow over. Because how do you cope, let alone adapt to this new reality? Most of us have never tried anything like it, so we’re in uncharted waters trying to learn how to swim before we drown.

But it’s exactly when you have to develop a key ability in an instant that you’re perhaps the most capable of doing so. There is just no workaround. So when the immediate shock gives way, it’s time to assess where you are, and what all this means for you and your startup and start adapting to the new normal. And I think there are a couple of things, you need to address and get used to.

First of all, you need to control your burn and your business fundamentals. The good times where it was growth at all costs, and nobody cared about the cost are over, as far as I see it. Going forward there will be much more scrutiny on your commercial model, and whether its viable or not. If it is and you can prove it to investors, you will still be able to attract funding to grow and seize opportunities (more on that in a bit) that may present itself. Furthermore you avoid getting into a situation where you need to raise new funding with your back against the wall. That’s a bad situation to be in in general – now it’s just plain terrible for you. So don’t go there. 

Second, be aware that a lot of the ‘smart’ growth tactics you have deployed in the past and probably semi-automated probably won’t have anything near the same effect anymore. Your customers don’t have the same spending power or urge to spend, as they had before, and you will most likely see cutbacks towards skipping things that are considered non-essential. And let’s be honest; a lot of what’s available out there are non-essentials that few customers would truly miss, if they had to cut it. 

With that there is also an opportunity. An opportunity to put your automated growth machine on the back burner and instead spend some time and energy on talking to customers face-to-face, listen and really understand where they are at, what they truly need and how your product applies to those things. You wan’t to ensure that you truly understand how your product is truly – and please don’t blow smoke in your own eyes here – essential for them, so you’re still considered valuable and thus they will continue using and paying for your product. 

Willingness to pay is going to be the only metric that matters here. Forget about most other metrics right now. If you can’t get your customers to pony up the cash for what you provide and have them continue doing so, you have a serious challenge. It’s that simple. 

The benefit of this simplicity is that once you get this right, you will know that you have the strongest possible foundation that will pretty much insulate you and your startup from market turmoil. You will know for a fact that what you do and deliver is essential to your customers, and that any future downturn will hurt a lot of others before it hurts you. 

Knowing that is priceless. It allows you to get a bit out of the crisis “all hands on deck”-mode and start thinking about the future and pursue interesting opportunities. What do I mean by that? Could be that one of your competitors don’t have the same stamina that you do and suddenly provides an opportunity to consolidate. Consider it. If it makes sense, and you can get the financing right, consider doing it. Exploit the crisis of others for your own benefit. 

Do whatever it takes. And understand down to your very core that this is a new reality we’re looking and have to operate in.  

(Photo by Tobias Bjerknes on Unsplash)

The beachhead pitfall

Every time I see a startup pitch for funding, the founders include an assessment of the size of the market, they are going after. The more detailed ones also give an assessment of the size of that market, they believe they can make their own and why.

It is all well and good. Sometimes I might even think that the slide is in the boilerplate department, where it’s there because it’s expected, but it’s not the most sexy or informative slide.

But what I have learned is that it is actually more important than that. That if you get this wrong or don’t think enough of it, you can potentially end up in a place, where you and your startup find yourselves stuck between a rock and a hard place.

Why that is has something to do with the first share of land, you grab in your market – the beachhead.

Normally, when we talk about beachheads, we refer to them as a representation of the segment you go for first in order to prove your value proposition and achieve the illustrious Product-Market Fit. It’s your assessment of where the best match between your customers pain and the relief, you can bring to the customer, is the best at this particular stage of your startups life.

You go after a beachhead, because you want to get traction ASAP to show your investors – and potentially also the first significant revenue to show for it. And it makes total sense.

But – and this is a big but – if you’re not mindful about the bigger market opportunity, your specific plans to get there and the narrative about what you’re doing right now, you run the real risk of getting stuck in the midst of what otherwise might look like a success.

What could potentially happen, if you’re not careful, is that your beachhead becomes your market. That what was once thought of as the first small slice of a big cake becomes the entire cake.

If that happens you may develop a super strong position in a niche market, but you will never be able to scale your business to the bigger market opportunity, you will need in order to find investors, who are willing to put up the ressources required to be there. In other words you risk turning into an ok business on the longer term rather than an amazing business. Which – without saying anything bad about ok businesses in general – just seems like a wasted opportunity.

And this is where we come back to the role of the beachhead.

It is super easy to get excited about your beachhead, when you start seeing traction in it. You naturally want more, and you want to build on the early success. And you can do that, but you need to control the narrative.

You need to keep telling yourself, your investors and everybody else who might listen that what you’re currently doing is NOT the end goal but just a beachhead. That while you’re killing it in your beach head, you understand the fundamental dynamics and value of your product in a larger context for different segments of customers, and you’re well on your way towards branching out.

Thus, your narrative and your operations becomes about the beachhead based on what a beachhead should be; a stepping tone towards making real landgrab in land. If you can balance the two stories about what’s happening now and where you’re taking it, you’ll have a much more compelling story to tell. Not least to the investors, you will need to enable you to get the ressources you need to make real landgrab and fulfill the potential, you set out to fulfill.

If you don’t get this right, the risk is that you end up becoming a de facto niche player doing a stellar job in too small a market that no investor really sees the upside in. And if that happens being able to move the needle and move inland will become infinitely harder. Just don’t go there, when there is an alternative that is so much better by just being more conscious about how you stay the course.

(Photo by frank mckenna on Unsplash)

What excites you?

What intrigues you the most? Going after the same things everybody else is going after? Or going counter and look in places that most other people have abandoned?

I am all for the latter. While I recognize that there are indeed major trends out there and obvious opportunities, I personally find those that run counter more intellectually appealing. When I meet those I always ask myself: Is what they are trying to do just dumb? Or is it really super brilliant? It’s usually one or the other.

For me too much groupthink doesn’t do it for me. The argument for doing something because everybody else is doing is has always been weak and void to me. While there may be something there, the sheer fight over something with a lot of other piranhas eventually leading to a slide down to the lowest common denominator simply just isn’t that appealing. Add to that that the math seldom checks out for me; in a saturated market easy to penetrate, not everybody who claim whey will win will have the ability to win. Simply too many piranhas in the sea. Most will end up with a fairly decent haircut.

Going counter is another matter. Going where everybody else – or most – have already given up, while the problem at hand persists, intrigues me. I does something good to me to know that succeeding where others have decided not to even play takes something extraordinary, and that success rests on the ability to figure out what exactly that extraordinary component is.

Yes, I know the risk is bigger. It’s really do or die. The difference between making a bet on red on the roulette versus placing all your chips on 0. However, I love this approach for three reasons:

First, it’s deeply satisfying to get really challenged in figuring out something that’s super hard and not for everybody to dig into. It provides a sense of real accomplishment, when – if – you succeed in doing it.

Second, you can add the satisfaction of hopefully having been able to solve a real problem to people that others have given up on trying to solve. You get the sense that you’re affecting real change, creating impact and that people are substantially better off, because you decided to put in the work and effort that was beyond reasonable for many others.

And finally, the returns on your success are likely outsized – at least if the problem you have chosen to tackle is valuable enough to enough people. Because you were the one going counter, most of the pie will be yours. At least in the beginning.

Again, I fully realize a great opportunity when I see it, and I am not hellbent on making things as complex as they can be. Sometimes easy truly is the better way forward. But in terms of really what makes me tick, it’s the tougher challenge – the one where you really feel alive and in the zone.

(Photo by Stillness InMotion on Unsplash)

Tracking progress

As a former business manager at Microsoft, I am almost bred up on KPI’s, metrics, tracking progress and so forth. Sometimes even to the extend where I have a hard time understanding, why it is a more alien concept to many. Including some startups.

The way I usually frame it is that you cannot play football, if you don’t have goal posts that help you decide, when you have scored the winning goal. Or any goal for that matter. If you don’t have goals, you’re just kicking around, and while that can be nice exercise too, it’s kind of hard to measure who’s winning and who’s losing.

So, if we accept that being able to set goals and track progress can be helpful, how do you go about it in a way that doesn’t kill you in bureaucracy.

This is where I actually back in the day got a great tip from my colleague at Berlingske Media, CFO Peter Nordgaard. He had a very simple way of looking at things and how to determine real performance that goes something like this:

You basically have 3 things you’re looking at in a traffic light perspective to set goals and track progress:

First you look a the market and the macro economic climate. What’s your assumptions related to overall growth in the economy YoY. Make that your target.

Then you look at the competition in the market. What’s your target market looking like? How much is it growing? Make that your first target? How much share are your most important competitors looking to grow? Make that your second target (and in effect your pre-dominant benchmark).

Finally, look at yourself. Given your assumptions about the economy, the market and the competition, how do you think you yourself is going to do? How much is you going to grow? What does that mean in terms of products shipped, sold, used or whatever your Northstar metric is?

Does your Northstar metric make sense in the light of all of the above (aka is it still valid as the most important single denominator in determining your progress)? If yes, good. Keep it. If no, come up with one that is.

Now you essentially have a Northstar metric and three sets of simple KPI’s you can track in order to determine your progress. And this is where it gets interesting:

If you end up short but the economy and the market has exceeded expectations, you will know that the buck stops with you. On the other hand: If you have done better than expected for the economy and the market, you have really put in a stellar performance.

While that in itself is super simple, it does another thing that is really great: It eliminates any doubt as to what should be the focus of your review and discussion about what to do going forward.

Because if it is your own performance that is sub-par, it will be evident, and you don’t have the need to come up with silly excuses. You can address the real problem. And move on from it.

So think about this super efficient approach the next time, you’re discussing KPI’s and ways to track your progress. We’re not too far off the start of a new year, so this might actually be as good a time as any.

(Photo by Tolga Ulkan on Unsplash)

Bad market feedback

One of the hardest things for many startups is dealing with bad market feedback; the sense that what you have been trying to bring to the world just isn’t being that well received at all.

It is the flipside of doing market testing and validation. While obviously the right thing to do, we always go into a test in the hope that results will be good and support our hypothesis. Yet, many times it just won’t happen.

What to do then?

Obviously the answer is not not to do any testing. That’s just stupid; it won’t make the bad feedback go away – it will just present itself way later when you have put a lot more energy and ressources into a product that ultimately might be failing.

The answer of course is to (1) learn to deal with bad market feedback and (2) think about how you deal with particular feedback based on what it is that you’re testing.

The best way to deal with bad market feedback is to remember that the market and the customers are always right. If you get bad feedback it is a sign that something in what you’re doing is off; the wrong approach, the wrong customer segment, maybe even the wrong product.

You get the feedback, internalize it, redo and come back much stronger. And you understand and accept that there are no points for insisting you’re right and the market is wrong. None.

On the second point, you can grade how you do testing and work with bad market feedback. While it of course sucks to get very bad feedback for your product as such, getting bad market feedback for an outlier idea or approach is actually really, really valuable.

Let’s assume that you have been playing with an idea of getting a sub-set of your feature set earlier to market in order to start generating revenue. It’s not entirely ‘on strategy’ when you look at your vision, but you want to start generating revenue as soon as possible.

Should you do that? Or should you stay the original course?

Test it.

If you get bad market feedback from testing that outlier approach, you will have learned that (a) clearly your idea is not going to be a runaway hit and (b) maybe the opportunity you saw to get an early product out and essentially diversify is a bad one and will only take away focus and ressources from your main effort. If that is the case, you will be happy that the bad market feedback has helped you and your team dodge a future bullet.

So, in summary, bad market feedback can be extremely good and valuable feedback, as it can help you focus on what’s really important and utilize your ressources in the best possible way. So make sure you don’t get distracted on a personal level and take it in as a defeat that leaves you stuck in f***.

It’s not.

(Photo by Jon Tyson on Unsplash)

Be problem-driven

There are quite a few really good arguments for why you should focus on the problem rather than the solution, when you’re trying to build a successful company. But there is one that I think takes the prize as the most powerful one:

By focusing on the problem, you broaden the opportunity for yourself, your company and your future success.

Why?

Because you start being less solution-focused. Not agnostic as such because there will always be something that you do that you need to put into the product to give it the real edge it needs. But less solution-focused.

You may start out developing and shipping one product, get a good reception and perhaps even some decent traction. And once you can see that the core fundamentalt of what you’re doing seems to resonate in the market, you can lift your gaze and start thinking about what’s next.

And this is where focusing on the problem rather than the solution enters the picture:

By focusing on the problem, you will see more opportunities just by looking. And others may present themselves that you would otherwise not have noticed. And this gives you opportunity.

Instead of being strong in a niche, you can become stronger in a space – and maybe even grow to become dominant of an entire industry.

Because you chose a laser like focus on the problem.

Looking in retrospect, most companies don’t become wildly successful by just doing one thing or having one product. They become wildly successful, because they understand the market they are in, the jobs, pains and gains of their customers and constituents – and the problem space they’re working on.

You should apply that approach to yourself and your company too.

(Photo: Pixabay.com)

Your idea is not about you

One of the hardest things to do when you’re trying out an idea for a new venture is to separate your own feelings from the data.

After all, you probably came up with the idea because you thought it was great – perhaps even the greatest since sliced bread. And now you’re bringing it doubt and jeopardy by subjecting it to some sort of validation in the actual real world.

Frightening.

But fear not. Because chances are that not everything is wasted.

Your idea might still be great. But the present application of it is not the optimal one. Wouldn’t it then be rather nice to get that insight through data, so you can change the application and move towards the iteration that gives both you and your future customers most ‘bang for the buck’?

Of course it would.

But still; the idea of finding out that your initial idea wasn’t the optimal solution for your customers can hurt and sting. Just make sure you realize that that’s ok; it is all part of the plan.

After all it is about the application of the idea – not you as a person.

If you think it’s too much to deal with, and – more importantly – you’re in danger of closing your eyes to the data and just venture on with what you originally had in mind, consider getting some sort of outside help or perspective. Someone with a clean slate and a fresh pair of eyes, who can help put it to you more gently – but nonetheless put it to you.

It might prove to be one of the best investments, you can make.

(Photo: Pixabay.com)

Arghh, it’s good enough

“They will love it, when they see it. And they will realize that this is just what they have been waiting for.”

Trying to build something for a market that’s nascent is super hard on so many levels. Yet, it is also one of those areas where time and time again, I meet founders who seem determined that their novel idea is going to take the world with storm, once they unleash it.

It is almost as if the future customers have just been waiting for this new breakthrough. Without knowing it of course.

Reality is it seldom happens that way.

Breaking into a new market let alone creating a new market and a demand in it is super, super hard. And founders who think it’s just a matter of making the technology work are doing themselves and their chances for success a big disservice.

Because what you’re up against is the most dreaded practical barrier of them all:

Good enough.

While they may not be using the optimal solution today, maybe what they have just works for their needs.

Maybe they have become so accustomed to nothing happening in this particular space, that they have stopped looking or even hoping for something better.

Maybe their habits are just so engrained in them that the very thought of doing something in a novel way is somewhat frightening.

The point is that there could be a lot of reasons but that the end result is the same – for the time being:

What I have is good enough.

Overcoming that dreaded barrier is not only a question about making technology work. It is also – and perhaps to some extend more – about packaging it right, getting the message right and getting it out there in front of future customers using the right channels at the right time.

And so much more.

The real important lesson here is that although the opportunity can seem huge, and there seems to be a big void in the market for something new, getting something new going in that void is going to take skill, experience, muscle (aka money) – and some degree of luck.

Don’t ever underestimate that job.

(Photo: Pixabay.com)