I have long viewed my role as an investor and board member with startups as that of a product manager, where the “product” is the company itself, not the product the company sells to its customers.
Using this metaphor, the product’s features become things like its business model, gross margins, cash collection cycle, etc. The product’s brand becomes its corporate identity, its customer list, etc. The most important product features are, of course, the entrepreneurial team members.
New research from Stanford now demonstrates an empirical basis for my metaphorical approach. In “How Do You Explain a New Product Category?”, Jesper Sørensen of Stanford’s Graduate School of Business explains that a startup’s potential customers usually care more about who they believe the company is, and how they feel about the company and its leadership, than they care about the product offered by that company. One excerpt:
Truly innovative products are often the ones that bring ideas across categorical boundaries. But doing so creates potential confusion, and people devalue what confuses them. The solution, difficult as it may seem, is to adopt a crisp identity instead. After all, staking a claim on your identity is a key element of the entrepreneurial “bet”: When introducing an entirely new product into the marketplace, make a choice about who you are.
Read the full article here.
(image by Norbert von der Groeben Photography)
Adding fuel to a long-running debate, a new Stanford research study shows that startup founders with technical backgrounds are more likely to be successful than those with business degrees:
A Stanford study highlights the critical importance of strong technical skills in launching tech ventures, casting doubt on the conventional wisdom that a founding team with diverse business skills is the best approach.
The study, led by assistant professor Chuck Eesley in Stanford University’s Department of Management Science and Engineering (disclaimer: I am also an adjunct faculty member in the same department), has been published online by the journal Strategic Management.
A key takeaway from the study is that technically-focused founders can more quickly reach market milestones, from design and prototype completion – all the way to product launch.
The full article by Michael Pena from Stanford News is here.
Last week’s Schumpeter column in the Economist had an interesting report on a recent management conference in Vienna. Rising interest in how to manage “big data” and complexity across global organizations reflects the speed and volume of information gathered in real-time:
Businesspeople are confronted by more of everything than ever before: this year’s Global Electronics Forum in Shanghai featured 22,000 new products. They have to make decisions at a faster pace: roughly 60% of Apple’s revenues are generated by products that are less than four years old. Therefore, they have a more uncertain future: Harvard Business School’s William Sahlman warns young entrepreneurs about “the big eraser in the sky” that can come down at any moment and “wipe out all their cleverness and effort”.
The article does a nice job of articulating two different views on how best to manage this complexity. The first approach is to leverage self-organization to manage via networks instead of hierarchies. Think Kickstarter, Kiva, AirBnB, or AngelList.
The second approach is to impose simplicity, articulating a few simple areas of clear focus for the entire business organization to rally around. Companies like Coca-Cola, McDonald’s and the German Mittelstand companies are examples of this approach.
I found the article interesting although I disagree with its contention that these two approaches are in competition with each other. I believe that the most successful and innovative growth companies today are those that use _both_ of these approaches. They pursue simplicity of focus, and articulate this simple vision to an organization that is network-based instead of hierarchical. In fact, in my view, it’s hard to imagine the success of AngelList, AirBNB, etc without having both ingredients.
In any case, the full one-page article is worth the read. You can access it here.