Starting an Entirely New Organization
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You are an entrepreneur who has developed a new product or service. Either you've got some investors or partners or you're able to start up an organization of your own.
Key Issues
Creating this organization will take lots of time, money, and people, as well as new or cutting-edge technology.
Time typically seems to be the most readily-available resource. However, this is an illusion. Indeed, it is critical to conserve time. If you take too long to get the new product or service into the market - or if you spend too long simply setting up the new organization's infrastructure - other forces will take over that will cripple your ability to make a profit.
Many failed pioneers began with very good products or services, but simply ran out of time trying to establish themselves profitably in their markets.
Time must be managed very carefully through continuous strategic and short-term planning. It is essential to focus the attention of the whole organization on the few crucial things that must be done well, even while everyone is fixing real and present problems that inevitably arise in a new market.
Money is normally a problem. Investment is usually needed to underwrite each major step in building the enterprise. The paradox is that, while it takes money to grow, people often won’t invest in your organization if it is not already growing.
People are the key to the success of the new venture. A pioneer organization needs people with technological savvy to develop and improve products or services; people with the vision to guide that development (and the development of the organization as a whole); capable people to produce and sell the products or services; and committed people to form the infrastructure to support these functions.
While most business organizations need such people, the difference for pioneers is that most or all of these people also need to be entrepreneurial. Indeed, the more entrepreneurs, the better.
In most new pioneer organizations, everyone tends to do everything; defined jobs, as such, often do not exist. Everyone may become a salesperson; everyone may share in solving production problems; everyone may pick up some of the slack when support functions are understaffed (as is often the case). It pays, therefore, to have people who share the dream and are willing to make it happen however they can, including by playing multiple roles.
Savvy, committed people are also able to find ways of getting things done when there are few or no funds available for doing them. They find ways of making each other most effective, and of making maximum use of the knowledge and skills each person brings to the organization.
The technology behind each of your organization's new products or services needs to be sufficiently developed far enough that these products or services can be produced and delivered profitably. Much may still need to be learned about the products or services, as well as about the production process - even though production may have already begun.
It is not uncommon for the methods and equipment for mass production to be designed and built while orders are being filled. Furthermore, it often takes longer than planned to get the mass production process up and running. This results in lots of manual construction and/or more steps and rework than is profitable, at least temporarily.
Putting all of these in place where they have not existed before is a daunting task. This is why few entrepreneurs make it on their first try.
Common Difficulties
Soliciting investment
Most entrepreneurs are astonished at the amount of time and effort needed to solicit investments and manage investor relations. This is especially true in the case of organizations that develop new-to-the-world offerings in industries that themselves are new, such as biotechnology. Some of these organizations are formed on the basis of a promising process that may take years to perfect, much less produce a profit or something of value. Yet huge expenditures may be required during that incubation period.
Few pioneer startups are fully funded. Indeed, most new organizations experience long and painful periods of inadequate financing. This is particularly true if you are not one of the present darlings of investors. You must establish a clear and widespread understanding of your products or services and their potential, so that investors are willing to choose your organization from among many possible opportunities. This can be a long and grueling process.
Establishing a credible presence in the market
Establishing credibility often means making lengthy and tedious efforts to influence opinion leaders; providing innumerable free or at-cost demonstration projects; and advertising extensively (and usually expensively) to targeted markets. (This is partly why it is so important to manage time wisely. Many startup pioneers have gone under because time ran out before their credibility was established and sufficient demand for their products or services had been built.)
No matter how wonderful your new product or service is, it will almost surely meet fierce resistance at first. Remember that the market has done just fine without your product or service. Furthermore, those who are invested in currently-accepted products and services are not likely to easily accept your presence. In fact, they will normally work hard to keep your message from being heard above theirs.
Managing the difficulty and intensity of the startup process
In some ways, nearly everything done by a pioneer startup is difficult. There are no precedents; no paths to follow that assure success; no income to count on from long-term customers that can help the organization weather financial storms; and no detailed, long-term information about sales and expenses to help management know what is really going on. At least at first, everything is being built on educated guesses.
Defining the real business
Establishing the total process that defines the organization is critical to long-term survival. At first your products and services are the only concrete or definable things to hold onto. Thus, they initially tend to define and determine everything. However, your real business may turn out to be the technology that your new product or service represents, or the marketing channel that your organization has built or discovered. Figuring this out demands both long-range and strategic thinking - at a time when urgent short-term concerns are constantly eating away at time and resources.
Solutions
Define the business as early as possible
It is easy to become intoxicated with new products or services. We think they will be so useful and wonderful that customers will be easily won over, and that our success will be assured.
The reality is almost always quite different. A set of interlocking forces must come together to create customer demand: availability, visibility, customer need, timing, positioning, luck, and several other forces that are less definable. It often takes considerable experimentation to determine what those forces really are and how to best align your products or services with them. Furthermore, if even one significant part of the puzzle is overlooked or misunderstood, the whole organization can travel down the wrong path. The sooner the puzzle is put together and all assumptions have been checked out with the market, the sooner a clear strategy can be developed and used to focus efforts. Yet this focus is critical; without it, resources get ill-used and wasted.
Some startups actually create a position called Chief Development Officer, whose primary responsibilities are to quickly create a viable business definition and to build a strategy for successfully engaging the market.
Set your organization's sights on the jungle or the kingdom
Determine where you expect to take your product or service - into a jungle market or a kingdom market - and how it will get the organization there. (Don't expect it to stay in the frontier for long. 98% of all products and services leave the frontier within 18 months.) This is a hugely-important strategic decision. If it is possible to own and rule the market, it will take very significant effort, and a lot of money, to make that happen. This represents the high-risk side of the venture capitalist's world, where great rewards are possible if a product or service does make it into a kingdom market.
Most products and services, however, will have to move from the frontier into a jungle. If you plan for this, know that you will eventually need to create a very lean process and an organizational culture that can cope with lots of competition.
Your decision on which direction to plan for will be based on a combination of goals, observation, costs, risk tolerance, and as much hard market information as you can acquire.
Build a suitable organization for now and for the future
The new venture and its culture should of course be designed to function in the frontier - but also be thinking about the next iteration of the organization. If the plan is to constantly invent new products, services, or variations and spin them off, provide for this in the design of the organization. Think in terms of building an institution as well as developing product or service lines.
Openly share this vision of the future with all stakeholders. Keep a holistic view in front of everybody. Expect a significant contribution from everyone. Stay lean. Share the rewards.
Consider what is needed to be successful in the next market, and, as soon as possible, get your people and processes prepared to be successful in them.
Ensure innovation as a constant, especially if you intend to create a kingdom. Build fluid structures to allow and encourage sharing rather than competition. Keep bureaucracy to a minimum.
Carefully monitor and manage finances
Be realistic about the financing needed to carry out your organization's growth plan. Be assiduous about tracking expenditures and costs of all kinds, from inventory to advertising to payroll. Stay in control of finances at all times, even if plenty of funding is available - because at some point it may not be.
Focus - and encourage others to do the same
As a manager, focus on the two or three things each person in the organization can do to make a difference. Organize the system around those things. Have people come together often to discuss how the process of defining and building the organization is going.
Adaptation Issues
The uncertainties of frontier markets are great. Managing in this environment sometimes seems like an impossible mission. Most new entrepreneurs operating in frontier markets find that their organizations eat their lives. This is the stuff from which personal dysfunction is often born, or at least nourished. Keeping your life centered and your values intact can be very tough.
Things can be difficult for many of your employees and managers as well, especially if they are not used to pioneer organizations. The uncertainty is simply too great for many of them. On the other hand, a new breed of person has appeared who wants this kind of life and expects to make a fortune early as a reward for their dedication to a new product, service, or company.
In short, for as long as your organization stays in the frontier, it will be in non-stop transition. Your operating principle will need to be adaptation. There will be no security until you begin operating in a jungle or a kingdom.
