Saturday, May 27, 2017

Why Entrepreneurs Need To Keep Their Business Focused

business-focusEvery new business or product owner wants to attract the broadest possible audience, so they are prone to adding more features, multiple sales channels, and appealing to every demographic. Unfortunately, often the result is potential customers who are confused, the limited resources of your business are spread too thin, and customers and investors look elsewhere for a better fit.

Thus one of my key messages to entrepreneurs, as a business advisor and angel investor, is “focus.” It’s better to be known for and to do one thing extremely well, than to do many things poorly. For example, it’s all too common for a technology entrepreneur to highlight a new battery technology as the ultimate power for smartphones, medical heart pacemakers, and home lighting.

These are three different worlds from a business perspective. Focus simply means launching your first and most memorable initiative where you see a unique skill and experience fit, your best competitive positioning with the least risk, and the greatest potential return. People still remember Google for Internet search, Amazon for books, and Facebook for talking to friends.

Now, of course, they all do much more, but those things came later. In the beginning, like them, make sure you are focused on the following set of principles:

  1. Quantify one problem to highlight your solution. Focus means starting with solving a specific problem, rather than a generic list. Customers want a solution from you, not many. For investors, show the depth of your business potential by prioritizing a strategic plan for multiple later phases that capitalize on additional problems you plan to address.

  2. Pick a business model that you can best support. With limited resources, you can sell via ecommerce, but it’s much tougher to support retail as well, or hire a direct sales team. Consider a subscription model for a repeatable revenue stream, or full-purchase model, but not both. Your business model determines cash-flow, staffing, and funding required.

  3. Define no more than 3 to 5 goals and priorities. No organization can remember and deliver on a dozen goals and priorities without becoming unfocused and ineffective. Keep these balanced and aligned between people (customers, employees) and process (quality, service), and keep the scope limited. Eliminating world hunger is too broad.

  4. Zero in on a specific market segment. Targeting all the people in China as your opportunity gives you big numbers for a small penetration percentage, but will be seen as lack of focus by key constituents. The more precise you can be in your definition of the target demographics (location, age, income, education), the more successful you will be.

  5. Limit solution scope and features. Focus means creating a minimum viable product (MVP) first, and validating it in the marketplace. Feature-rich products take too much time and money to build, are hard to pivot, and will likely be slow and difficult to use. Your product will never have enough features to satisfy everyone, and it will never be perfect.

  6. Realistically characterize the competition. If you really believe that IBM, Microsoft, and Oracle are your competition, you have a big challenge that you can’t afford to meet. It’s better to focus on a niche that none of them do well, and build your plan around that opportunity. Claiming you have no competition also implies lack of focus on competition.

  7. Simplify your solution positioning. You can’t win by trying to position yourself as both a premium provider (high quality, high service, high price), as well as a player in the commodity end of the market. Your team, customers, and investors will all be confused with your lack of focus. The grass always looks greener on the other side of the fence.

  8. Concentrate your marketing efforts around a single channel. You always need a budget for marketing, but don’t spread it evenly or randomly across digital media, social media, direct, and traditional channels. Focus on one channel at a time, measure results, and then move to the next. Too many channels has the same effect as no marketing.

I understand the pressure to grow and scale the business to satisfy investors and your ego, but premature scaling is seen by many experts as the number one reason for startup failure. Don’t spend money, or expand your focus, into domains you don’t know, with an assumption that all new customers will be additive to your current base. One plus one sometimes equals zero.

In the same vein, you can also have too many advisors, and too many investors. If you listen to everyone, and take money from everyone, your focus will be diluted to the point that you won’t be able to satisfy anyone, especially customers. In the long run, it takes a narrow and memorable core focus to build a sustainable company.

Marty Zwilling

*** First published on on 05/11/2017 ***



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