Category: Strategy

There’s a prominent Atlanta technology company that launched a new, full rewrite of their product this year. It was a disaster. I’ve been there as well. In fact, I know of several other software company CEOs who have similar battle scars.

A simple piece of advice: never rewrite a product from the ground up if you have a considerable customer base.

Here’s what I learned when we did a full rewrite four years ago:

• It literally will take twice as long as your worst case scenario
• Morale will be significantly affected on the engineering team
• Sales will suffer as reps continually think the new product is around the corner
• There will be major bugs upon roll-out, even with significant product QA

Now, we’ve all heard these issues happen to normal large IT projects, but not to software companies that specialize in this, right? Trust me, it doesn’t matter. People are overly optimistic that things get done in a shorter amount of time. My recommendation is to plan the big rewrite but to implement changes incrementally, instead of with a single release.

There have been so many discussions as of late about Groupon and clones, especially with regards to whether or not Groupon will continue to be a major success. Here are some of the common shots at it:

• It’s only an email list
• They only do one deal per day per city
• Anyone can compete with them
• Their 50% fee to businesses isn’t sustainable
• People who use it aren’t repeat customers and therefore not profitable customers

Here are reasons why it will continue to be a major success:

• Building a critical mass of opt-in email addresses is terribly difficult and expensive, combined with fatigue from people getting emails from too many different competitors
• Groupon already announced that they are going to offer multiple deals per city per day targeted against user preferences as well as hyper local deals based on zip codes
• Creating a massive sales force to sell to local businesses takes a small fortune, and the only other companies suited to that are existing yellow pages and coupon companies, not low-cost startups
• Businesses will always be opening new locations, remodeling existing locations, as well as other types of constant change that will make running a Groupon campaign beneficial to bringing people in the door

What else? Do you think Groupon will continue to be a huge success?

One of the most powerful ways to describe a startup’s business is to think of an offline analogy. The idea is to create a hook in the listener’s mind so that they understand and remember the startup’s purpose. By using an offline analogy, you connect to a more known quantity.

Here are a few examples:

• We’re like the printing function of FedEx Kinko’s, but entirely web-based with next day delivery at 30% less
• We’re like a manual financial audit by a CPA, but done automatically every night
• We’re like the Manheim Wholesale Auto Auctions, but online for dealers only

It can also be useful to try out a few different offline analogies to find the one that is most memorable. My recommendation is to come up with an offline analogy for your business and use that when describing your startup. The most important goal is to have the person you’re talking to be able to recall it in the future for potential customers, partners, investors, and employees.

Each time in the Fall, for the past two years, my sister-in-law has attended a kids consignment sale in Durham, NC near the RDU airport. I’ve heard her talk about it several times, and every time you can literally hear the excitement in her voice. The consignment sale has tons of great kids clothes and toys at awesome prices. For her, one of the best parts of it is the priority access she gets where you get to go through and purchase stuff during a private pre-sale only available for certain people.

Now, this is where it gets interesting. Inquisitive as I am, I asked how she gets access to the pre-sale. One way to get access is to bring 10 items, only from specific brands, a week in advance to put up for consignment at the show. Once those items are evaluated and approved, then your name gets put on a list. That’s for one day before the show begins.

The even more amazing thing is how to get access to the show two days before it begins. How, you ask, do you get such early access? Glad  you asked. Here’s how: you volunteer for 20 hours helping the show producers sort items, put on price tags, and generally do whatever they need help with. Wow, 20 hours of labor to get access to a consignment show? Oh, and it is a for-profit event. That’s right, the people who put on the show get moms to work for free for them so that they can then buy stuff from them where the stuff they buy is from someone else on consignment, hence the owners of the show don’t have to carry any inventory.

If that’s not some of the most passionate customers, I don’t know what is — and, yes, my sister-in-law is one of the ones who donates 20 hours of labor to get first dibs access to the goods.

What do you think? What are some similar stories you’ve heard of regarding passionate customers doing things that are hard to believe and loving it?

The number one challenge for startups is the lack of market awareness. Lack of market awareness is another way of saying no one knows about the startup or the product. This is especially challenging when the startup’s product is in a new market which doesn’t have much demand yet — it hasn’t crossed the chasm.

When starting a new company, my recommendation is to spend more time than you expect on the following:

• How will companies learn about your business?
• How will you convince them you’re different in 30 seconds?
• How will you explain what you do in 30 seconds?
• How will you acquire new customers?

What else? What do you think is the number one startup challenge?

One area startups do a poor job with is answering the competitive question “how are you different?” In addition, there’s a tendency to talk about differences compared to mega products/companies (e.g. we’re like SharePoint, Facebook, eBay, etc but do x,y, and z differently). This is nice in that people are more likely to be familiar with these brands but bad for internal focus in that there are so many fundamental differences that it makes it hard to narrow down the meaningful ones.

More often than not startups should focus on sub $100 million/year revenue competitors. Here’s why:

• Sub $100 million competitors typically have a more specialized focus or a single product, making it easier for a startup to ride their coat-tails
• Sub $100 million competitors are still large enough to have a meaningful customer base whereby you can reach and talk to their users, find out where they are advertising, etc
• Sub $100 million competitors are more attainable size-wise and can be more easily emulated, making it more mentally palatable to say “we’re going to beat X”

My recommendation is to focus on differentiating your startup against sub $100 million dollar competitors.