by Bill Aulet
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Success story of disciplined product scaling: Now let’s look at the other end of the spectrum. Think of a wildly successful product from a startup or a bigger company. What was the product’s Beachhead Market? How did they scale the product and move into adjacent markets? What can you learn? ______________________________________________________________________________
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WORKSHEETS
Product Plan – Version 2 for the Beachhead Market
This plan is not a commitment, but a best-guess plan subject to change as you learn more from Version 1.
# Feature/function Benefit How does it leverage your Core? Priority Est. resources needed to develop
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Product Plan – Version 3 for the Beachhead Market
This plan is even less of a commitment as it is further out in the future.
# Feature/Function Benefit For whom?
End user, economic buyer, champion
How does it leverage your Core? Priority Est. resources needed to develop
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Other Activities beyond Functionality for the Beachhead Market
What other activities do you anticipate doing related to the product to help it scale after version 1.0 for the Beachhead Market (e.g., go-to-market activities, regulatory matters, additional complementary services to support the product, additional sales channels—anything not related to product functionality listed above)?
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Moving beyond the Beachhead Market—Analysis and Prioritization of Follow-on Market Candidates
For the worksheet on the next page, refer to your work from Step 14, Calculate the TAM Size for Follow-on Markets, but build upon it with the knowledge you have gained since that first draft.
# Name Which market does it follow from? Pros Cons Does it leverage your Core?
(Y/N)
Priority Key factors needed to succeed Resources required Risk Reward
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Wow! The good news is that you have made it through the 24 Steps. Congratulations! That is quite an accomplishment, and you are so much better off for it. Now the bad news: It never ends. You are constantly updating what you have done. Life never stands still, nor does business. You must constantly use this framework to refresh your business so that another startup does not come along and take your market share. But more good news to end the chapter: It is much easier the second time around, and it will continue to get easier with more repetitions.
Beyond the 24 Steps
WHAT IS MISSING IN THE 24 STEPS?
I always talk about the need for focus and to be clear about what you are “deselecting” when you choose what to focus on. Similarly, in order for the 24 Steps to excel at guiding you through new product development, there were so many things relevant to startups in general that I had to leave out. In Disciplined Entrepreneurship, I ended with a reminder about the many areas essential to a startup that the 24 Steps do not cover, such as building a company culture, selecting a founding team, growing and building the team (human resources processes), selling and sales execution, servicing the customer and building customer service processes, raising money to scale the business, entrepreneurial leadership and scaling the business, building and utilizing good company governance, and much more.
In this workbook, I want to elaborate a bit more on three key areas of focus so that you have guidance to keep your entrepreneurship education going and refreshed.
Team and Culture
As mentioned earlier, your team will be your most important factor in determining success. That does not mean you shouldn’t put enormous focus on your customer and product plan (you should) as that is the best way I have found to determine whether you have a strong and aligned team. Always be aware that you must have a great team; “good enough” never is if you want a great company.
The customer and product plan is essential, but conditions will change and you must have a team that will adjust. As you think of different versions of your product, it is also important to think of different versions of your team, each time getting stronger. This may involve upgrading skills, adding people to the team, moving people off the team, redesigning the organization to work better, or changing responsibilities and reporting structures. You must do what is best for all the stakeholders, which includes not only the employees but also the customers and, later, investors. If someone on the team is not a good fit, you are doing no one (including that employee) a favor by failing to acknowledge the lack of fit. It does not mean the employee did not play a vital role at some point, or is a bad person, but rather they are not in a job that allows them to shine. You need to have a very coherent and skilled team to succeed in the tough world of entrepreneurship. Keep upgrading your team and have a mindset and general plan to do so, but always consider values in this decision process.
I wrote a piece on this topic for TechCrunch called “Culture Eats Strategy for Breakfast,”1 which talks about the incredible power of a strong corporate culture and the danger of ignoring this difficult topic. It also gives you some examples and references as to how to develop your own unique but appropriate culture.
With regard to a more prescriptive approach to the HR challenge of building and continually upgrading your team, I would recommend the definitive book on the topic by Noam Wasserman called Founder’s Dilemmas and his website www.noamwasserman.com, which has assessment tools and lots of other useful materials.
Financials
In this book, you did product unit economics and you were encouraged to make a first draft marketing and sales budget, but that alone is insufficient to fully understand the viability of a business and to track progress. This analysis only briefly mentioned the investments you will need to make in research and development as well as general and administration expenses; much more needs to be done.
Sometimes people say you should not worry about the financials because all financials are going to be wrong. Yes, they will be wrong, but without a simple, dynamic model to gauge the rough magnitude of the financials, you will be flying blind in a turbulent area when you don’t need to. At the outset of Disciplined Entrepreneurship, I state that the single necessary and sufficient condition for a business is a paying customer. That is not an accident. Money needs to come into your organization for it to be a business, and for it to be a sustainable business, you have to have more money come in than go out. Cash is the oxygen for your business; without it, you die.
So even if you know you can’t get the numbers in your financial projections precisely right, it is so important that you build a general financial model to guide you in this critical area. Don’t let this impossible-to-solve problem drag you down; instead, do enough to understand the underlying dynamics so that yours
can be an economically sustainable business. You don’t need an MBA, but you do need to be financially literate.
There are many books and financial specialists who can guide you through how to make a simple model. There is no one-size-fits-all model here that magically solves the problem, as each startup has its unique story with different cost dynamics. It is not that hard, but you have to be organized and be comfortable with numbers—or someone on your team needs to be. If you and your team are not, I warn you that business requires this skill, so you should consider putting someone on your team (at least part-time) who has an interest in and can ultimately do the financial analysis to guide you before you jump into the entrepreneurship world.
Other Functions
You will need to set up functional groups/teams for other things that need to be done to support the product getting to your customer in the most efficient and effective manner. This includes but is not limited to human resources (as per “Team and Culture” above), finance (as per the previous paragraph), customer service, marketing communications, public relations, competitive analysis, engineering, research, legal, regulatory, manufacturing, fundraising (different than financial and often overemphasized for startups—most often the best thing you can do to raise money is to have a great business), and other general services.
Setting up these functional teams within an organization is nontrivial and nonobvious. I personally got invaluable training at IBM in my early years on how to do this and the importance of organizational design. It is not something people are just born with and, in fact, it is often counterintuitive.
I suggest you seek out experienced people in designing scalable organizations and listen carefully. Sometimes success in the product area makes you believe you can easily solve this problem; that is not true. First, it requires a different skill set. Second, it is very hard to get right the first time. It is complicated because it involves humans and their motivations, so get assistance as you do this.
Conclusion
Each one of these items, as well as each part of the 24 Steps, has a rich amount of experience and research behind it. Use this book as the beginning of your entrepreneurship education, not the end. The more you know about entrepreneurship, the more you will not only control your own destiny going forward, but you will thrive in the increasingly changing and unpredictable future. Hopefully this book has given you the insight, the confidence, and the hunger to want to become a better and better entrepreneur. The entrepreneurial journey never ends, and neither should your entrepreneurial education journey.
WORKSHEET
What other activities are you going to do to continue to build your entrepreneurial skills and network?
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NOTE
1 See https://techcrunch.com/2014/04/12/culture-eats-strategy-for-breakfast/.
EXERCISE ANSWERS
STEP 2
The beaches of Normandy, France were an ideal beachhead for the Allies because they were not an obvious choice to start the invasion, so they were less fortified by the German army. Once the beachhead of Normandy was secured, follow-on “markets” included other areas of France, followed by countries like Belgium and Luxembourg, and finally Germany.
Socially active college undergraduates at Harvard University.
Pinterest is an interesting case. They stumbled upon an “accidental beachhead” after some time of trying to find their way in any market. Before they knew it, a large proportion of their user base were women who used Pinterest’s boards to plan their weddings. While Pinterest would not necessarily describe this group as their first target market, this market provided the initial lift and development of the fundamental product that would allow Pinterest to conquer additional markets.
Finance departments with complex calculations that required sensitivity analysis. In particular, the first spreadsheet program for the IBM PC, VisiCalc, was the “killer app” that solidified this beachhead.
The Apple Macintosh is another case of an accidental beachhead. It took over a year after the computer’s release in 1984—where it appeared that the Macintosh never got real market traction and it seemed headed for the same fate as its predecessor, the infamous Apple Lisa—before desktop publishing (Aldus PageMaker to be precise) became available for it. Once PageMaker caught on in 1985 and it became the killer app for the new machine, the Macintosh not only dominated the desktop publishing market quickly but became the highly preferred computer of the creative professional.
Cell phones first appealed to wealthy people who frequently needed to be reachable while traveling, such as real estate agents and doctors who already were using pagers and were used to such mobile technology, according to cell phone inventor Martin Cooper. See Tas Anjarwalla, “Inventor of cell phone: We knew someday everybody would have one,” 7/9/2010, CNN, http://www.cnn.com/2010/TECH/mobile/07/09/cooper.cell.phone.inventor/. Personally, I vividly remember a Beachhead Market for cell phones for traveling salespeople in cars, which made perfect sense to me. This likewise was a “killer app” that had a very compelling value proposition.
STEP 5
Studies show that the second advertisement is much, much more successful. Soviet leader Joseph Stalin is reputed to have said, “A million people die and it is a statistic; one person dies and it is a tragedy.” To learn more about the power of narrative, see Made to Stick by Chip and Dan Heath.
Having led a few startups and having worked with hundreds more, I can assure you the answer is “B.” You’ll never figure out the absolute best strategy, even if you have all the time in the world, unless you roll up your sleeves and start trying things out. Instead, you need to focus on building a strong and committed team so you can keep moving and figure things out as you go along.
These spokespeople are not Personas, but rather aspirational figures who inspire and attract the real target customers. The company wants you to think they are the Persona because they want you to think that you are like these celebrities, and that you can be like these celebrities if you buy the product. The spokespeople serve in the role of heroes to the target customer, and are therefore able to influence the target customer dramatically. As you will see in Step 12, Determine the Customer’s Decision-Making Unit, influencers play a strong role in any decision-making process.
STEP 6
B—specifically, the right people don’t know about the app, so they never try it and they don’t know what they’re missing. It’s the classic paradox, “If a tree falls in the woods and no one hears it, does it make a sound?”
STEP 7
“a” is a benefit, “b” is a feature, “c” is a function.
STEP 9
Team 1: The team seems to have good sales skills, but they should not be selling yet because they do not have a homogeneous Beachhead Market based on these Next 10 Customers, as evidenced by how many of the customers don’t match the demographics, psychographics, use case, or value proposition of the Persona. Yes, the customers have said they will buy the product, but without a well-defined target customer, the company will find it hard to gain traction due to poor word of mouth. This team needs to redo their Next 10 Customers map, and if they can’t find 10 customers similar to the Persona, they need to reevaluate their whole plan, starting with the TAM.
Team 2: The team has great focus and a homogenous set of customers. It is good to see that the customers are not family or friends (or friends of friends), meaning the customers will be less biased toward liking the product out of politeness and will provide more honest feedback. The team now needs to go talk to the rest of these customers and ascertain their willingness to purchase the product. Maybe they
can use one of Team 1’s salespeople to do so!
STEP 10
Each company’s Core:
Walmart: Vendor management and logistics; worldwide sourcing and a strong purchasing organization that extracts the lowest possible prices from vendors. All of this is supported by a culture celebrating ruthless minimization of expenses.
Honda: Motor technology and manufacturing.
eBay: Network effects.
Gillette: Domination of distribution channels.
Oracle: Sales organization—existing long-term relationships, well-defined and refined sales processes, IT systems, training, compensation systems, culture.
Zappos: Complete top-down commitment to customer service excellence above all else, embedded into HR, operational processes, systems, measurements, culture, etc.
Apple: Tightly integrated products based on industrial design, hardware development, software development, and manufacturing, creating a frictionless user interface
