What losing $17,543 taught me
Posted by Andrew Skotzko on
When I was 19, I had the inclination to start a travel-related business. The idea went something like this: build a network of frequent-traveler small businesses and consultants and leverage group buying power to get them better rates on airfare and personalized service.
That one tanked. Not only was the product terrible, we had no idea how to build a sustainable channel to customers that could support a successful product launch and sustain a relationship with customers.
It was my first cut at the entrepreneurial plate. I lost $17,543.22 in the process that I really didn't have to lose. In hindsight, I consider it tuition. But I'd be lying if I said that didn't hurt and I wasn't completely embarrassed by my own ineptitude.
I wish I'd understood ideas like "minimum viable product" (MVP), customer development, and how to approach creating and launching a product. I wish I'd been seeking out smarter people and learning from them. But in retrospect, that failure taught me a very valuable lesson about building a scalable business: it's about mousetraps and platforms.
Dissecting a flop
Last weekend, Seth Godin penned a great post about what happens when the MVP as you've defined and launched it doesn't work in the market. It's easy to read his post and think, "oh, we built too little product. We need more features." This is wrong. If you are a firm believer in the lean startup methodology, you may also read it and think "We built the wrong product. We didn't actually discover what our customers needed." This may be right or wrong. But it's definitely incomplete. Why? Because as an advisor of mine once put it, "Build a better mousetrap and the world will beat a path to your door...if they know about it."Building in parallel
You probably didn't build too little product before you launched. The far more common case is feature creep. Or building a product that your customers don't find compelling. But let's assume you didn't succumb to either common scenario. So if you built just enough product or built something truly compelling, what did you not build enough of? A platform. A permission channel. A base of people who give a crap about what you have to say and offer to them. You should do this WHILE you are doing customer and product development. Those are key practices in building an amazing mousetrap and avoiding waste. But while you are doing those, you also need to be investing in your platform.Two types of launches
There is a difference between a product launch and a public launch of the company. You should be building, testing, and crafting your product with customers so it is amazing and you know who you are as a company. This is core to the lean startup practice. But this doesn't mean you should be doing lots of press yet. At this point your customers are still early adopters and your product may well change a few more times. It is very hard to redefine your public image once you've created it. Only once you've found product/market fit and established proper positioning should you do a company launch. While you are finding your way there, you should be building your platform. This is what the most effective thought leaders and content marketers do. They build the platform before the product/company is ready for a public launch, so that when they finally get there they have a receptive customer base waiting. It's why you should blog, use Twitter and social media, create an email list of people who are interested in the story you're telling and what you're creating.My favorites examples of companies that did this in tech are Mint, 37Signals, SEOmoz, Flowtown, KISSmetrics. Outside of tech there are even more examples—consider any entertainment property that creates audience and later sells consumer product directly or licenses its IP to a third party to do so. In music, mashup artists pioneered this approach—they gave lots of value away for free (music), and sold the scarce resource (live shows). In fact, that's how I discovered one of my favorite DJs—Pretty Lights—two years ago, and he is now one of the fastest rising DJs out there. He's killing it.
When does this work? When doesn't it?
When I think about companies that have successfully executed a content marketing strategy, the common factor I notice is that they are usually selling vertical solutions rather than horizontal platforms. Content marketing works brilliantly when you are selling a vertical solution because you exist within a definable space whose mindshare can be owned. It may not be easy, but it's fairly straightforward: Make amazing content, well packaged and marketed, that is relevant and useful for your customers. I think content marketing may be the most under-appreciated marketing program out there for vertical solutions. Combined with good SEO, it pays astonishing compounding returns. Content marketing doesn't seem to work as well for horizontal platforms which often have network effects. True horizontal platforms are many things to many people, and often the definable mindshare of the space is created by the success of the product itself. It is easier to market Mint with content than it is to market Twitter. The reality is that we still know very little about successfully and repeatably creating network effects businesses. One thing I have noticed is that generally, network-effects businesses conflate both types of launches in order to try and reach minimum critical mass faster. Content and other marketing channels and optimizations often follow afterwards, because in most network effects businesses there is no value to market until after minimum critical mass has been reached.What now?
If I was building a vertically-oriented company right now, I would be doing three things in parallel:- Customer development to discover my customer and the product they find truly compelling
- Building that product iteratively alongside that discovery process
- Building the content platform for the company so that when the product is ready to launch, there is an audience waiting for it. I would also do more video content and infographics, as opposed to just writing. These are not done well by many people.