How To Gain Market Access If Your Business Idea Is Ahead of Its Time
Some entrepreneurs or inventors find themselves in a difficult position: they may have a technology for which no clear market application exists as yet, or they’ve devised a concept to solve a problem that prospective customers don’t yet think of as a priority, meaning that demand isn’t urgent. So the environment is ‘uncertain’.
These entrepreneurs also face a difficult value chain, in which incumbents are powerful and perhaps not interested in the start-up’s offering, or gaining access to potential end markets involves a complex sales process. They may also have a product offering that’s difficult to protect from imitation, such as software, making it risky to enter partnerships with large incumbents.
These entrepreneurs know they have an original idea or offering of value, which could provide a fine solution to a problem, if only they can gain the market access needed to prove it.
Growth path. These companies aim to increase the value and
legitimacy of their technical solutions,
the size of their company, and their market share and revenues. But they do so
by gaining a commercial foothold in the market, rather than a technological
one. Ventures in this quadrant require the most resource-intensive strategy to
succeed. If your offering is in this category, your resources need to be developed
and deployed as follows.
1. Technology resources. While the start-up might begin with some proprietary
technology or ideas, it may also be necessary to acquire some complementary
technologies to create an integrated product offering that fits potential
customers’ needs (for instance, by embedding the new technology as an
improvement to an existing technology product). When speed to market is needed,
buying such technology ready-made from other companies (or buying those companies)
is faster than developing from scratch. If this option isn’t feasible, the start-up
may hire technical staff to develop integrated, market-ready products
2. Social resources. Rather than technology partnerships, this type
of startup needs commercial partnerships with other businesses that have sizable,
established distributor or customer relationships, in order to worm its way
into the value chain and gain access to those ‘complex’ customers. Even better,
if the start-up can acquire some specialist distributors or small businesses
with loyal and attractive client lists, it can leverage those established
relationships of trust and habit to introduce its novel offering to customers
and/or embed its innovations into the existing product lines, creating
3. Human resources. With this strategy, you need managers to
oversee the development of technology, products and sales. However, while some
of these people will be hired as part of the management team of the initial start-up,
others will come on board through acquisitions. You therefore need to make
decisions about whether and how the acquired subsidiaries and their managers
are absorbed into the parent company – whether in a full company merger or by
retaining different operating companies. Our research suggests that it is preferable to
retain the managers of the acquired companies in order to benefit from their customer
knowledge and keep tabs on cash flow of these new units.
4. Financial resources. Naturally, the product development and acquisitions
will require a lot of money. Companies operating in this quadrant need to raise
substantial venture capital in multiple rounds of funding, but they’ll also
require investors with multiple specialities. At each phase of the strategy,
investors should be brought in with expertise in that area: start-up phase,
technology/product development phase and the
aggressive acquisition phase.
Critical success factor: acquiring and retaining credibility with customers.
The challenge for these companies is to get end customers to buy very novel products, which often may imply a change in customers’ behaviour or business processes.
That is why such ventures aim to reach the market by acquiring profitable small companies that have established names and customer relationships in the target sector, or by building commercial partnerships with other companies. Pre-existing customer relationships will lend initial credibility to new product launches because customers already trust a company they know.
Obviously, the manner in which new products are introduced will also affect customer retention, so skill must be applied to retaining rather than destroying that credibility in the process of acquiring new customers. For this reason, an attempt should be made to retain managers from acquired companies to create smooth transitions to new business lines.
This is an excerpt from Sabrina Kiefer's book, The Smart Entrepreneur, which she co-authored with Prof. Bart Clarysse.
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