In various blogs and news-feeds recently, both Blackbird Ventures and Sydney Seed Fund have estimated that, of the perhaps 1000+ startups formed this year in Australia, only 10% are attracting external funding and the percentage is much lower for the very early stages entrants. Part of the reason for these figures seems to be attributable to the growth in the number of people giving entrepreneurialism a shot whilst at the same time failing to adopt any kind of robust commercialisation process.
“There’s really nothing remarkable about it. All one has to do is hit the right keys at the right time and the instrument plays itself” – JS Bach
As a musician, this quote makes me smile. I recognise that having a framework is not enough but I do believe that not using one at all is a recipe for disaster.
Some of the biggest problems facing these new entrants to the commercialisation space appear to be: (a) failing to solve a real problem (ie one worth solving), (b) insufficient levels of market interest/traction, (c) derivative products with poor differentiation, (d) being too niche to scale effectively and (e) significant capability challenges.
One of the keys to getting it right is to adopt a sound commercialisation framework with an iterative focus on the whole business canvas rather than just the product or service. This is the message of the Lean Startup community and has been around for many years in other guises (eg. the commercialisation models proposed by Goldsmith, AIC and others). In my view, this approach is a natural byproduct of systems thinking and its associated full life-cycle (cradle-to-grave) mind-set. Typically, there will be a maturity pathway that begins with some form of ideation, convergence and selection based on validated hypotheses in each of the domains of desirability, viability and feasibility. These three domains (called ‘technical’, ‘market’ and ‘business’ in Goldsmith’s model) need to be addressed in a balanced way throughout the evolution from concept to launch, scale and beyond. Anticipating iteration is key since each domain will both inform and constrain the others. It is essential to hypothesise, test, learn and adapt across the board and not just where it might be most interesting.
A primary key to overall success is the capability and culture of the commercialising entity. It is, I suggest, fairly obvious that the more complex the development or integration, the more likely success will require an established capability on a commensurate scale. One guide to the existence of an appropriate culture would be the degree to which any given entity already invests in development activities that successfully translate similar ideas into something that adds value.
There are a number of critical factors that underpin each of the domains mentioned above. In the case of Feasibility this needs to extend beyond the design to incorporate verification and validation related to anticipated scaling in production, distribution and support. From a Desirability perspective there needs to be a clear understanding of the market, channels and pricing and there must be a differentiator or advantage that is both durable and sustainable. IP protection helps in this area but is not a panacea; particularly if you do not have the resources to defend your corner. That aside, products targeting growing markets with a high level of need that are both familiar and exhibit natural value-chain synergies will have a higher chance of success.
Looking through the lens of business Viability there needs to be a frank assessment of both the capital and professional needs. Among other things, this will assist in determining a venture, alliance or licensing model. Since capital is generally only available in exchange for anticipated economic gains and control purposes these will be important decisions. Given a sound market position, viability will ultimately hinge on the people, infrastructure and systems that are established (or accessed) to provide the necessary capability and growth path. Initially, speed to market is critical since the initial phase is usually cash-negative and you only have a certain amount of ‘runway’. Thereafter, everything hinges on scaling to volume to climb back into positive territory and recoup costs. This transition needs to be anticipated by establishing the necessary capability ahead of time. Clearly, two critical areas for early capability development will be innovation program delivery and marketing.
By adopting an iterative and adaptive approach and by considering options across all domains concurrently it becomes easier to weed out dead-ends or poor performers at the earliest opportunity. Then, as progress is made along the maturity continuum, this weeding process will naturally give way to more focused risk reduction and optimization considerations related to the chosen trajectory. One thing is for sure, the closer you are to your market, the more likely it is that you will develop something they will embrace and be able to give it to them when they want it.
There are a number of commercialisation models in the public domain and a growing number of accelerators and other support platforms that can help set you up for success. The key take-away is to adopt something that works for you, adapt it to suit and apply it holistically. And one more thing – get some help.
“No one can do it for you, but you can’t do it alone. ” – Barak Obama