says Steve Blank, and he’s totally right! Actually it’s surprising that we needed to hear it from him, when the same concept was apparent also from Moore’s Innovation Adoption Cycle. According to Moore’s Cycle, the first customers of an innovative product are the Innovators, followd by Early Adopters.
Innovators are “easy” customers for a technology company since they focus on the technology itself. The real focus for a startup are the Early Adopters. They focus on the product and they are willing to try it even if they will need to adapt their habits to fit it in. But you have to look for them and look for the product that will make them tick! Hence the need for an efficient trial-and-error process to test assumptions about product and customer in order to attain the Product/Market Fit.
Only at this point the entrepreneur will look at how to make his business work. It’s the time of Business Modeling. Again a time of trial-and-error to validate hundreds of assumptions about how the business works, to make it work for the Early Adopters!
But what happens after the Early Adopters? The Moore Chasm is there! The next group of customers are the Early Majority. Mainstream is coming in! They focus on reliability. They cannot afford to just try the innovation. They need to be sure that that particular innovation will not turn them down. It’s not just about the product any more, they consider what comes attached with it. Ancillary services, customer service, maintenance and so on. Their risk profile is very low. They have to be efficient and avoid risk taking.
With Mainstream customers, startups have to put in practice systems, processes and procedures to make sure customers get what they need. They need to start thinking like a larger company! For this particular product they are not in research mode any more. They must make sure they deliver consistently and efficiently. They have to behave like a large company if they want to be able to serve mainstream customers, both because of these customers’ needs, and because they are many. If startups want to maintain their ability to innovate, they must wear both hats and it’s not an easy task.
Startups Focus on Trial-and-Error search for Optimal Solutions
Large Companies Focus on Efficiency and Risk Reduction
Let’s now consider large companies doing innovation. How do they manage the innovation process? They are focused on efficiency and risk avoidance but they need to try new things. Their situation mirrors the startup’s situation when it has to learn how to deal with mainstream customers without loosing its ability to innovate.
Companies have to learn from startups how to innovate, that is, search for the Product/Market Fit of their innovations. A linear, planned approach like the ones companies are used to, becomes useless. A planned approach is like when startups pretend to plan their business before they’ve reached at least a Product/Market Fit. Statups, instead, are good at searching this fit and large companies can learn from them.
A number of approaches are coming out to help companies in the task of innovating like startups, the most important being Pretotyping and Effectuation.
Pretotyping for companies says “Invent like a Startup, Invest like a Grownup” and focuses on an extremely efficent way of testing innovations against the market.
Effectuation focuses on the overall entrepreneurial process identifying and implementing the most important entrepreneurial habits, all related to the ability of entrepreneurs to make things happen (effectuation).