Garage to global

A TEN-PART SERIES EXCLUSIVE TO NZBUSINESS IN WHICH SUCCESSFUL SERIAL ENTREPRENEUR MARK LOVEYS PROVIDES A SUCCINCT ‘HOW TO’ GUIDE FOR WOULD-BE ENTREPRENEURS – TO HELP TAKE YOUR IDEA TO THE WORLD.

PART 3. DEVELOPING YOUR PRODUCT OR SERVICE

Developing and refining your product or service is a vitally important process that will continue throughout the lifespan of your business as you maximise your value proposition, beat your competitors and adapt to ever-changing market conditions. However, the most mission-critical work in product or service development happens during the start-up phase of your business.

During the start-up phase, you’ll need to design and build your ‘Minimum Viable Product’ (MVP). This is because it takes a lot of time, investment and market feedback to build a full-featured product or service.

So, to get your business started and start gaining this muchneeded market experience and feedback, you’ll need to look at the minimum you need to offer in order to have a viable offering that will sell well enough to get you going. This is the MVP.

“I have always strived to use inhouse resources to design and develop products in order to achieve tighter control and better communication with other parts of the business.”

Often, other positive aspects of your offering will compensate for its minimal feature set.

One of my earlier software businesses, Exonet, started with an MVP accounting software package. It sold extremely well as soon as it went on sale, because its technology platform (SQL database with middleware and a Windows user interface) was revolutionary at that time and was desired by the market.

Twenty years later, Exonet is now known as MYOB Exo and its wide appeal relies more on its rich and mature feature set and huge partner base than purely its technology base.

On an even larger scale, the same could be said about Rod Drury’s Xero, which was also once an MVP sitting on a revolutionary technology base (‘The Cloud’). It has obviously sold extremely well and now has rich functionality, a huge partner base and is a major success story.

“NAIL IT BEFORE YOU SCALE IT”

To develop your MVP you’ll need one or more friendly early-adopter customers who will use your product or service in the very early stages and provide you with valuable feedback and advice.

Don’t think you know it all already, even if you’re experienced in your market.

These early adopters should be representative of the various types of customers you are targeting. Look after them as best you can, by perhaps giving them preferential pricing and/or services to compensate them for the help they are giving you and any inconvenience they might suffer in the process.

The feedback loops you establish with these early-adopters are valuable assets for an early-stage business.

Once your early-adopter customers are happy with your offering and willing to endorse you, you can now look at ramping up your sales and marketing efforts.

I love the expression “Nail It before you Scale It”, which was a recurring theme at the SaaStr (Software as a Service industry) conference I attended in San Francisco in February.

Before you get aggressive with sales and marketing, you need to get your MVP offering right and get a close understanding of your target customer, otherwise you risk damaging your reputation and future potential.

In simple terms, “Nail It” and “Scale It” are the two major phases of growing a start-up business – especially in SaaS. It’s important to continue to “Nail It”, even after you “Scale It”.

OUTSOURCING AND IP

You might be faced with the decision to develop your product or service using third parties in order to reduce costs or because you don’t have the necessary skills in-house. This is an area of significant risk and needs to be managed carefully.

I have always strived to use in-house resources to design and develop products in order to achieve tighter control and better communication with other parts of the business, including sales, marketing, technical support and of course, customers.

If you outsource your development, then good communication, trust and a mutual understanding of what you are trying to develop is paramount. Ensure that you have adequate contracts in place to protect your business in the event that things don’t work out. Use a good contracts lawyer.

Your product or service might have unique aspects to it or key features that may contribute to the value of your business. This is referred to as Intellectual Property (IP).

No matter how you structure the development of your product or service, you should secure the ownership of this IP with your business using contracts and/or registered patents. Failing to do this will short-circuit the value of your business and this might only become apparent when you come to sell the business.

For professional advice on this crucial subject, you should seek the services of a specialist IP lawyer.

In part 4 of this series next month we look at raising capital.