Talk is Cheap (But Valuable)

Get out there and talk to your potential customers. Regardless of how clever your business plan or how advanced your technology, the real test for any business is in the marketplace.

By all means bounce ideas around your team, conduct desk research, refine and develop your plans – but remember they are really just theories about how the market will respond. Perhaps stunningly original and well developed, but still theories nonetheless. And your success ultimately depends on how they work in practice…

In most cases, the "build it and they will come" approach exposes you to far greater risk and cost than is necessary. No point rushing to market with a product no-one wants, and finding out (by way of deafening silence) that maybe you should have done things differently.

It’s far better to get market feedback before you’ve committed your precious time and money. And it’s as simple as getting out and talking to people – especially your target customers and potential channel partners.

Before you do, take some time to clearly think through why you believe your business will succeed, and what key assumptions lie beneath your reasoning: e.g. customer segment X values convenience more than price; a Y% commission is reasonable; distribution channel Z will take on a new product at their standard trading terms; hosting costs will be less than $A; etc

This process gives you a list of things to test. Now get out there, talk to people in the market, and keep an open mind. Talking doesn’t mean pitching – it’s not about convincing them that you’re right, but about gathering evidence you can use to either support or to disprove your theories.

No-one (at least no-one I know) likes cold-calling. But a few hours of calling potential customers and business partners can do wonders for your new business. Very quickly you’ll find out which theories are well-supported, which are just plain wrong, and which ones are in a controversial grey zone of conflicting opinions.

Talk is cheap. But the insights you will get from pressure-testing your business concept can be priceless.

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Entrepreneurial Lessons from Wesfarmers

I recently heard Richard Goyder from Wesfarmers speak on the subject of leadership in a time of change. Although he runs a huge diversified conglomerate, it struck me how relevant many of his insights were to startups, in particular on:

  • Purpose
  • Values
  • Strategy

So here are some of Richard’s insights, mixed in with a few of my own reflections…

Purpose

Be clear on why your business exists. For Wesfarmers, it’s about delivering a satisfactory return to shareholders in a sustainable way.

(Ironically, I have previously argued against this sort of purpose, but I think Wesfarmers is one of the few that actually manages to make this work. And with a business as diversified as theirs – from hardware to insurance to coal to supermarkets – it’s hard to have any other unifying purpose).

Interestingly, Wesfarmers talk about ‘satisfactory return’, not ‘maximising the return’. This objective measure (as opposed to a relative one) frees them up to run their own race, rather than comparing themselves endlessly to others.

Values

Be clear on your values, and continually challenge yourself about how well you are living up to them. It is only by standing up for them (and sacrificing something else – like comfort, opportunities, money, etc) that you demonstrate they are actually values not just nice-sounding words. And over the long term your values are a powerful asset and guide.

Wesfarmers has four values …which could in fact suit any entrepreneurial business:

  • Integrity – "because without this you’ve got nothing"
  • Openness – "make sure bad news travels just as quickly as good"
  • Accountability – "deliver on your promises"
  • Boldness – "think and act boldly, don’t let success breed complacency or conservatism"

Strategy

 Know how you will get where you want to be. For Wesfarmer’s there are four basic strategies …and these have remained constant for many many years.

  1. Ensure operational excellence in existing businesses
  2. Pursue entrepreneurial opportunities in existing businesses
  3. Consider value-adding acquisitions
  4. Invest in developing your people and capabilities

Whatever your business, the above four strategies are critical. Some startups fall over by going after entrepreneurial opportunities while neglecting operational excellence or their people. And many established businesses get so focused on running their existing businesses, they fail to grab hold of the future. It’s a balance (and a difficult one at that), but every business needs to be investing some time in all of the above.

Final words 

On reflection, I think I found Richard’s comments relevant to the startup environment in particular because (i) boldness is one of their values (ii) they focus relentlessly on entrepreneurial opportunities. It’s also a timely reminder that entrepreneurship is not just about startup ventures, but a critical part of any business however large or established.