What market type should your startup target? How can you unite your team around a clear vision for success?
In The Four Steps to the Epiphany, Steve Blank writes that the first steps to starting a business include understanding different market entry strategies, establishing foundational principles, and getting everyone on the same page. These initial decisions shape your entrepreneurial journey.
Read on to discover how to position your startup for success and build a strong foundation for growth.
The First Steps to Starting a Business
Blank describes the first steps to starting a business, which he regards as laying a foundation for customer development (his recommended approach to entrepreneurship). First, familiarize yourself with the four market types and which one your startup falls under. Then, establish your mission statement and core values. Finally, ensure that everyone involved in your startup is on the same page and ready to take on the customer development process with shared goals in mind.
#1: Choose How You’ll Enter the Market
A new market emerges when a product provides an original function that no existing products offer. While this approach benefits from having no direct competition, it requires significant customer education and patience during the adoption phase, as market size is unknown.
Entering an existing market with a better product means attempting to outperform current solutions. This approach benefits from known market size and competitors but faces the challenge of differentiating the product and capturing market share from established players.
Resegmenting an existing market with a low-cost product targets price-sensitive customers often ignored by established companies. The challenge lies in proving the product is adequate for customer needs while maintaining profitability through a sustainable business model.
Resegmenting an existing market with a specialized product involves focusing on specific customer needs. While this approach offers potential for market leadership, it typically faces aggressive opposition from established businesses protecting their market position.
Most startups focus on market types three and four, resegmenting existing markets through either cost reduction or specialization.
#2: Establish a Mission Statement & Core Values
In addition to understanding your market type, Blank recommends that you create and display a clear mission statement and core values to guide the company during times of uncertainty or turmoil.
Your mission statement is a general description of your product concept as well as the market type you’re entering. It should be concise—no more than two paragraphs—and clear, as it will help keep your team oriented toward your shared goal. The mission statement may change gradually over time, but it shouldn’t waffle frequently based on each new trend in the market.
Your core values, on the other hand, should remain constant, serving as the ethical and moral foundation of the company. He advises limiting the number of core values to between three and five to be most effective. For example, a talent agency’s core value might be, “We believe in uplifting the great artists of our time.”
(Shortform note: In Built to Last, Jim Collins and Jerry I. Porras echo Blank’s advice to align your company around a shared mission and core values (which they refer to as a core philosophy). They argue that, contrary to popular belief, you don’t have to choose between making a profit and pursuing higher ideals as an organization. Your core philosophy is what allows you to attain both of these things by unifying your actions and decisions. The authors recommend deciding on your core values first, selecting no more than six. Then they suggest formulating your purpose (or mission statement), which they say is the more important factor in guiding and inspiring your organization.)
#3: Get Everyone on the Same Page
No matter how well you’ve thought out your business plan, you won’t be able to execute it without the help of your whole team. Blank emphasizes how important it is to secure commitment from all stakeholders before embarking on the customer development journey. This means educating executives, board members, and other important players about the customer development process and how it differs from traditional product development. Remember that customer development isn’t replacing product development; rather, you’ll use both in tandem to accomplish your goals. Everyone in a startup needs to understand this and be ready to synchronize these processes.
(Shortform note: Your core values and mission statement will likely be essential to getting everyone on the same page. Studies have shown that shared goals and vision can significantly enhance team cohesion and motivation as well as employee performance. A clear mission statement can also improve both external and internal stakeholders’ perceptions of the organization, increasing buy-in and morale. In Leading Change, John Kotter recommends creating open dialogue around your company’s goals to make sure everyone understands and commits to your organization’s plans and processes.)
