Top 5 Product Development Faux Pas in Startups
Startups are everywhere and that isn’t changing soon: 99.7% of the 25 million businesses in the US are small businesses plus 850,000 small businesses are created each year. Lots of competition, but hey 50% of new ventures fail after only four years. Wait, is that not helping?
Before you go and abandon all your hopes and dreams of launching a startup, hear me out. All you have to do is make sure to avoid these common faux pas and you’ll be that much closer to success.
- Not Understanding Your Customer.
A typical mistake startups make is creating a solution to a problem that only they have. Before starting, you have to know and understand your customers. Which can be done by determining your Value Proposition and Customer Segments.
A Value Proposition answers, “What you are building?” “For who?” and “Why would they pay for it?” This part of the planning process is not about your idea or product, it’s about solving a problem AND satisfying a customer’s need.
Customer Segments answer, “Who are your customers?” and “Why they would buy your product?” This can be geographic, demographic, social, or whatever describes the who and why. The biggest thing to remember here is that your customers do not exist to buy your products, you exist for them.
2. Not differentiating.
Before starting on your venture, think about what you want to do, what your goals are and how you stand in relation to your competitors. Ask yourself “what are my competitive advantages”?
A competitive advantage is the advantage you have over your competitors (pretty self-explanatory actually). Basically, it is something that only you can do, not something that you are the only one doing. There’s a difference. If you’re the later, you are essentially running a glorified feature, and if a competitor sees you are successful, they will do the same. If they can’t do what you’re doing, then now you have something. If you find yourself with no advantage, change, which brings us to our next faux pas.
3. Getting attached.
A common mistake for startups is over planning and trying to get your product to be perfect and scalable as soon as it launches, except this can be risky and expensive. Without customer input, your product can end up not satisfying a customer’s wants and needs. However, what you can do is test, by creating a Minimum Viable Product (MVP) and pivoting when needed.
An MVP is essentially a prototype: the simplest, least-expensive, product that you can make as soon as possible. Now test it, get feedback, improve and repeat. When what you expect does not match reality so you improve or change what you’re doing you are pivoting.4 This is important and highly encouraged along every step of the way in your product development process.
If your product does not work, do not try to make it work, because you aren’t in control: the market is. Keep pivoting until you have a product that works, then you can scale.
4. Not maximizing consumer surplus.
Okay, so your product is good to go and resonates with customers? Awesome! Let’s slap on a high price and get going… or maybe not.
This is one of the more low-key faux pas on here, but important. Consumer surplus is the difference between what you would be willing to pay for something and what you actually pay for it. The greater the surplus, the better. If you still don’t get it you can read more about consumer surplus here.
You also have to ask, “Is there substantial cost for customer to switch to using my product?” and “Does using my product require a change in their day-to-day behaviors?” If the answers are “yes,” then you might want to pivot.
This all goes back to understanding your customer, which brings us to…
5. Still Not Understanding Your Customer!
Yes, not understanding your customer is on here twice, but because it is that important! Particularly, you need to be able to maintain customer relationships: how you get, keep and grow your customers. Without this, you have no customers, especially in the long run. Essentially, product development is never over, and if you fail, fail quickly, adjust and go back at it.
Got a great product but not sure if your pitch deck is perfect? Check out this article to ace your pitch.
By: David Contreras
David is a writer at SputnikATX, Austin’s new incubator / accelerator coming 10.4.17. He is currently earning his Bachelors of Business Administration at UT.
Sources
- Marion, T. J., Friar, J. H. and Simpson, T. W. (2012), New Product Development Practices and Early-Stage Firms: Two In-Depth Case Studies. J Prod Innov Manag, 29: 639–654.
- Carlson, L. (2014, September 11). Business Insider: 6 Signs No One Is Going to Fund Your Startup. Retrieved from http://www.businessinsider.com/signs-no-one-will-fund-your-startup-2014-9
- Maurya, R. K. (2016, Jun 28). Lean programming: Changing product development in startups. PCQuest,
- Stagars M. (2015) The Lean Startup Changed Everything. In: University Startups and Spin-Offs. Apress, Berkeley, CA
