All startups dream of having the billions of Uber, the wildly successful business model of Airbnb, or the popularity of Snapchat. But the overwhelming majority of tech startups must persevere to make sure their product or service makes it to market, whether solo or by taking a partner corporation along.
Shifting from a beta version to the marketplace requires a solid plan and, often, maybe a strategic detour as well, according to a Forbes story quoting Knowledge @Wharton.
“We have these ‘unicorns’ and ‘decacorns’ (startups valued at billions of dollars) that everyone recognizes as being disruptive and whose valuations are incredible. But for most new ventures, there’s going to be a healthy amount of skepticism,” says David Hsu, a Wharton professor of management. He notes entrepreneuers generally use one of two routes - entering into the market and competing directly with a product, or going with a partnership strategy.
The problem for many startups is, neither may be feasible at first.
A startup may wish to sell to customers, but be lacking the infrastructure for marketing, distribution or services.
Conversely, a startup may prefer to license its technology to a larger partner, but cannot land a corporate alliance with an unproven product.
Hsu suggests that if a direct pathway does not seem unattainable, a strategic detour is a good idea – sometimes the pathway to success goes sideways before going up. His findings are detailed in a paper, “Strategic Switchbacks: Dynamic Commercialization Strategies for Technology Entrepreneurs,” co-written with Matt Marx, a professor at MIT.
They advocate a “switchback” strategy such as the one employed by mountain trains that surmount steep inclines by going sideways while ascending. The most efficient way of reaching the top of a mountain is to bolt straight up, but many trains use a switchback. “If you could zig and zag your way up to the mountaintop, you’re going to take some detours that may feel a little bit less efficient. But the payoff there, is, you could easily get up to the top,” said Hsu.
Unlike a pivot, in which a business only changes its course after a failed strategy, startups utilizing a switchback deliberately plans on a change of course after an initial strategy succeeds.
Here’s a classic example of switchback from partnership to competition – HubSpot, a marketing-automation company introduced its software to the market in 2006. At the time, Salesforce dominated the Sales CRM software industry. As sales and marketing go hand-in-hand, it made a good case for partnership between the two companies. By integrating its marketing-automation software with Salesforce, HubSpot greatly extended the value proposition for both HubSpot and Salesforce customers.
When Salesforce started dipping its toes into marketing automation, HubSpot became a prime candidate for acquisition, but ultimately Salesforce chose to buy Pardot making it a competitor for HubSpot. In 2014, HubSpot launched its own sales software – a platform for CRM (Customer Relationship Management) – thus becoming a competitor for Salesforce on both fronts.
A second potential strategy is the temporary-competition switchback. Some startups that are having a tough time finding a bigger partner to license their technology or sell their products might go to market themselves at first – essentially competing in the market to prove the worth and usefulness of the product or technology. Besides market validation, this strategy can enable a company to get market feedback and improve its product or service.
To read the entire article, go here.
Additional Resources & Further Reading:
- Knowledge @ Wharton - https://knowledge.wharton.upenn.edu/article/how-a-detour-can-help-start-up-success/
- Forbes - http://www.forbes.com/sites/knowledgewharton/2015/10/01/shooting-for-start-up-success-take-a-detour/
- LinkedIn Pulse Story by Giancarlo Colombo - http://www.linkedin.com/pulse/ shooting-start-up-success-take-detour-giancarlo-colombo
- MBA World - http://community.mbaworld.com/blog/news/b/weblog/archive/2015/08/17/ shooting-for-start-up-success-take-a-detour
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