Market positioning for startups – focus, focus, focus

I was on a call yesterday with an inspired and talented management team.  As we walked through the deck, one point particularly struck me as I listened to their well-honed pitch.  The company was trying to boil the ocean and do everything for its customers.  While it was great that the team seemed to understand the market and the problem that their customers had, I must say that I started to lose interest by the fifth differentiating feature of the product/service.  One slide really highlighted the problem for me - it showed a feature list of 10 features and then showed 3 different competitors who were either already well established public companies or well funded startups that only offered 30% of what this angel-funded startup would offer.  In my mind I was wondering how an angel funded company could go-to-market against companies with billion dollar market caps or with $30mm of venture funding which were highly successful because they were incredibly focused on a subset of problems that this start-up was trying to solve. I know, I know, I always like entrepreneurs to think big but that must be balanced with how a startup goes to market.

You see, it is always hard for a startup to enter a market with an end-to-end product positioning as most customers expect large companies to cover this territory.  What most customers expect from startups is innovation and breakthrough offerings, not end-to-end solutions.  Going back to the call, my humble suggestion was for the management team to complete their beta test with their handful of customers and figure out which 2 or 3 features were the most compelling and differentiated offerings with respect to their competition and market.  They should then plan their go-to-market strategy with a more focused approach that emphasized a new and innovative offering instead of a "we do it all for you" approach.  In the long run, if successful, the startup could always add another feature or two as they grew their customer base but keeping the message simple early on is imperative to drive a successful product launch.

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This post was written by who has written 358 posts on BeyondVC.

11 Responses to “Market positioning for startups – focus, focus, focus”

  1. twitter.com/cody_swann Jan 22, 2010 at 1:27 pm #

    I think it’s time to replace the “think big” mantra with “think niche.” As you point out, there is no reason why a niche, either feature or market, can not later be expanded.

    In fact, targeting a niche first may help because it generates buzz and initially targets more involved customers who will provide feedback and guidance

  2. Jane Williams Jan 23, 2010 at 8:31 am #

    Another great idea…

    This is good.

  3. Scott Maxwell Jan 24, 2010 at 9:11 am #

    Ed,
    I couldn’t agree more with your point and also continue to try to pass on the idea as well. I put together a “Market Clarity Assessment” to help management teams “see” the complexity of product and go-to-marketed strategies, as the easiest way to get to high market clarity is to reduce the segment of focus and then to minimize the differentiators. Take a look at the assessment and let me know what you think. It is not perfected yet, but it is directionally correct…

    link to blog.openviewpartners.com

  4. M Jan 24, 2010 at 11:20 am #

    really great post. Sometimes when you struggle for years researching an industry and uncover all the pain points it is natural to want to ‘boil the ocean’ to demonstrate expertise.

    The problem of course is the start up can burn through tens of millions of dollars and build the wrong management team behind the light bulb goes off and they either have to retrench or close.

    Really great post. I think this is a bigger problem with start-ups, since mistakes are sometimes hidden, than people think.

  5. Ed Sim Jan 25, 2010 at 12:08 pm #

    Scott-love how you are trying to take an art form and put some more metrics around it. it definitely looks spot on and of course like all things, the clarity score depends on how honest you are about yourself. that is why having an outside board member or investor to help you go through this could be quite illuminating

  6. Kathleen Schaub Jan 25, 2010 at 4:21 pm #

    Ed, your description of this problem is excellent. Any time you attempt a market entry you need a very sharp point on your strategy. That sharp point comes from value that is simple, super-clear, and addresses an urgent problem for a specific market in a way that is magnitudes better than current methods.

    My experience is that this is an issue of “new-ness” rather than small-ness. The more “new-ness” there is, the sharper the point required – new technology? new product? new company? new customer segment? That sharp focus is the only way to penetrate the thick hide of the status quo (be it big brands or established ways of doing things). The problem you describe happens in bigger companies, too, when they attempt to introduce innovation.

  7. sproutlore Jan 25, 2010 at 8:20 pm #

    I always thought the “Pointy haired boss” in Dilbert was an exaggeration. I was mistaken. “New-newness, directionally correct, clarity score” – obviously I was mistaken. Sure, “Focus your ideas and don’t try to be everything all at once,” isn’t as sexy as “I have defined a market position that correlates a singular market dynamic, but at least everyone knows what is being talked about.
    Though, so far, clarity isn’t getting me anywhere – oh, wait.

  8. Mio Navman Spirit S300 Jan 29, 2010 at 4:47 am #

    Reading this post I completely agree with the writer’s point of view.Also I firmly believe the focus,focus and focus are the only three thing to boost up the self-confidence and motivate a business person.

  9. Richard Wilner Feb 1, 2010 at 3:15 pm #

    These thoughts are very similar to the concept of “establishing a beachhead” in Crossing The Chasm (link to en.wikipedia.org for those unfamiliar). A synopsis: early success is garnered by solving one problem that applies to many people (b2c) or companies (b2b): i.e., a one-to-many relationship. Many-to-many or many-to-one are very challenging for a startup to maintain or scale.

    At my startup, we think of ourselves as the Surgeon with the scalpel that cuts out the specific customer pain, not the General Practitioner who prescribes the broad-spectrum antibiotic.
    http://blog.sagepointsoftware.com

  10. Brad Feb 11, 2010 at 3:57 pm #

    Scott: I think your Clarity Assessment does a great job of uncovering those “success factors” a start-up need to focus on. In gathering that kind of intel I find targeting industry knowledge leaders is more beneficial than gathering broad quantitative data. Your thoughts?

  11. Ramine Darabiha Nov 23, 2010 at 10:29 am #

    I understand the argument in theory. However, can you tell me what niche Drobox and Evernote are targeting?

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