Establish mission, market business model
Achieving business success
Next Step—Silicon Valley & Oslo, Norway
The power of today’s technology, entrepreneurial ambitions, and digitalization allows innovations to disrupt traditional markets. While the ability to launch a new service worldwide overnight may seem like nirvana to entrepreneurs and digital business unit leaders, that is simply one step toward success. Over 85 percent of new initiatives fail, often as quickly as they are launched.
Lessons from Amazon
The 15 percent that are successful, such as Amazon, Netflix, and Adobe Cloud, started with a clear mission and alignment of “what they were trying to achieve” long before launching a new service. Preparation included customer research to identify a specific market with unaddressed needs.
The next step was a series of pilots offering simple solutions to address the needs of this initial (small) target market. Through close monitoring of customer behavior and adaption of the solution, the successful digital leaders proved the concept that the offered service or solution would meet customer needs.
Rather than an immediate launch to multiple markets, developing customer engagement, i.e., repeated use of the solution and demonstrated loyalty to the service, is a critical milestone achieved by Adobe, Amazon, and many entrepreneurial ventures.
Business model based on engagement
The question of “how the business will make money” is best answered after the initial pilots have proven that customers will engage with and return to use the solution. By studying behavior patterns and preferences, the business leaders can identify the elements of the solution that are of greatest value to the customer. The business model is then built around the customers’ perception of value and what they are willing to pay to address their needs.
Ideally, the business model defined in this approach allows the company to consistently generate revenue through some aspect of a “subscription” or recurring revenue payment structure.
One example of this progression is Amazon, which started with a mission “to build a place where people can come to find and discover anything they might want to buy.” The initial market targeted was educated adults in urban areas. By offering a range of books (sourced directly from publishers at low cost), Amazon tested the concept of easy access, ordering, and home receipt.
Through investment in an efficient logistics system for accurate home delivery, combined with a relentless dedication to customer experience, Amazon quickly gained a loyal customer base. Analytics revealed that areas of great value were convenience, low-cost shipping, and personalized customer engagement.
What followed was Amazon Prime, an annual subscription (paid in advance) for convenient (free two-day) shipping. By closer engagement with their most loyal Prime customers, Amazon was then able to offer more (often higher margin) items for purchase, creating greater revenues while achieving the initial mission.
Steps to success in digital world
While technology, innovative ideas, and global access to broad audiences can make launching a new digital solution quick and easy, investing the time by following proven steps for success pays off. By following the Steps to Success (noted below), you can be among the 15 percent of ventures that are successful after the initial launch.
1. Identify and ensure clarity and alignment on the mission
2. Define a target market that has needs or desires that will be met through the mission
3. Prove the concept by offering an initial solution to the target market
4. Analyze customer behavior to identify where and how customers are engaging and developing loyalty
5. Invest in the services and elements of your offering that create the greatest customer engagement and loyalty
6. Define the business model around the areas that are of greatest interest and benefit to customers
7. Build a recurring revenue stream to provide predictability of revenue that can be supplemented through individual product sales.
Whether you are an entrepreneur building the company of your dreams or a corporate business leader chartered with developing new digital solutions, by starting with a clearly defined mission, market, and needs, you have greater opportunity for success. Through proof of concept by engaging customers in your target market you are then able to implement the business model that will support future sustainable growth.
You can reference the Business Success Canvas from Next Step at www.nextstepgrowth.com/wp-content/uploads/2018/03/BusinessSuccessCanvasEditsNS2.pdf.
Jennifer Vessels, of Silicon Valley and Oslo, is CEO of Next Step, leading business transformation for Adobe, Autodesk, Avinor, Microsoft Nevion, Posti, ShoreTel, and more. If you would like to take the next step in your business, contact firstname.lastname@example.org.