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Industry Growth Patterns 1: Why Startups Should be Aware of the Bass Diffusion of Innovation Model

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Industry Growth Patterns 1: Why Startups Should be Aware of the Bass Diffusion of Innovation Model

Planning startup strategy leaves founders with plenty to think about. Getting proof of concept, hiring first employees, and knowing when to pivot are some examples. But startups should not lose sight of what is going on at the industry level. Industry growth can be a significant source of opportunity for startups, but also create major debtbergs that can sink them.

What should founders pay attention to in terms of industry trends and growth of the overall market? Often entrepreneurs want to think about a market in terms of straight-line growth that is linear over time. Unfortunately, market growth is typically more varied and hard to predict—particularly early in an industry life cycle, or in disruptive markets. Monitoring and understanding the industry growth trajectory can help startups better allocate resources and avoid debtbergs across oceans.

Industry growth variants are many and complex, and each market follows its own trajectory. However, three models roughly characterize different growth patterns with important strategic implications. They include:

1. The Bass Diffusion of Innovation

2. Crossing the Chasm

3. The Hype Curve

This is Industry Growth Pattern 1 and we will review the Bass Diffusion of Innovation model.

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The Promise and Perils of the Startup Pivot

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The Promise and Perils of the Startup Pivot

With the “lean startup,” a generation of entrepreneurs have become enamored with “the pivot.” For those unfamiliar with these terms, the lean startup is an approach to launching a startup by creating a product as quickly as possible and putting it in customers’ hands to get feedback. Once customers have the product, the focus moves to experimentation to get the product right over time. This approach is contrasted to incessant planning and completing a giant business plan before launch - or even talking to a customer. Pivoting is how startups redirect their product and/or target customer through experimentation.

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What Lessons can Entrepreneurs Learn from Gold Rushes, Pickaxes, and the Titanic Effect?

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What Lessons can Entrepreneurs Learn from Gold Rushes, Pickaxes, and the Titanic Effect?

So what do gold rushes have to do with the Titanic? To start, gold rushes—both literal and figurative—have the potential to create significant wealth for a few lucky/opportunistic ones who jump on board. Windows of opportunity, whether to exploit a specific limited natural resource or to leverage a disruptive technology, create ample potential for significant wealth--but also a plethora of sunken ventures. The Titanic was a vehicle for many aspiring immigrants to achieve their own dream in the new land of the United States, a gold rush of sorts.

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What Does Academic Research Tell Startups about Advertising?

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What Does Academic Research Tell Startups about Advertising?

Since we are business school professors, one of the things we do is read and review academic research on business topics. Specifically, Kim is an associate editor for the Journal of Advertising Research. Of course, this journal focuses on what makes advertising effective. And the bulk of academic research is on TV advertising which might be beyond the reach of most startups. Kim also gets to vote on the “best” article of the year. So we thought we might review the best articles from 2019 and give you the highlights that are relevant to startup advertising. Here are top four facts about advertising we learned last year:

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Startups Need to Monitor Customer Usage Metrics

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Startups Need to Monitor Customer Usage Metrics

We were recently asked how to validate that an MVP  (Minimally Viable Product) is working. When we say “validate an MVP,” what we mean is to have some proof that you have a product the market wants, that product has been acceptably configured, and it’s now time to start figuring out how to scale sales. If you want to connect this post to The Titanic Effect book, we are looking at the First Customer stage in Chapter 5 – The Technical Ocean.  One approach you can use is to do market research on the MVP. This takes the MVP from internal to external testing. There are two main ways to do this market research:

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What are the Pros and Cons of Startup Crowdfunding?

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What are the Pros and Cons of Startup Crowdfunding?

This week we got an update email from a Kickstarter project we backed in December 2016 – yes, three years and we are still waiting for the rewards. It was update #37 and here is what it said: “Until the last few weeks, we thought we were more likely than not to make product xyz (we blinded the product to protect its owner).  This is no longer the case.  There’s still a small chance we can do it, but we are less confident about that now.” So we thought we ought to address the pros and cons of crowdfunding campaigns…

Why B2C Startups Need to Understand Walled Gardens

Why B2C Startups Need to Understand Walled Gardens

Let’s start by making sure we all know what we are talking about. First, “B2C” means Business-to-Consumer -- startups that sell products to consumers as end users. We can contrast B2C with B2B, which is businesses selling to other businesses. Each type – B2C and B2B – have different selling processes. So today, we are going to focus on B2C and the challenges they might experience selling through e-commerce sites.

So far, so good. But, what’s a “Walled Garden?” It is just what it sounds like. It comes from olden days when rich people had beautiful, luscious gardens that they locked behind a wall so that others could not see in. We use the term to describe the big tech giants. Here’s a more specific definition from mediarithmics_what is:  “A Walled Garden is a closed ecosystem in which all the operations are controlled by the ecosystem operator.” Think Google, Facebook, Amazon to start. They’ve created a really interesting marketplace in which they make the rules and they have all of the data. Together, these three companies control 70% of the all the digital ad spend. 

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The 10 Steps to Physically Starting a Business

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The 10 Steps to Physically Starting a Business

Someone who read our startup book, The Titanic Effect, reached out to us to say, “I think I understand the decisions I need to make. Now, I am ready to start my business. What are my first steps?” While our last blogpost shared how to develop a process for making complex decisions, this one is for those of you who are ready to actually start your business. So, here are your first 10 steps. In case that number intimidates you, they are interrelated and can be done concurrently. You are already working on another step while completing an earlier one. And we assume you already have the business idea. These are the steps to physically start that business. 

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Decisions, Decisions: How Startups Need to Approach Decision Making

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Decisions, Decisions: How Startups Need to Approach Decision Making

We recently started reading Steven Johnson’s book Farsighted: How We Make The Decisions That Matter The Most. The essence of the book is that complex decisions require a thoughtful and intentional process to increase the odds of having a favorable outcome… Here are three key elements to good decision making in the startup context:

 

The logic is very similar to our framework in The Titanic Effect. Making important decisions under conditions of uncertainty can have unanticipated consequences—what we call debtbergs in our framework—in a variety of areas including people, markets, technology/product, and strategy. Understanding the tradeoffs and implications of these decisions is important for complex strategic choices like those that startups make on a regular basis. We map out many of the common mistakes founding teams make that can subsequently sink their startups.