When you are starting a business with an exciting new idea, it’s easy to dismiss potential competitors as not being in the same space, or too fat, dumb, and happy to be concerned that you even exist. I hear it all the time as an angel investor, but I also see that same naïve or cavalier attitude come back to haunt entrepreneurs once they really get out in the marketplace.
“Sleeping giants do wake up,” I always say, to remind new business owners that nobody cares what you do when you are not a threat, but when you get some real traction with customers, competitors will come out of the woodwork with a vengeance. Therefore it behooves you to ask yourself these ten key questions, and formulate concrete answers, before even entering the fray:
- What “secret sauce” does you bring to the problem?A strong work ethic is great, but patents and intellectual property are critical. You need quantified value for customers to see, feel, and pay for. Fuzzy words, like “improved usability,” “paradigm shift,” and “breakthrough technology” won’t convince investors, customers or deter competitors.
- Have you lined up the stakeholders who drive success?Stakeholders are key people impacted, and leaders who influence key people. For example, early adopters may be easily sold online, but new technology product success really hinges on adoption by mass demographics, more likely associated with distributors and brand name retailers.
- Do you have all the key deliverables for maximum impact?The last thing you need in a new business is a false start, where you can’t deliver on a seasonal deadline, volume manufacturing, or support. Deliverables and the resources you have on board are two sides of the same equation. Make sure all the elements are aligned before you commit.
- What metrics should you use to measure success?Define both hard data and soft (anecdotal) metrics on the new solution, as well as on the productivity of you team. That means you must know the current state of competitors against the same metrics, before you can assess progress or success. Make sure the team has buy-in, and is motivated.
- Are your financial projections consistent with current realities?It’s important to separate optimism and dreams from market possibilities. Ask yourself, “If I were an investor, would I support this effort, given the costs and traction to date?” Just because Google sales hit $1.5 billion in 4 years doesn’t mean any other new business can do it.
- Do you have the business discipline to prevent scope creep?Making last-minute enhancements to a solution without additional time or resources is called scope creep. It takes a strong team and strong leadership to manage it. What works is a documented change request process, as well as quantification of resources and incremental return.
- Is your business plan complete and documented? If your business plan isn’t written down and approved by all key players, it’s probably not complete. Calibrate the plan with the financial and people resources available to deliver it. Keep the plan simple, focused, and up to date as you learn more from early experiments and early customer feedback.
- Do you have a model to predict funding requirements?Without adequate funding and people to support your efforts, you will be faced with trade-offs that lead to cash flow problems and a burned-out team. What works is creating a financial business model, using credible advisors, with a reserve buffer of at least 25 percent for contingencies.
- Are you prepared to hire and train team members required?Most innovative solutions require new ways of working, including new knowledge, skills, mind-sets, behaviors, relationships, and processes. You need to provide adequate time, step-by-step job aids, training, and a hiring process to cover critical aspects of the new plan.
- Do you have a contingency plan to mitigate risk?A key aspect of mitigating risk is to first identify the competitive risk elements early, and build contingency plans, in case the risks materialize. Then establish trigger points to clarify when contingency plans need to be activated. This will speed up pivots and remedial actions and minimize damage.
Even if you believe there are no competitors today for what you are planning to deliver tomorrow, you still need all these questions answered. If the opportunity you are addressing is large, there are most likely several potential competitors, not yet visible, who will be there working against you near your rollout. Waiting for one of them to find your gaps before you do can kill your dream.