Robert Ochtel’s Blog

An Experienced Approach to Venture Funding

To Become an Expert in Your Field – You Must Become an Externally Focused Entrepreneur

Throughout history some of the most successful companies ended up in failure.  There are many reasons for this, but many times the most telling one is that many of these same companies, as a result of their success in the market, became internally focused and not externally focused companies.  As an entrepreneur, to develop a successful company you need to focus on the external factors that drive your business. This external focus will ensure that you know the key drivers in the market, understand the general trends, and develop a long term sustainable competitive position in your targeted markets of interest.  This article focuses on the external market factors that all entrepreneurs should focus on to become an expert in their field on their way to developing a successful company.

Know the General Market Trends

 

To become an informed, externally focused entrepreneur you need to understand the general, long term market trends.  This is accomplished by studying the markets, analyzing growth opportunities, and determining the consumers’ needs as well as the technology and service trends in the market.  Understanding these long-term macroeconomic indicators will provide you as an entrepreneur a basis to determine the strategic opportunistic market needs that are not being met in the market today. This will allow you to position your start-up company’s technology, product or service offering to address the unmet needs in the market. By doing this high-level analysis, an entrepreneur will be better equipped to provide their company with a long-term vision and associated product roadmap that will ultimately provide their start-up company focus to drive their success in the market. 

Target Your Markets

 

As an entrepreneur, determining your start-up company’s target markets of interest is one of your most important externally focused activities. The task of targeting specific markets of interest is usually easier said than done.  There are many market opportunities out there, and as an entrepreneur you need to determine which markets or market segments best fit your start-up company’s technology, product or service offering and at the same time will provide the highest return on investment for your start-up company.  To do this properly, as an externally focused entrepreneur you need to take into consideration the market size, maturity, and growth of all of your potential target markets.  All of these factors will have a tremendous affect on the long term viability of your start-up company.

  

Market risk is also a key factor to consider when choosing to target smaller, burgeoning markets for your start-up company.  Market risk, is defined here as the ability of a targeted market to grow at a rate necessary to create the appropriate amount of opportunity to sustain your start-up company, and a number of competitors. This is a key consideration when targeting smaller markets.

 

Finally, as an early stage company, it is often important to identify multiple target markets that are applicable to your technology, product or service offering.  By doing this, you provide the opportunity to support multiple revenue sources, higher return on investment, and at the same time mitigate individual targeted market risk for your start-up company. 

 

Analyze the Competition

 

As a start-up company another external factor to consider is the competition in your target markets of interest. Competition may come from large, medium or other small start-up companies.  Competition may also come from other existing companies that have complementary products or that have the capabilities to compete in related markets.  So, as an entrepreneur you need to analyze all possible competitive threats in your target markets to determine the competitive advantages of your technology, product or service offering in the market.  A complete competitive analysis is time consuming, but it often provides the entrepreneur with significant insights to the competitive positioning, and the ultimate competitive advantages of their own technology, product or service offering within their target markets of interest.

An excellent way to develop a complete competitive analysis is to list all of the product features, functions and capabilities that are important to your customer base. At the same time, develop a complete list of competitors in your targeted markets.  This information can then be easily presented in a table format to show how the competitors stack up with regard to these required product features, functions and capabilities.  If done properly, this table will show how your start-up company’s product offers compelling advantages over the competitions’ products. For an explanation on how to develop a complete competitive analysis and examples for various real world applications, refer to my book, “Business Planning, Business Plans and Venture Funding – A Definitive Reference Guide for Start-up Companies.”

Develop a Successful Business Model

 

All start-up companies must offer a business model that is financially viable and ultimately profitable in the market.  More often than not, your start-up company’s business model will primarily be developed and then driven by other successful competitors in the targeted market of interest and their existing business models.  A successful business model, along with the market size, will drive the potential revenue generation capabilities of your technology, product, or service offering.  Therefore, to compete effectively, as a start-up company you must analyze the other competitors’ successful business models and determine where you may have targeted cost advantages.  These cost advantages can be based on the underlying technology or by lowering the costs associated product itself, its development, or the distribution channel, etc.  The key here is to clearly delineate where and how your start-up company’s business model differs from other successful competitors and results in a significant and disruptive competitive advantage for your start-up company and its targeted customer base.

 

Call Your Customers

 

The final component of becoming an externally focused entrepreneur is to know your target customers.  This is only accomplished by calling and then meeting with your customers and discussing your technology, product or service offing with them.  This is where many entrepreneurs fall short and is often what differentiates a successful entrepreneur and their start-up company from its competitors. Only by calling on your customers can you determine what is really important to them in terms of your product’s features, functions and capabilities.  All of the analysis in the world is not a substitute for “real” customer feedback.  Remember, by definition, your customers will know the end market application better than you do.  In addition, as is often the case, what you as an entrepreneur believe are important features, functions or capabilities of your product offering, are many times not really that important to the customer.  Therefore, real customer feedback will provide you with significant insight and at the same time make start-up company a stronger competitor in the market.

To become an expert in your field, as an entrepreneur, you need to be externally focused.  Only then will you have the insight, background, and ability to develop a vision for your company and at the same time determine a long-term sustainable competitive advantage in the market for your start-up company’s technology, product or service offering.  By addressing the items outlined in this article, the entrepreneur will ensure that their start-up will have the proper focus and at the same time be better prepared when presenting to investors.

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April 20, 2009 - Posted by | Finance, Venture Capital

2 Comments »

  1. Great stuff
    Dear Human Friend
    Mr. Robert Ochtel

    Thanks and REgards
    Bhaveshkumar J. Bati

    Comment by Bhaveshkumar J. Bati | May 2, 2009 | Reply

  2. This is a great business advice article. It covers all the aspects, I am thinking to relocate my business soon using a professional company and seeking new challenges for better success.
    Thanks and Regards/-
    Jason Webb

    Comment by Jason Webb | July 8, 2010 | Reply


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