March 6, 2011

"How to Identify & Successfully Bring to Market Disruptive Products" -- Part 2 w/ Michael Price: General Partner @ CEO Ventures

Name: Michael Price
Company: CEO Ventures
Position: Founder and General Partner

Situation: As General Partner at CEO Ventures, Michael's focus is on starting, growing and managing early stage technology companies.

Challenge: Most startups fail. What does CEO Ventures do to increase the possibility of success?

Solution: There are a number of strategies that CEO Ventures has implemented to increase their success rate of identifying and successfully bringing to market startup firms. These strategies should also be useful for established companies looking to identify and then successfully bring to market disruptive products:

1. Focus on products with low startup costs within the fastest growing sectors of the industry. SaaS products are an area of focus for CEO Ventures. It makes sense that web-based services -- whether B2B, B2C or social media platforms -- represent lower risk w/ high potential reward because of the low cost structure and the fact that this industry continues to produce exciting & successful disruptive products.

2. Do the market research. It's surprising how many businesses fail to test their ideas before bringing them to market. Just because you think you have the next great product does not mean your customers think the same way. There is an issue of balance which must be considered with this point -- there is no sure thing, so understand your customers, do your best to design a disruptive product based on these understandings, get it to market and then continually adjust (more on this below).

3. Structure product design and production processes that allow you to make quick, constant changes to your product. This builds off the lessons learned from Aviad Gefen (CEO @ Microwave Networks) -- a nimble business is better positioned to produce disruptive products because it can more quickly respond to learnings from the market.

In addition, Eric Lefkofsky -- one of my professors at Kellogg SOM and a Groupon co-founder -- preaches that the key to accelerating disruption is to create a culture in which customer feedback is constantly collected and the feedback is almost instantly implemented into product design. This process has to continually occur in order to produce a disruptive product and -- just as important -- ensure the product continues to be disruptive.

4. Accountability and support at/from the highest levels. If the leaders of the company are not driving the development and successful launch of disruptive products, then disruptive products will very likely never be developed and/or never gain market traction. Innovation can be tracked and measured just like anything else -- set expectations, track performance, and provide constant and specific feedback.

5. It doesn't matter that you have created a disruptive product if you can't sell it. When I was speaking with Michael Price, he said that one of the key things he looks for in a potential president of one of his startup companies is extensive sales experience in the industry. In order to create a successful disruptive product a company must: understand what customers want, design a product that meets these needs, and then gain market adoption.

What is interesting about a disruptive product is that even though it can revolutionalize an industry by repositioning customers (see February 27 post), it will typically not initially sell itself. Why? Because a disruptive product is so different from the norm that it needs a very talented group of marketers and salespeople to educate customers as to why they need the product. A great example of this is when TiVo was introduced to the market -- the product was capable of disruption, but only caused disrupted when it was successfully marketed to and then adopted by customers.

My favorite takeaway: if you can't sell then it doesn't matter that you have a disruptive product. You have to be able to communicate the value of something that no one has ever thought of needing. You know they need your product because you have done the research, but they don't know because they don't realize that this new disruptive product can meet their needs in a way no other product ever has before. Once you help them see the disruption, then you will reposition the market.

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