Achilles Heel of Start Ups

Start Ups tend to believe they can compensate for a perception of value mismatch with the market (weak link) by making everything else a little stronger, and will only claim in hindsight that it was the fatal weakness.

The Detail

Achilles Heel, is defined as a weakness that may not seem important, but is actually mortal. Many insurmountable problems have been solved looking through the eyes of “Achilles Heel”. We have a tendency to think that it is the big problem that will kill you, and underestimate the smaller one! With a very high Start Up mortality rate, what could be a Start Up’s Achilles Heel, and can we solve the mortality mystery?

Most inventions and start-ups, start with the idea that the market’s perceptions of value, will match the inventor’s perception of value. No sooner have they hit the market, and it becomes apparent, that the market does not share the same level of enthusiasm. This mismatch of perception of value, acts like an Achilles Heel. The inventor’s emotion makes him/her blind to this fact, thus allowing them to see the situation as less important at the time, but in hindsight, will claim that it was the fatal weakness.

They did indeed see the weakness; they just didn’t see it as a fatal weakness, but rather as a situation that they can accommodate for – “Don’t worry, we will find a better product market fit over time”. The mismatch pushes the inventors or founders into over-drive mode, to compensate for the apparent weakness. The method to compensate for this, is mostly based on the idea that one can overcome the effect of a weakness, by making everything else a little stronger. For example, one will put more pressure on marketing and sales to up the game, to bring “more” sales no matter what. The pressure to bring more sales, quickly results in more advertising, redoing the websites, going after more markets, more channels, more products, more features, more discounts, more pilots and more …

Lift-off or take-off, is the nett result of speed and lift. If one’s wings have a fatal flaw and cannot create sufficient lift, then no matter how fast one goes, you are going to need a lot more runway (cash)! Execution (speed) is necessary, but it is not a sufficient bailout, for a mismatch in perception of value (lift). Not fixing the fatal weakness will haunt you for life – it is your Achilles Heel!

So why wouldn’t inventors / founders just fix the fatal weakness, in the first place? The only logical explanation is that if they knew how, then they would have done it on day one! Let me ask you, the inventor or founder, to do a little test. If you are comfortable with your product market fit, I am going to ask you to give a value guarantee that counts (with teeth) to your customer, detailing the value the customer will get, and if he or she doesn’t get it, you will take a significant knock. This test, even though a challenge in most cases, is going to highlight something very important – If you, who knows your product / service the best, are not willing to offer a value guarantee, then imagine what your customer’s perception of value should be!

Let’s take the little test, one step further. Could you verbalise the reasons why you would be reluctant to offer a Value Guarantee that Counts? Maybe, the reasons hold the key to how to fix the “mismatch” weakness. People talk about compelling value propositions, unique selling proposition, product market fit or a competitive offer, but almost none are prepared to back the value, with a value guarantee that counts – interesting.

After 30 case studies, evaluating the reasons why founders would be reluctant to put a value guarantee that counts, two reasons stood out by far. The first reason was – they are not 100% sure how to quantify the customer’s value, and if it will be sufficient for the customer. Secondly – they are not sure if the customer would be able to realize the full value on their own. Amazing how simple – if you bring sufficient new value to the customer, and the customer can easily realize the full value, then there is no reason why one cannot guarantee the value!

As a result of the analysis, three areas have been identified to develop additional “know-how”.

  1. How to link the new innovation, to unlocking significant new value for the target market (a move from the traditional concept of “benefit and features of the innovation”, to the “new value that the innovation will unlock”)
  2. What must the target market adopt, to be able to realize the full value (a move from “ease of use”, to the “ease of realizing the value”), and
  3. How to design and structure, a “Value Guarantee that counts” (a move from traditional “product guarantees” to “value guarantees”)

Over the past year, developing this new ”know-how” took a major turn in the right direction, after recognising the first principles that governed each part. It brought profound clarity, and it brought a more reliable process. The following first principles, hold the key to value matching your innovation, with the target market.

  1. Unlocking new value: Innovation can bring new value, if and only if, it is able to remove a significant limitation or restriction for the target market
  2. Realizing the full value: Innovation is necessary but not sufficient, the target market must adopt new rules to enable them to realize the full value.
  3. Value Guarantee: Putting your money where your mouth is, is convincing!

Unlocking new value:

What was impossible yesterday, in the life of the target market, which your innovation makes possible today? The key, is to identify the limitation under which the target market has been living all their lives, that your new innovation is now removing. And, by removing the limitation, you are opening the door for the customer to totally new benefits. We are not talking more of the same; we are talking second-order benefits (new value)! If it is more of the same (first-order benefits), then it’s best to follow a different approach.

An example everybody knows: What was impossible in the life of people looking for a taxi, and a taxi looking for a customer, before the latest innovation became a reality? They could not find one another in real time. Certainty of finding one another, was mainly through physical marked points [TAXI]. Removing the limitation for the market (UBER), unlocked new benefits previously impossible for the market, and the market responded extremely positive.

Realizing the full value:

Limitations and restrictions in the environment, shape the traits; rules and norms people adopt, to make it easier for them to live in harmony. You come along with your new innovation, and remove a significant limitation, but everybody continues to obey the old rules, then the end result is the same as if the limitation still exists.

The following example will clarify further: Before the invention of large-scale information systems like MRP and ERP, business had to rely on manual processing and calculation, which was slow and unreliable. It took many days to complete the net calculations for the sales and operation plan, and as a result, people decided to adopt a rule to do it only once a month. The first major large-scale information system (MRP) came along, and removed the need for the manual mode. A major limitation (manual mode) had been removed. What value would business realize, if they implement the new system, but continued to follow the rule of once a month – any new value? If you sit on a game changer, then please remember to bring the new rules also!

Value Guarantee:

When you are hesitant, the market is even more so. Unless, you are prepared to put your money where your mouth is, the customer will not easily part with his or her hard earned cash. There is nothing so convincing, as a guarantee with teeth! It acts like a catalyst, causing the desired accelerated behaviour, from both the demand-, and the supply-side, and it fends against any would-be competitor attacks. It is not for everybody, but can take you to the winning line, a lot faster.

The following examples illustrate the concept: Brick manufacturer – “Next day delivery, and if we are one day late you get it for free”; Granite Rock supplier – “Short pay us by scratching out the line item you were not happy with, keep the item, but just tell us why you were not happy”; Fishing rod supplier – “Lifetime guarantee” against anything, you broke it, let us replace it for free, you only need to cut out and send us the name piece of the rod”. Second-hand car seller and buyer platform (internet application) – “We guarantee you a higher price than trade, and if it doesn’t sell within 30 days, we will buy it on condition your car passes our 240 point quality test”.

The way forward:

It comes as no surprise, that when a start-up has a perfect value match with the target market, that can be backed up by a value guarantee that counts, that business tends to be amazingly simple. There is no “more and more” to compensate for the fatal flaw, but a slick, lean working machine.

Value matching opens a door to many new possibilities:

  • Business in its simplest form, and not an overcompensated one.
  • A substantial window of opportunity, before any competitor will be able to catch up.
  • Levelling the playing field when talking to potential funders.
  • Easy scalable model, where funding goes primarily into growth, and not into compensation for a fatal flaw.

The evidence is hard to ignore and the way forward is clear and unavoidable – an Achilles Heel can be fixed!

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