A Harvard Business School study found that 93 percent of all companies emerged (at exit) with a completely different strategy from what they had initially set out to implement. Furthermore, the study found that it took four to five years for a company to discover the right product and business model.
A Crescent Ventures study concluded that “a funding strategy that deploys capital incrementally while the business model is sharpened and the market is better understood” is infinitely preferable to a strategy that releases the funds in more conventional large amounts. The common thread is iteration. Receiving additional capital should be dependent on achieving specific company milestones. Good teams iterate products as quickly as they can learn from their customers. Good businesses change their strategies.
What this means is that the average startup releases a product, and then modifies its product and business model gradually over the next five years until it discovers the optimum business strategy. This approach is inefficient and more like blindly groping in the dark until you stumble across the optimum business model.
Strategic entrepreneurism ™ essentially reverse engineers each step. Instead of starting with a product and business model and gradually shaping it through multiple iterations, Strategic Entrepreneurism ™ begins with the specific goal of having your company acquired by another company. To achieve this you should:
Decide the type of business and product a larger company would most likely want to acquire. Create that product in collaboration with a strategic customer that a potential acquirer finds attractive. Put together a team of people that provide skills necessary to create your product or run your company while also providing contacts to a potential acquirer. Start up your company with as little outside funding as possible using high-technology to keep costs to a minimum.
Under Strategic Entrepreneurism ™, you aren’t guessing what the market might want and wasting time for five years continually modifying your product for acceptance. Instead, you’re collaborating with the customer to create the exact product needed right away.
The goal is to sell your company. By beginning with this goal, you work backwards so that everything you do brings you one step closer to achieving that goal. By steering straight toward your goal, you’re more likely to reach it than a similar startup that fumbles around, constantly redefining its product and business model until it stumbles across one that works.
Jon B. Fisher
Strategic Entrepreneurism at Amazon
