The Evolution of Value Most companies fortunate enough to carve out a unique place in the market embark on a journey through three distinct phases of evolution: start-up, mid-sized and large company. Value, defined through the eyes of the customer, also evolves throughout this journey. Starting with Early Adopters
“Climbing the wall requires a delicate balancing act... Too much process and you stifle innovation, too little and you inhibit your ability to scale effectively.”
In the start-up phase, the initial value proposition is often defined by a small team of entrepreneurs who see a market opportunity often before a market truly exists. Value normally falls into one of two categories: breakthrough ideas or capabilities that improve on the status quo. In other words, creating something that is better, faster or less expensive than what exists today. Maximizing value during the start-up phase often begins with a key insight and a small founder-driven team passionate about their idea’s potential. The culture is often characterized by fluid decision-making, agile teams and constant concept iteration with single-minded purpose. Innovators often generate their initial revenue streams from early adopters who see value in the new and unique and do not require a “complete” product or service offering. Value creation at this phase is all about serving the needs of the early adopters who can clearly see the potential in your company’s new idea. As companies generate momentum by proving their concept — validating that a market exists and refining their idea — they are almost through the start-up phase. Because few markets have enough early adopters to sustain continued growth, this is where the concept of value begins to evolve. The core skills that built the company, the leadership skills that carried it this far and the processes or lack thereof have been defined by growing market share with early adopters. Early adopters are willing to accept less than whole products — they want to finish the product themselves and often will collaborate with you to get what they want. They are a significant source of revenue and a springboard to the next phase of growth, but they don’t represent the mass market.
Moving to the Mass Market To continue to nurture the health of the company and tap the full potential of the products and services that were tested on the early adopters, the core offerings now must make the jump to the mass market. This is where nearly all companies stumble — if only for a moment — as they face “the wall.” Some never make it over the wall, because they don’t recognize the obstacle for what it is: an opportunity. Others seize this opportunity, conducting a thorough self-audit to determine whether the leadership team that started the company, the business model and process, and the products and services have the substance to appeal to the larger mass market.
© Greg Geracie, All rights reserved.
The Evolution of Value Ironically, facing this wall is the reward for your organization’s successful navigation through the start-up phase. It is the threshold to becoming a successful mid-size enterprise selling scalable products and services. The meaning of value has just shifted as you reach this threshold. For successful companies, it leads to meaningful changes in the way the company needs to operate.
Scaling the “Wall”
About Greg Geracie Greg Geracie is the President of Actuation Consulting and the author of the global best seller Take Charge Product Management. Greg is also the Editor-in-Chief of The Product Management and Marketing Body of Knowledge.
Now, the organizational emphasis shifts from founder-driven product development to market-centric activities. This transition requires different leadership skills, which the founders may or may not have. Decisions are now being made by a diverse group, spread throughout the company, to ensure nimbleness. Skilled functional leaders are added to set boundaries aligned with the overall company vision. To overcome the wall, your focus must shift toward satisfying the needs of the mass market who view “complete” products as central to the value proposition your company must now offer. Market success is now defined by the eyes of the mass market and your company’s ability to anticipate changing market dynamics and customer needs before your competitors.
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Leadership skills and process deployment take center stage in scaling the company, but not at the expense of innovation. Climbing the wall requires a delicate balancing act. You must inject new thinking and new processes while preserving the entrepreneurial spirit and value creation skills that formed your company. Too much process and you stifle innovation, too little and you inhibit your ability to scale effectively. However, if you successfully manage this transition, your company has crossed the next threshold to the final stage of growth. The dynamics begin to change again.
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The Final Stage: Achieving Scale
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In the final stage, strong process orientation must emerge to ensure that complex company and market dynamics are appropriately managed. Portfolio management and innovation processes play a more central role in decision making as a company strives to grow by balancing mass market and early adopter opportunities through acquisition and mergers while nurturing organic growth. Teams tend to be much larger and geographically distributed and decision-making is more often centralized. Value is once again viewed differently and more broadly from a customer’s perspective. The evolution in value, from a customer’s perspective, leads to changes in company dynamics as the concept of value of shifts over time. As the definition of value migrates, each phase requires different skills in leadership, process and value management. While each phase of growth presents unique challenges, the juncture between start-up and the mass market (the “wall”), requires adroit management of this critical transition — a skill essential for every start-up’s ultimate success.
© Greg Geracie, All rights reserved.