The nation is officially in the midst of economic recovery, albeit without the substantial job growth we had all hoped for.
Those that stayed in business throughout the “Great Recession” likely survived by adopting lean practices and “Six-Sigma’d” their business to the ultimate in efficiency. The problem in continuing with the efficiency approach is that most companies have reached the point of diminishing returns.
So what now? Where do you grow from here?
The answer is simple: Think like a startup. Consider developing a product that addresses an unmet need. That may sound easier said than done, but 2014 may be the year for your company to think about an investment in new product development.
This approach is a true means of providing the wealth creation and job growth that your business wants and our economy needs.
As the CEO of one of the longest-running business incubators in the country, I have the privilege of working with startup companies poised to disrupt markets with innovative technology. These companies are creating jobs, changing the way we do things and are positioned for exponential growth. “Veteran” companies can do this as well, likely without the excruciating task and wealth-diluting exercise of convincing angel or venture capital groups to invest.
Spending resources, however, on anything more than incremental product improvement may be new for many businesses. Acting this way would mean spending money on a venture that may not see a return, which can be scary.
Mind of a startup
The trick to thinking like a startup is to view your new initiative through the eyes of an investor. Equity capital investors are champions of taking risks, but they are even more proficiently skilled at mitigating risk. They manage risk by thorough evaluation and diligence, and also by building a portfolio of investments that allow for some failure.
So long as their “winners” cover the less successful ventures, returns can be lucrative. Successful companies today may take the same approach by managing a portfolio of new product ventures and finding ways to wring the risk out of each.
Tips for reducing risk
Develop a compelling case for your product: Learn why your target customers are suffering without your new product. Understand how your product can offer them relief and why your product is the only option to provide that relief.
Make it real: Talk to your customers — lots of them. Confirm that the product you envision would really solve their problem. Research your competition to see if others are developing similar solutions. Find out if your customers would be willing to invest time/resources to help you develop your new product. If so, this is a good sign you are on to something.
Monetize: Create a detailed assessment of your customers’ comprehensive costs with and without your new product. Make sure the gap is a healthy multiple of what you plan to charge for your product.
Protect your idea: Make sure you have adequate barriers in place to protect your intellectual property or trade secrets.
Hedge your bets: Diversify your portfolio with two or more development efforts. Even if you are not a statistician, it is easy to see that betting on the success of one of three ventures that each has a 75 percent chance of succeeding is a smart risk.
By thinking like a startup and evaluating your ventures like a professional investor, you can build a portfolio of wealth and job creating products while smartly managing the risk. The only difference is that you don’t have to work out of your garage. ●
Anthony Margida is chief executive officer of the Akron Global Business Accelerator, a National Business Incubator Association Innovation Award winner. AGBA currently serves 38 technology-based startups and has created 640 jobs for Northeastern Ohio in the last five years. For more information, visit www.akronaccelerator.com.