Most e-merchants resell existing products, but some of the most successful ones create their own products to sell.
We don't have to tell you how daunting a task this is. But selling your own products is a great way to separate yourself from the growing mass of competitors nipping at your heels.
That's where the book The First Mile: A Launch Manual for Getting Great Ideas into the Market can help. Taking that first step is always difficult. Proceeding from there isn't a cakewalk, either. In his book, author Scott Anthony provides a game plan that's sure to help. Our interview with him follows.
Entrepreneurs that succeed don't do so because they had a perfect plan. They do so because they took their punches, adjusted and iterated their way to a successful model
Where should you start?
Schepp: What are some of the challenges entrepreneurs face when trying to travel that "first mile?"
Anthony: First, let me define the first mile—it's that moment where you begin to translate an idea into reality. It is a perilous time, because you realize very quickly that no matter how much you thought about it, no matter how much you planned, the idea that looked so good on paper doesn't work the way you thought.
Every idea, and I mean every idea, is partially right and partially wrong.
That leads to a lot of specific challenges: the customer who told you with rock-solid certainty that they would buy your product gets cold feet when they have to open their wallet, the supplier who promised certain quality levels fails to deliver, the numbers that looked great in Excel fail to materialize.
As Mike Tyson once quipped, "Everybody has a plan until they get punched in the face."
Entrepreneurs that succeed don't do so because they had a perfect plan. They do so because they took their punches, adjusted and iterated their way to a successful model.
Schepp: What criteria should you use in evaluating potential ideas?
Anthony: I always ask three questions about an idea. First, is there a market need? Generally speaking, you want to make it easier and more affordable for people to do what they are already trying to get done. Ideas that struggle ask people to adopt new habits or develop new priorities.
Second, can you deliver against that need? Remember here that innovation goes beyond the features and functions of a solution. It is all of the end-to-end components of the business model, including how you create, market, deliver, price and support your idea.
Finally, do the numbers work? This doesn't mean building a pretty spreadsheet. All spreadsheets for ideas look pretty, and as Intuit founder Scott Cook once said, "For every one of our failures, we had spreadsheets that looked awesome."
Rather, it means developing market-based evidence, which you can charge more than it costs to make your product, and that you sell enough to cover planned overhead. There are questions underneath each of these areas, of course, but I find if you keep coming back to these three questions it serves as a useful guide through the first mile.
We have been taught that paralysis by analysis is one of the big barriers to successful innovation, and it absolutely is. But doing without thinking can be very dangerous as well
Document, evaluate, focus and test
Schepp: What characterizes the first step entrepreneurs should take, and where does an "idea resume" come into play?
Anthony: The first thing I suggest people do is to document their idea with a degree of rigor. It is an easy step to skip.
We have been taught that paralysis by analysis is one of the big barriers to successful innovation, and it absolutely is. But doing without thinking can be very dangerous as well because you can waste time and money learning things the world already knows.
I suggest a happy medium. You are thorough, but have a clear bias to action. For example, of the 400 or so business plans we have now seen in our venture investing arm, my favorite was all of 13 pages long, and it had more pictures than text. But it covered every aspect of the idea—the market need, the proposed solution, how the entrepreneur planned to deliver the solution, a hypothesized profit model, the team, key unknowns and more.
The idea resume is the simplest way to document an idea. Just like your resume details all the salient facts about your professional life on a page, an idea resume captures the essence of an idea on a page. The time invested in developing it will pay dividends by sharpening the focus of the steps that follow.
Schepp: How should they proceed from there?
Anthony: Once you have documented your idea, you should evaluate it from multiple angles.
The goal isn't to figure out if the idea is good or bad. Rather, it is to begin to tease out the risks and unknowns. Remember, every idea is partially right and partially wrong. Your next step is to focus on those unknowns that require the most attention because they could sink the entire business, or have a big impact on the ultimate path forward.
Finally, and most importantly, you test rigorously and adapt quickly. The acronym to remember is DEFT: document, evaluate, focus and test. Following the process rigorously helps to speed through the first mile of innovation.
A customer will look at an idea on paper and express enthusiasm. But when they have to open their wallets, the interest dissipates
Schepp: What sort of twists and turns might entrepreneurs face?
Anthony: There are two that we have encountered most frequently. The first comes once you realize that customers lie. This happens all the time. A customer will look at an idea on paper and express enthusiasm. But when they have to open their wallets, the interest dissipates.
This happened to us when we tried to create a medical tourism business where U.S. consumers would fly to Singapore to get first-rate treatment for elective procedures like hip replacements at sharply lower prices. The target customer said they loved the idea, until they faced the reality of traveling 9,000 miles through 12 time zones for health care.
Actions always speak louder than words. It almost always takes a few iterations before you figure out how really to create something that sparks with the customer.
The second twist comes when you realize the beautifully crafted spreadsheet that laid out the financial logic of your idea was nothing more than mathematical relationships between made up assumptions. This happened to a laundry business we tried to build in India.
We had hypothesized building small kiosks where a consumer could drop off their laundry and pick it up 24 hours later. It looked great on paper, and investors gave us more than $1 million to scale the business.
After opening up dozens of kiosks, we began to realize it was next to impossible to make money with our approach. So we scrapped the kiosks and focused on a central store with a platoon of drivers to go pick up and drop off clothes at customers' homes. Remember, beautiful spreadsheets and beautiful businesses are completely different things.
Schepp: How can such twists and turns be avoided?
Doing your homework certainly helps, but the honest truth is these kinds of pitfalls can't be totally avoided. In fact, arguably you shouldn't try to avoid them. Almost every breakthrough has twists and turns along the way.
For example, penicillin is discovered because Fleming leaves his lab dirty when he leaves for holiday in August and Twitter was a side project at a company that was founded to organize podcasts.
Once you recognize that your first idea is partially right and partially wrong, you seek to figure out how you are wrong so you can start the iterative journey to success. And you keep your eyes open for the surprises along the way that might open up entirely new paths to success.
Once you recognize that your first idea is partially right and partially wrong, you seek to figure out how you are wrong so you can start the iterative journey to success
Break through the innovation fog
Schepp: In your book you use the term the "fog of innovation." What do you mean by that and how can entrepreneurs cut through this fog?
Anthony: The fog of innovation descends once you are in the first mile running experiments and the data comes back inconclusive.
This is true almost every time. Because the data is never crystal clear, you can simultaneously make a convincing case to slow down, speed up or change course. But too many people do none of these things—they instead crawl to a halt and study and debate and discuss.
One thing that helps is having an objective outsider providing advice, particularly one that has been through the entrepreneurial journey. Another helpful approach is to always be thinking about the next test. Even if you don't have perfect answers, if you start designing and executing the next test, it keeps moving you in the right direction.
Finally, keep asking those magic three questions: Is there a need, can you deliver and is it worth it? Returning to those questions can help keep you moving in the right direction.
Schepp: What else should readers know about this process and how your book can help them?
Anthony: The harsh reality is that most startup companies fail. Innovation is really, really tough.
I think, however, academic research and practitioner experience has coalesced around a set of principles and processes that at the very least can get to decision points in a much more resource efficient manner.
I always hope that anything I write gives people three things.
First, they should leave with a language system around how to manage strategic uncertainty. It seems almost trivial, but a common language increases the productivity of what can be tough discussions. Second, they should have a set of practical tips they can begin using immediately. Finally, and most importantly, I hope they leave with a confidence that there are proven and practical ways to increase the odds of success.
Schepp: Thank you, Scott.