Building and Selling

While I’m pretty sure I’m not the first person to discover this (or say it publicly), there is something that I believe in that should apply to any company that wants to be successful. There are two parts:

Don’t build something you can’t sell

Don’t sell something you can’t build

To many people, once they see it, its seems pretty obvious. But, astoundingly, there are many, many companies that ignore these precepts, and then wonder why they don’t succeed. Let’s take a look at each in turn.

Don’t Build Something You Can’t Sell

What I mean by this is that you generally shouldn’t put your effort into a product or service that nobody wants or will need. There are times when you will build throw-away prototypes, proof-of-concepts and other items for demonstration or test purposes. When I mean “sell”, I don’t mean that you necessarily need to charge money for everything you put out there. There are times when you need a product or service as a loss-leader or a give-away to build the brand and attract customers.

I am not talking about expecting or demanding complete certainty of success for a product. There is always a chance that a product or service, no matter how compelling it looks and how much your research says should be a hit, can fail. This isn’t about absolutes.

This also isn’t about only building products to address needs people or companies state they have. There are times where a product or idea will address a need that potential customers don’t realize they have. Sometimes people or companies don’t know there is a gap to be filled until someone comes along to point it out, and provide a solution.

What I am talking about in this instance is finding an acceptable level of risk that you (and your team and investors) are comfortable with. It means you have enough of an indication and enough information that says what you want to do can make a go of it. At the very least, it means your business moves forward in the right direction.

Unfortunately, there are companies founded on products or services either nobody wants or needs, or won’t result in enough revenue or brand equity, to make the effort worthwhile. I have worked with companies in the past that built products whose only proven customer base were the guys building it. They didn’t do any basic research or any testing of the waters to see who would want the thing, how much would they pay for it, and how many copies could they sell. I’ve encountered a lot of companies that thought their product “should” be successful, but never bothered to find out why it wasn’t.

I have participated in companies where we did start down the road in a particular product direction, and realized that the effort wasn’t worth the result. In one case, we were thinking about building a system that, after some digging, would have resulted in about 6 sales in total worldwide. Those 6 sales wouldn’t have resulted in a enough revenue to cover the costs of the organization needed to support the product, and keep it moving forward. So, rather than spending a lot of time and lot of our own money on that business direction, we abandoned it. It seemed like a good idea to us, but we realized that we needed to truly understand the market, and ultimately found the market too small to build a business on. We did use some of idea for another direction, and that has proven to be far more successful.

Companies, or more precisely the people in them, can sometimes get so enamoured with their idea that they forget that they actually need to sell it. They get convinced that their idea is so good, that people will flock to it, without ever testing the idea on people to see if this is true. They believe in their own press-clippings, and are blind to any evidence to the contrary.

It bears repeating that there are times when you have every indication that the product should succeed, and ultimately have it fail. That happens. No research is perfect. But at least you made the effort to see if someone would buy it before you committed time and treasure to the business. When you go out to raise money for your next venture, you will have lessons learned. Without the research, eventually people stop investing in you because you are failing due to blind optimism.

There is another facet to this that is sometimes overlooked by people, and that is how long will they go before they declare failure. In one instance, we as a team had set a deadline. That deadline had two components. The first was a time component, where we set a date where we would stop what we were doing, re-evaluate and test our results against specific goals. The goals were the second component. We needed to know, in a discrete and measurable way, what we had to accomplish to justify the continued investment of time and money into the idea. It was, at its heart, a simple go/no-go decision: did we meet the goals we needed to continue to move this idea forward, and spend our money to do it. We were actually just over a month from our decision date, when our idea started to gain traction, and we saw the forward progress we needed to continue working on the product. Had those events not occurred, we would have reached our deadline, measured the results, and most likely would have stopped work on the product.

Again, I worked at another place where they never did this. They never set a measurable goal for themselves, and a timeframe to accomplish it in (which would have told them how much money they would need to build up the business to that point). Instead, they kept going back to the well (their investors) for more and more money, but without a concrete plan and measurable goals, and a timeframe for how long they would continue before they would pull the plug. The plan “ended” when the current investors stopped giving them money, or they couldn’t find new sources of cash. They had every indication that their product wasn’t wanted or needed by enough people to make the business viable, but they continued to burn cash building it anyways.

The real lesson here is to try to make sure your better mousetrap truly is better, and that people will really want it. Otherwise, you will end up wasting a lot of time, effort and money to learn a very painful and expensive lesson.

Don’t Sell Something You Can’t Build

This one is a bit trickier. This is also known as the “over-promise and under-deliver” scenario, where you promise a product, or features on a product, that simply can’t be built, can’t be built in the timeframe promised, or built for a profit or other positive outcome. This can be the result of overly enthusiastic salespeople or overly optimistic technologists. It sometimes is both. This is the time where you need to prototype and test, and verify that you can do what you want before you promise it to a customer or a market.

This happens time again in many markets. How many console games have been announced, but have never seen the light of day? How many of those were going to “change the industry”? The Segway was supposed to revolutionize personal transportation, and didn’t. The Zune was going to be an iPod killer, and wasn’t. Either as vapourware, or missed expectations, products will always be announced that either never appear, or fall far short of their initial promises. To succeed, you want that to be the other guys, you don’t want that to be you.

Windows Vista was a good example here: the original feature list was long and impressive. As the product development proceeded, the features got cut one by one until all we ended up with was a bad upgrade to XP with little to offer as far as the customers were concerned. To be fair, once Vista stabilized it really wasn’t as bad it is was initially. However, by that time the damage had already been done, and the Vista brand irretrievably tainted as a result. Microsoft learned from that lesson when releasing Windows 7. They made sure they did a better job of carefully managing the expectations and promises, and the outcome has been better as a result.

In the end, going this route has pitfalls. First, for an established company, selling what you can’t build can taint your brand. Do it often enough, and you can damage the brand and hurt the sales of your good products, possibly irreparably. In smaller ventures, do this often enough, and publicly enough, and you may find it hard to raise capital from VC’s and angels. A history of failure isn’t necessarily bad. A history of failure coupled with incompetence (real or perceived) is.

The Lesson

So, what are the lessons here. First, back to the aphorisms:

Don’t build something you can’t sell

Don’t sell something you can’t build

Get enough feedback and information that will give you (and your team and investors) enough of a feel for the risk and reward, and an indication of success, that you are all comfortable with moving forward. This is not just ensuring that people want or need what you are building, but that you can actually build it. Set milestones with concrete goals, and re-evaluate. Failure is possible. Determining failure sooner rather than later means you minimize the amount of time, effort and money lost. Periodic re-evaluation also allows you to adjust your course, and in some cases increase your chance of success. In the end, you still have to be able to build your product and sell it to succeed.