This is the second installment of this series on the “New Space” economy. In this article we are going to talk about the central player and (usually) the hero of the piece, The Founder.
Here, we’ll talk about the first stages of the process of converting a great idea into a functioning business. This process is often referred to as “The Founder’s Journey.” This is an acknowledgement that starting, owning, and running your own business is not really a job, it is a life experience that will consume all of the passion, skill, and energy that you have and some that you didn’t think you did.
The Journey almost always starts at the Technology stage. This is the stage when I usually first encounter founders. Typically, they arrive here with the firm conviction that they are able to solve a problem that no one else can solve as well as they can. They are also sure that this solution is valuable to some group. They therefore believe that it is the foundation for a successful business.
Often, The Founder’s idea revolves around a particular piece of technology. Often this is a technology that they have invented or developed. Sometimes the idea is less about a novel technology and more about a novel way of using and existing technology or a combination of technologies. Either way, this “technology” is usually something that the founder has invested significant time, energy, and personal resources in developing. It might be the subject of graduate research. It might be the subject of a career’s worth of academic study, or it might be a project that they have been pursuing in their “free” time while employed in some other function.
The fact that will be universally true is that the founder will have a strong emotional connection to their invention or idea. It will be “their baby.” They will believe that they know more about this Technology than anyone else in the world. They will probably be right.
In my experience initial conversations with founders will invariably revolve around the technology. Founders will be eager to explain it and discuss it. Almost any question that is asked will eventually lead back to discussing the merits of the technology. This is good and necessary. Founding a successful business requires not only a clear differentiator – something you are better at than anyone else – but also grit, determination and passion. If you are not committed to your idea to, or past, the point of near-obsession, you are unlikely to endure enough of the “slings and arrows of outrageous fortune” to see your idea through to becoming a successful business.
But while this passion is necessary, it is entirely insufficient for success in founding a business. The first – and often hardest – thing that founders end up having to assimilate is that to create a successful business they need to actually stop focusing on their idea. Instead, they need to start focusing on the problem they are trying to solve. This is a subtle but very important shift. It means shifting from thinking about the value of the technology to you and to thinking about the value of the technology to your customers.
It is a very hard fact of business life that customers do not pay for exquisite technology. Rather, they pay to have their problems solved. The amount they will pay is a function of the value of the problem to them. It is not, by and large, related to the brilliance of the solution.
So, the first step on the founder’s journey is to move from consideration of a Technology to consideration of a Product. In this case, by “Product,” I mean that the Technology needs to be converted into a concrete good or service that can be packaged and sold to a customer. There are two essential elements to defining this product. The first is to understand everything that needs to be done to convert the Technology into the product. This will obviously include any additional technical development that is needed. But it will also include the effort required to design, create, test, and produce the product in a form that can be consumed by a customer.
The second element – which really should come first – is to understand what product potential customers actually want to buy. And, crucially, how much they are prepared to pay for such a product. I hasten to point out that this information is unlikely to be easily available. Obtaining it will likely require extensive effort to find and engage with customers. Almost certainly it will mean that the founder – or one of the founders – will have to stop spending time on the Technology and devote a significant amount of time to researching, identifying, and connecting with potential customers.
Some founders will find this takes them well outside their comfort zone. For others (the lucky ones) it is actually one of the more enjoyable aspects of the job. The plain fact of the matter is that founders who become adept at finding and engaging with their customers are much more likely to be successful.
So, a founder that has successfully navigated the road from Technology to Product will have in hand two essential pieces of information. First, they will know what their potential customers want to buy and how much those customers will pay for it. Second, they will know how much it is going to cost to produce that product. Obviously, at this point it is time for a sanity check. If the first number is not larger than the second number, then this particular business idea is in trouble.
I will say that again – if, as a founder, you cannot find people who want to pay more for your product than it is going to cost you to make it, you do not have a viable business idea.
Having made the transition from Technology to Product, many, if not most, founders will find that they need to raise the first real funding for their idea. We’ll talk about the stages of funding more in the next installment of this series. The short version is that while there are a wide variety of ways to fund a new business, investors will be much more comfortable buying in to the founder’s vision when it is clear that there is a viable product on the table. Similarly, even “non-dilutive” funding such as government R&D programs will normally require some idea of how the technology will be packaged and how it’s effects will be delivered. So, getting from Technology to Product is almost always a pre-requisite to finding significant outside funding for the business.
Assuming that founders are able to raise enough capital to continue on the journey, the next step on the journey is the transition from Product to Business. This transition is more subtle than the one from Technology to Product. Nonetheless it is essential.
In contrast to the first transition which involves answering a couple of Big Questions, this second transition involves working through a series of smaller ones. These questions often revolve around the two P’s of personnel and process. Questions like: “how and where will the product be produced?”, “How many people, with what skills, are needed to produce it?”, or “Who are we trying to sell the product to?”, and “How do we reach those potential customers?”, and “Whose job is it to do the selling?”. And on and on and on…
In a sense, the transition from Product to Business is the process of moving from being focused on the question of What your business is going do to focusing on the details of How it is going to do it. The important thing to realize, here, is that on a day-to-day basis, running a small business is mostly not about the What, it’s about the How. In the process of running a business, most founders will spend much more of their time and energy analyzing, debating, and resolving questions of how do get things done, rather than on questions of what should be done. This is a subtle change from the days when most of the founder’s time is spent thinking about their Technology and their vision for the company – which mostly centres on What they can accomplish.
In some cases, the hardest part of this transition for founders is to realize that it is a permanent transition. Once they moved from having a vision to operating a business to implement that vision, there will always be more time spent on ensuring that they are doing things right, than on ensuring they are doing the right things.
So, the transition from Product to Business is the transition from the role of visionary to the role of manager. It is a not a transition that many founders welcome. This is not really surprising given that the two roles require very different skills and a very different mindset.
There are many ways to make the transition successfully. When there is a group of founders, they may decide to divide the responsibilities – with one founder increasingly taking on the functions of business planning and execution while others focus on continuing to develop the technology or leading the effort to find and secure customers and investors.
In the case of single founder companies, the founder at this point may decide to “get some professional help” either from within the company or as a new hire. However the role is filled though, successful transition to this stage requires that someone specifically take on the role of business planning and execution. It may not be a full-time job yet, but it is a function that will require dedicated effort.
There is a danger that these tasks and this role may be seen by some founders as a kind of “necessary evil”, as something that has to be addressed only when absolutely necessary – and only for as long as required. In fact, these functions are always essentials and will only become more critical as the business grows.
Neglecting these functions or not dealing with them early enough in the life of a new business is responsible for a surprising number of business failures – even for companies that have great technology, and who have found sufficient funds to start developing a great product.
I should also note that this final “step” is not really a single event but rather a process that will continue for the life of the business. That is really why this is referred to as The Journey. While there are nearly infinite variations on this process, point I want to make is that most founders start from a place where they understand their technology very well. In order to convert that technology into a viable business they first have to understand what problem they are trying to solve, who their customers will be, and how to package their technology into a viable product that those customers will buy. Once that discovery is completed, they will be ready to confront the actual question of how to run a business that delivers that product to those customers at a cost that is less than what those customers are willing to pay.
Answering that question that will likely continue consume that majority of their waking hours while they continue to own and operate their business.
So, in very brief terms that is an introduction to the Founder’s Journey. The ways of walking that path are as numerous and diverse as the founders that take the journey, but ultimately all will need to walk the path from Technology to Product to Business.
In most cases, they will not walk that path alone. For many founders they will be assisted in, and joined on their journey by the next character in our drama – The Investor. So, having discussed the life of The Founder, in the next installment of this series we’ll take a look at the role and reality of The Funder.
Editor’s note: This is the second article in a six part series focused on entrepreneurial space.