How to Exploit Your Startup’s Constraints: Good entrepreneurs use their lack of resources to their advantage.
March 23, 2015 Editor 0
The enthusiasm that David Schonthal has for startups is not based solely on how much funding they might raise, the chance they may come up with a giant-killing innovation, or the potential for a massive buyout from an established firm. Instead, Schonthal, an entrepreneur focused on the health care industry and a clinical professor of entrepreneurship at the Kellogg School, is fascinated by how start-ups exploit their constraints.
“The interesting thing about constraints is how they can be used positively,” Schonthal says.
Let’s face it: given limited funding, a small-if-intrepid staff, and unproven—or even nonexistent—products, most startups have to be creative just to get off the ground. But being small has the advantages of high-speed product adaptability and close contact with customers. Having little funding means throwing money at whatever problems arise is not an option. So other creative solutions arise.
The Lessons of the Yankauer Wand
“A lot of entrepreneurs go out to try to get affirmation or pushback on something that they believe they know to be true,” Schonthal says. “I have worked for startups where we weren’t even asking the right questions or doing the right research. We never really went through the exercise of asking, ‘what assumption is the whole business hinging on?’”
Failing to answer that core question can lead startups to spend time solving problems that are not really problems at all, as Schonthal came to learn in the course of one of his early ventures, a medical-device company. This company developed a holster for a disposable Yankauer wand, which is used to suction out the respiratory systems of unconscious patients. The wand is important, but it typically had no designated resting place in a care setting. As a result, nurses and doctors tended to store the wand under the patient’s pillow or dangle it off the side of the bed, neither of which is hygienic.
“In the early days, you go out to learn, not to validate.”
Armed with the assumption that the device needed a designated home when it was not in use, Schonthal’s company poured money into sales force–led research to prove the need for the product. But they asked the wrong question—essentially, “wouldn’t it be great if this holster existed?” They realized later that all those nurses and doctors who told them, “sure, it would be great,” were telling the truth. But they were also not ready to incorporate a new habit—putting the wand into the holster after each use—into their rounds. That disconnect between what people say and what they actually do posed a huge problem for the company.
Since people are creatures of habit, asking them to change their behavior can be a huge obstacle, no matter how convincing the data may be. The experience of the Yankauer wand has led Schonthal to be aware of users’ ingrained habits when thinking about innovation, rather than creating devices that require users to adopt new ways of working.
Let Go of Certainty
Being convinced of a great idea is crucial to getting a company off the ground. But certainty can also limit flexibility. A startup has to question everything about itself—from the nuances of product development to core existential questions about whether or not the business even solves a worthwhile problem.
It has taken Schonthal years to learn how to incorporate his own blind spots into the way he researches and tests the products he hopes to bring to market. Some of these blind spots have turned out to be fundamental to reasons the products were conceived.
So how does an entrepreneur figure out the right questions to ask? One way is to use the constraint of a small staff as an advantage. Most startups have no choice but to be close to their customers.
“In the early days, you go out to learn, not to validate,” Schonthal says. “Be really honest with yourself: you don’t go out to sell and scale as quickly as you can. Rather, you reduce the size of the experiment to be just big enough to answer some key questions, and do anything you can to get the thing in people’s hands so you can watch how they use it in the wild.” This allows for the kind of authentic feedback that only users can provide.
Observing how people interact with a product may lead to some very important, if painful, realizations: that you misinterpreted who your customer are, how the value proposition resonates with them, or whether they care about your product at all.
The Risks of Growing Up
One great advantage startups have over established companies stems from the size and funding constraints most startups share. In the absence of the budget it would take to hire an R&D team, the founders themselves spend time in the field gathering information. “When you’re small, everybody’s interfacing with customers every day, talking to them. When you hear feedback from the market, the whole team is hearing the same thing.”
“By the time customer information reaches the innovation department of a large company, it is usually presented as statistically significant survey results,” Schonthal says. “Thousands of people now become one synthesized voice of some artificial customer archetype—‘Meet Joe. Joe is a 35-to-37-year-old urban male who makes $65,000 to $75,000 per year and has 1.5 kids’—these kinds of abstract representations of real people.”
While useful for established companies, that kind of synthesized, humanized data is less valuable to entrepreneurs in early testing than hearing the voices of the individuals who are using the prototype. This feedback has a different value: it can clue the company into the motivations, emotions, and behaviors of the user and may reveal the true utility of the product in question. But knowing how to interpret what you hear—and knowing what questions to ask—can be a tall order no matter how big or established your company.
“If you go right to secondary data and focus groups, you lose that ability to walk into the clinic and see somebody shove the Yankauer wand under the pillow,” Schonthal says. “That kind of information doesn’t typically get translated through spreadsheets, charts, and reports. You have to be there to see it and understand why people are doing what they do. Understanding the ‘why’ needs to be the first step in creating a better ‘what.’”
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