I posted earlier this week on the new book, “The Catalyst,” but there are a couple of more points I’d like to share before I leave it. The book, by Jeanne Liedtka, Robert Rosen and Robert Wiltbank, investigates the mindset needed to grow new businesses at established companies. It’s highly recommended, especially as a companion piece to McGrath and MacMillan’s “Discovery-Driven Growth,” which tackles the new-business question from a 
methodological perspective.
The authors assert in “The Catalyst” that successful new businesses should start with addressing a need of a real customer, one who provides a level of commitment to using the product. They call this an “early yes” and illustrate that it helps galvanize support for a fledgling project.
The customer’s commitment is important. Since launch customers have a stake in the project, they take it seriously and provide more focused and useful feedback than prospects would provide:
Demanding an early yes provides a reality check on customers and partners. Importantly, looking for an early yes minimizes the influence of potential customers. Potential customers are a false positive: They act like customers, they look like customers, but they may not be actual customers. We use the word potential in a pejorative sense here. Potential customers may lead you down a primrose path that involves investment on your part, with only the promise of future business that may or may not materialize. To weed these out, the Catalysts place some demands on those who have the privilege of influencing the growth opportunity. They want to influence and be influenced only by actual customers and actual partners.
Vitally, the close working relationship with an actual customer forces the project team to get out of theory and conjecture and get real: “They are able to work around forecasts and predictions, because direct involvement with others gives them much more specific and useful information.”
I’ve seen the problems with building new products around the need of potential customers. In the 1990’s, I was the product manager on a prepaid cellular product (before such a thing even existed). We had an important launch customer (a large market of what is now AT&T). I worked with the design team and customer to come up with specifications, test prototypes, etc. After several months of this effort, we were no closer to getting the customer committed to using the product. Yet they continued to provide feedback and we continued to rework the product in hope of getting them to install and use it in production.
Eventually the customer’s focus moved onto other projects. Our management killed the project, and we put our code on the shelf. A couple of years later, of course, this type of product emerged (from another company) and became very successful.
To this day, I believe the customer’s option (them being a potential customer, not an actual customer) prevented the product from being installed and used, which would have provided critical momentum to help us continue to develop and improve the product, and for the customer to gain revenue from their customers for this new offering.
Related posts:
“Discovery-Driven Growth” – a vital handbook for developing new business
Innovation catalysts view making mistakes as essential to growing new business
Tags: business development, customers, growth, reading list
