New Business Ventures
Starting A New Venture
Starting up a new business can be incredibly difficult. After all, it takes a lot more than a good concept or idea to enter new markets successfully. Entrepreneurs need funding, mentoring, and a lot of grit to prosper. That is why nine out of ten startups shrivel up and die within three years.
Startups and New Business Ventures have in common that the unknown factors outweigh the known ones. Secondly, since past experience cannot be applied in the new context it requires transformation thinking to increase the chance of success.
It is self-explanatory that relevant past experience is very beneficial when entering into a new business activities. However, it is not sufficient to succeed. In order to increase the chance of success, It requires a more agile approach, a more flexible mindset, and a more entrepreneurial spirit in comparison to mainstream marketing or sales practices in existing markets, distribution channels, or geographical areas.
In order to increase the chance of success, a number of typical entrepreneurial characteristics should be strongly present, being:
- A lot of grit: it requires a lot of passion and motivation to develop a new business and to overcome all the unknowns and obstacles you will be facing over a long period of time.
- Risk taking: being able to work in an ambiguous environment means that you need to use your gut feel, simply because you cannot research everything upfront.
- Hard work and disciplined dedication: starting any new business successfully, it requires hard work and a lot of self-discipline. Nothing is routing and therefore taking much more time than you would think upfront.
- Adaptable and Flexible: although you might have a strong vision and a good strategy, while implementing new ventures, you will always come across unexpected roadblocks and/or opportunities that force you to come up with bypasses or even pivot your complete business model.
- Product and Market Knowledge: good upfront understanding of the products and market is required in order to find differentiating propositions. If not you run a huge chance that you are ending up with another me-too initiative.
- Strong Money Management: no new business starts with high profits and sound cash flows. If you are not able to manage your expenditure and overheads tightly, you will not make it to the moment of break even.
- Effective Planning Skills: it takes strong planning skills and experience to sustain implementation progress in an ambiguous and dynamic environment without loosing time by becoming bureaucratic.
- The Right Connections: a good network is always important, but even more so when you are establishing a new business since there are so many new things to overcome and every help is beneficial.
- Exit Preparedness: when starting a new business with the aim to financially benefit, you always have to be willing to step aside when the business situation requires. If not you are running the risk of losing everything you invested.
- Ability to be self critical: although this is an ability that is always helpful to perform better, especially in a new business environment it is crucial to identify possible shortcomings without delay to avoid damage beyond repair.
New product or service introductions and/or entering new geographical markets or new market segments are all part of new business development.
Ansoff’s product/market growth matrix is a useful instrument to identify and understand the basic aspects of new business development.
Market penetration is not being considered as new business development, because the aim of market penetration is to grow sales either by growing the penetration rate and increasing market share. Although it can be tough to further penetrate the market, it is relatively simple in comparison to new product or new market introductions.
Market development is the name given to a growth strategy where the business seeks to sell its existing products into new markets.
There are many possible ways of approaching this strategy, including:
- New geographical markets, e.g. exporting the product to a new country.
- New product dimensions or packaging: for example new distribution channels (e.g. moving from selling via retail to selling using e-commerce and mail order).
- Different pricing policies to attract new market segments.
Market development is a more risky strategy than market penetration because of the targeting of new markets.
Product development aims to introduce new products into existing markets. This strategy may require the development of new competencies and requires the business to develop modified products which can appeal to existing markets.
- A successful product development strategy places the marketing emphasis on:
- Research & development and innovation
- Detailed insights into customer needs (and how they change)
Being first to market
This is an inherently the most riskful strategy because the business is moving into areas in which it has little or no experience.
For a business to adopt a diversification strategy it must have a clear idea about what it expects to gain from the strategy and an honest assessment of the risks. However, for the right balance between risk and reward, a marketing strategy of diversification can be highly beneficial to establish growth.