Use the internet to lower the risk of failure in your business

Use the internet to lower the risk of failure in your business

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By Nish Bhutani, Founder & CEO – Indiginus

As published in the Mint on Sunday on October 8, 2017

The internet can be a giant laboratory where you hypothesize, validate, change direction and generate revenue, all while you build and evolve your product

Research, build, promote, sell, repeat. That has been the norm in business for decades. But today, the internet is scrambling that order. Products are being sold before they are built. Selling and research can be conflated. Customers promote a company’s products, more than the company does. Marketing is built into the very products being promoted. Let’s take a look at some examples in this topsy-turvy, Alice-in-Wonderland world.

Sell before you build

Kickstarter, the crowdfunding website, helps you find customers for products that don’t exist. If you have a product idea, but lack capital and customers, Kickstarter gets you both. Your project is funded by your first customers, who buy your product in advance. They also form a community of early, or should I say, prenatal adopters, committing to your baby while still in the womb, who are invested in your product’s success and give you feedback along the way. Kickstarter says it has provided nearly $2.9 billion of funding and advance sales in this manner.

This sort of back-to-front thinking on the internet has influenced the non-digital realm as well. Flintobox , an early learning start-up based in Chennai, provides a complete education curriculum to pre-schools. When its service was first conceived, the team’s initial step was not to create the curriculum, or even conduct research on its target customers. Instead, it placed a tiny ad in a regional newspaper, costing all of Rs5,000, for its non-existent product. The responses to its promotion, and subsequent advance sales, gave it a bit of capital, but, more significantly, a healthy dose of confidence that a market existed for its proposition. (Disclosure: The writer is an investor in Flintobox.)

Market research serves as an inexpensive proxy for the most important questions in business. What should my product be? Who will buy it? Will they pay, and how much? But a proxy is not the real thing. No matter what customers say they intend, no one can accurately predict their actions at the moment of truth, when asked to reach for their wallets.

Selling before building is all about mitigating risk, by not taking on extensive product development, marketing and hiring before understanding which customers resonate with your value proposition and how that proposition should evolve before taking it to a larger market. With the inexpensive targeting and feedback mechanisms of the internet, start-ups within new and existing businesses are increasingly taking this route.

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