Tuesday, August 26, 2008

Tech-Smart, User-Stupid - Why Software Startups Fail

Over the course of three software startups and 10 years of teaching entrepreneurship, I have seen one flaw kill more software startups than all the other flaws combined. That flaw is caring more about your technology than your customers - failed software startups are smart about technology and stupid about who is going to use that technology.

Inexperienced technology entrepreneurs usually almost always focus more on what their technology can do, not what the market needs. If you don't have a specific customer in mind when you build a product, you are performing the marketing equivalent of walking outside on a sunny day and hoping to get hit by lightning.

Not having a clue about your intended market leads to all sorts of misguided behavior. In particular, there are two dead give-aways to user-stupid companies:
  1. Dog ball product management. There is an old joke about dogs and balls where the punchline is "because he can." Most of the Ajax products on the market today are stuffed with features for which the best explanation is that the developer added it just because they could. For example, there are roughly 2 bizillion Ajax toolkits out there, but every week someone introduces a new one, figuring no doubt that what the world really needs right now is yet another color picker widget. Adding random features does not make you look cool, it just makes you look confused.

  2. Leaky marketing. When you have no idea who your target customer is, all you can focus on is your competition. Just like a celebrity stalker believes that if they scare off all the boyfriends, then the supermodel will have no choice but to fall in love with them, the leaky marketer believes that if they take a leak on everyone else's products, then the market will have to come to them. Among other problems, when you have a number of companies in a small market doing this to each other, all you really do is convince potential customers to wait until there is a serious provider for the technology. Making other companies look small does not make you look big, it just convinces customers to stay with IBM another year.
The simplest antidote to being user-stupid is recruit a business partner who is externally focused. Entrepreneurship is a team sport - it takes a passionate techie and an equally passionate business person to make an idea go (think Gates/Ballmer, Jobs/Wozniak, Ellison/Miner). Successful innovation happens when a company is user focused and tech smart about how to solve that user's needs.

For more on this topic, see Top 10 Business Idea Mistakes.

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