When considering a new venture, the design of the business is as important (if not more important) than the design of the products. Just as much analysis, engineering, and creativity must go into designing the business for success. Things to consider include:
- The strategic landscape
- Competition
- Buyers
- Sellers
- Threat of new entrants
- Substitutions
- Complementors
- Brand strategy & positioning
- The distribution / channels
- Partnerships and the ecosystem
- Financing roadmap
- Defense strategies
- Organizational & management structure
- Organizational capabilities
- The market roadmap
- The socio-economic landscape and roadmap
- Key risks & their mitigations
There are at least as many strategic decisions to be made with the business as there are with the product. The best companies integrate both business and product strategies to create more efficient, focused execution. In contrast, misalignment between the two can be a recipe for disaster.
Oftentimes, the key innovations are in the business strategy rather than the product. In fact, there are numerous examples of innovators shaking up industries by changing the business model rather than the product. Examples include Dell with PCs, Southwest with air-travel, mail-order contact lenses, and Amazon with books. None of these companies introduced significantly different products compared to their competitors, but each innovated on the nature of delivering those products to customers.
Sustainable Competitive Advantage
A key consideration with any innovation, business or product wise, is how sustainable a competitive advantage it confers on you. If a new feature you introduce can be cheaply, easily and quickly copied by your competitors, then it doesn't really help you in the long run. On the other hand, if you can develop a monopoly on providing a valuable feature or maintain a lower cost structure, you will have a significant advantage against your competitors.
Examples of sustainable competitive advantages are:
- Access to more capital in a specific area - e.g. large VC funding
- Specialized knowledge or talent - e.g. engineering, domain knowledge
- A powerful brand or brand position
- Infrastructure - e.g. wireless network, manufacturing capacity, distribution network, stores in a particular area
- Patented technology - e.g. drug patents
- Licensing or certification - e.g. Security clearance, broadcast licenses
Normally, no advantage is permanent in a free-market economy. However, the time, cost, and difficulty it would take a competitor to match your advantage must be taken into account when considering it.