How to Exploit Your Startup’s Constraints
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Entrepreneurship Innovation Mar 2, 2015

How to Exploit Your Startup’s Constraints

Good entre­pre­neurs use their lack of resources to their advantage.

Finding answers for your customers is a SWOT startup strategy.

Yevgenia Nayberg

Based on insights from

David Schonthal

The enthu­si­asm that David Schon­thal has for star­tups is not based sole­ly on how much fund­ing they might raise, the chance they may come up with a giant-killing inno­va­tion, or the poten­tial for a mas­sive buy­out from an estab­lished firm. Instead, Schon­thal, an entre­pre­neur focused on the health care indus­try and a clin­i­cal pro­fes­sor of entre­pre­neur­ship at the Kel­logg School, is fas­ci­nat­ed by how star­tups exploit their constraints.

The inter­est­ing thing about con­straints is how they can be used pos­i­tive­ly,” Schon­thal says.

Let’s face it: giv­en lim­it­ed fund­ing, a small-if-intre­pid staff, and unproven — or even nonex­is­tent — prod­ucts, most star­tups have to be cre­ative just to get off the ground. But being small has the advan­tages of high-speed prod­uct adapt­abil­i­ty and close con­tact with cus­tomers. Hav­ing lit­tle fund­ing means throw­ing mon­ey at what­ev­er prob­lems arise is not an option. So oth­er cre­ative solu­tions arise.

The Lessons of the Yankauer Wand

A lot of entre­pre­neurs go out to try to get affir­ma­tion or push­back on some­thing that they believe they know to be true,” Schon­thal says. I have worked for star­tups where we weren’t even ask­ing the right ques­tions or doing the right research. We nev­er real­ly went through the exer­cise of ask­ing, what assump­tion is the whole busi­ness hing­ing on?’”

Fail­ing to answer that core ques­tion can lead star­tups to spend time solv­ing prob­lems that are not real­ly prob­lems at all, as Schon­thal came to learn in the course of one of his ear­ly ven­tures, a med­ical-device com­pa­ny. This com­pa­ny devel­oped a hol­ster for a dis­pos­able Yankauer wand, which is used to suc­tion out the res­pi­ra­to­ry sys­tems of uncon­scious patients. The wand is impor­tant, but it typ­i­cal­ly had no des­ig­nat­ed rest­ing place in a care set­ting. As a result, nurs­es and doc­tors tend­ed to store the wand under the patient’s pil­low or dan­gle it off the side of the bed, nei­ther of which is hygienic.

In the ear­ly days, you go out to learn, not to validate.”

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Armed with the assump­tion that the device need­ed a des­ig­nat­ed home when it was not in use, Schonthal’s com­pa­ny poured mon­ey into sales force – led research to prove the need for the prod­uct. But they asked the wrong ques­tion — essen­tial­ly, wouldn’t it be great if this hol­ster exist­ed?” They real­ized lat­er that all those nurs­es and doc­tors who told them, sure, it would be great,” were telling the truth. But they were also not ready to incor­po­rate a new habit — putting the wand into the hol­ster after each use — into their rounds. That dis­con­nect between what peo­ple say and what they actu­al­ly do posed a huge prob­lem for the company.

Since peo­ple are crea­tures of habit, ask­ing them to change their behav­ior can be a huge obsta­cle, no mat­ter how con­vinc­ing the data may be. The expe­ri­ence of the Yankauer wand has led Schon­thal to be aware of users’ ingrained habits when think­ing about inno­va­tion, rather than cre­at­ing devices that require users to adopt new ways of working.

Let Go of Certainty

Being con­vinced of a great idea is cru­cial to get­ting a com­pa­ny off the ground. But cer­tain­ty can also lim­it flex­i­bil­i­ty. A start­up has to ques­tion every­thing about itself — from the nuances of prod­uct devel­op­ment to core exis­ten­tial ques­tions about whether or not the busi­ness even solves a worth­while problem.

It has tak­en Schon­thal years to learn how to incor­po­rate his own blind spots into the way he research­es and tests the prod­ucts he hopes to bring to mar­ket. Some of these blind spots have turned out to be fun­da­men­tal to rea­sons the prod­ucts were conceived.

So how does an entre­pre­neur fig­ure out the right ques­tions to ask? One way is to use the con­straint of a small staff as an advan­tage. Most star­tups have no choice but to be close to their customers.

In the ear­ly days, you go out to learn, not to val­i­date,” Schon­thal says. Be real­ly hon­est with your­self: you don’t go out to sell and scale as quick­ly as you can. Rather, you reduce the size of the exper­i­ment to be just big enough to answer some key ques­tions, and do any­thing you can to get the thing in people’s hands so you can watch how they use it in the wild.” This allows for the kind of authen­tic feed­back that only users can provide.

Observ­ing how peo­ple inter­act with a prod­uct may lead to some very impor­tant, if painful, real­iza­tions: that you mis­in­ter­pret­ed who your cus­tomers are, how the val­ue propo­si­tion res­onates with them, or whether they care about your prod­uct at all.

The Risks of Grow­ing Up

One great advan­tage star­tups have over estab­lished com­pa­nies stems from the size and fund­ing con­straints most star­tups share. In the absence of the bud­get it would take to hire an R&D team, the founders them­selves spend time in the field gath­er­ing infor­ma­tion. When you’re small, everybody’s inter­fac­ing with cus­tomers every day, talk­ing to them. When you hear feed­back from the mar­ket, the whole team is hear­ing the same thing.”

By the time cus­tomer infor­ma­tion reach­es the inno­va­tion depart­ment of a large com­pa­ny, it is usu­al­ly pre­sent­ed as sta­tis­ti­cal­ly sig­nif­i­cant sur­vey results,” Schon­thal says. Thou­sands of peo­ple now become one syn­the­sized voice of some arti­fi­cial cus­tomer arche­type — Meet Joe. Joe is a 35-to-37-year-old urban male who makes $65,000 to $75,000 per year and has 1.5 kids’ — these kinds of abstract rep­re­sen­ta­tions of real people.”

While use­ful for estab­lished com­pa­nies, that kind of syn­the­sized, human­ized data is less valu­able to entre­pre­neurs in ear­ly test­ing than hear­ing the voic­es of the indi­vid­u­als who are using the pro­to­type. This feed­back has a dif­fer­ent val­ue: it can clue the com­pa­ny into the moti­va­tions, emo­tions, and behav­iors of the user and may reveal the true util­i­ty of the prod­uct in ques­tion. But know­ing how to inter­pret what you hear — and know­ing what ques­tions to ask — can be a tall order no mat­ter how big or estab­lished your company.

If you go right to sec­ondary data and focus groups, you lose that abil­i­ty to walk into the clin­ic and see some­body shove the Yankauer wand under the pil­low,” Schon­thal says. That kind of infor­ma­tion doesn’t typ­i­cal­ly get trans­lat­ed through spread­sheets, charts, and reports. You have to be there to see it and under­stand why peo­ple are doing what they do. Under­stand­ing the why’ needs to be the first step in cre­at­ing a bet­ter what.’”

Featured Faculty

David Schonthal

Clinical Assistant Professor of Innovation & Entrepreneurship

About the Writer

Fred Schmalz is Business Editor of Kellogg Insight

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