Why most new products fail

A better mousetrap does not necessarily sell. In fact, most of the time, it doesn’t.

If you build it, they will come.

Nonsense.

If they come, build it.

That’s pretty much the message I try to ram into new startups, imploring them to use the lean canvas, or some such method, to ‘just get out there’ and be nimble and responsive to customers’ needs, building up their business along the way.

These days, you can get a new startup going on credit card debt, build an MVP (minimum viable product), work with your first paying customers, get revenue coming in as soon as possible, laying the ground work for a possible scale up later on.

That way, you don’t risk piles of cash. Having less money also teaches you to work smart, fast and love your early clients to death. You’ll learn the fine art of on-boarding, and how small tweaks to your landing pages can make massive differences to your conversion rates and first revenues.

The fact is that most products fail.

Studies show that, depending on the category, 40% to 90% of new products don’t last. Every year in the US 30,000 new products are launched, but 70% to 90% of them are no longer sold after 12 months.

It’s also a myth that you have to be first to market. 47% of first movers don’t make it. Sometimes, even better products don’t cut through. Better, as in ones that have distinct advantages over incumbent offerings.

Why?

A classic Harvard Business Review paper (“Eager Sellers and Stony Buyers” by John Gourville) a dozen years ago laid out the reasons, yet we still see people ignoring the advice.

Gourville’s paper is a must read for anyone looking to develop and market a new product.

People are not always rational. I’m not talking about some crazy guy you see on a train or shuffling down the street. I mean all people, as a rule. Irrational.

For example: studies have shown that if you give people a 50% chance of winning $100 and the same risk of losing $100, most people won’t take the bet. In fact, you have to offer most folks a two to three times gain over a possible loss before they are swayed.

In other words, if they have 50% chance of winning $300 and 50% chance of losing $100 then more will go for it than not. But not if the 50:50 chance of winning was $100, or even $200.

The reason, says the theory, is that losses loom larger in our minds that wins. We may know what we have is not all that great, but the costs of switching means we are happier to stay with our current lot, than strike out and go for something potentially better. Unless the odds are stacked more heavily in its favour.

Put it another way, better the devil you know than the devil you don’t.

“Loss aversion”, says the paper, “leads people to value products they already possess more than those they don’t have.”

This bias is called the ‘endowment effect‘. And it is quite strong.

The implication is that if you are trying to get people to change their behaviour (use your bright shiny new object rather than the one they are used to), then your new product better have massive advantages, well communicated and understood, before your potential clients make the switch.

In 2007 and 2008, I was happy with my Blackberry. It had email, allowed me to surf the net (chunkily, but it kinda worked) and the keyboard was on the outside, much like the PC I was used to. It was way better than my old flip top Nokia phone.

Then came the iPhone. No keyboard. I heard rumours the batteries did not last. It took me til 1999 to make the move, but after I’d started using it, I never dreamt of going back to Blackberry. Nine years on, I still use iPhone.

Many millions did likewise. Blackberry subsided and never recovered. Apple went on to become the richest companies on the planet, and is inching its way to a trillion dollar valuation (it will be the first company to do so, if it gets there).

The fully electric car may seem like something fantastic (no more petrol pumps) but if you are not sure there will be charging stations, are you really going to switch to the Nissan Leaf?

The 9x Effect

Company executives tend to over emphasise the benefits of the new product (by a factor of 3) while the consumer tends to over emphasise the benefit of their existing product (also by a factor of 3).

This means that the new product actually needs to be better by a factor of NINE if it is to be viewed as equivalent to the incumbent.

Which is why you hear of innovators talk about the ’10x’ effect, which means their new product may have a chance.

I recently saw a new agtech service that would (at least) save the user 10 times the cost of the product itself. It should stand a chance. If they were going for 2 or 3 times uplift, little chance.

Easy Sells

The best new products are those that require little change for the consumers, while providing massive improvements on the existing product.

Maybe this is why hybrid cars have made a greater impact than fully electric ones. The consumer gets the benefit of better fuel consumption, but still has the knowledge that a petrol tank exists, which is something they’ve been used to all their lives. In time, perhaps the fully electric car will out, but for now, the hybrid serves a purpose.

Another implication is that you need patience. Patience is a virtue, as I tell my children at every occasion, much to their annoyance. Customer acceptance of a new way takes time. Google, Facebook & AirBnB all took several years to take hold.

It also means that you should strive for 10x improvement. Find believers, get them to be evangelical about the new product and spread the word.

But, whatever you do, do not believe that simply because your new mousetrap is better, it will sell. It will most likely fail.

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The 3 drivers of digital marketing success, that most businesses don’t have

With Australian companies feeling the pressure of digital disruption – a ‘damburst‘ if you will – new research has found three key areas that companies successful at digital marketing have in common.

The research indicates that a clear strategy, team-wide digital literacy, and using data to shape narratives inside a company correlated strongly with the digital success of Australia’s highest-achieving brands.

According to the research…

  • 85% of Australian companies believe their organisation has been disrupted by digital;
  • 51% are “somewhat confident” in their ability to execute their digital marketing strategy;
  • Only 29% of companies were “highly confident” in their ability to execute their digital marketing strategy.

The most confident companies — labelled “Digital Achievers” in the report — are on average 59% more likely to have seen 20%+ revenue growth in the past 12 months, and 6.5 times less likely to have seen a headcount decline over the last 12 months.

Although the “Achievers” said they had more people and time to execute their strategy, there was no correlation with company size — meaning the key difference was that resources and time were being used more effectively.

As far as individual skills, the marketers surveyed feel the most confident in social media and email marketing and gave themselves the lowest marks in marketing automation and SEO.

The independent research was commissioned by the Australian-owned digital strategy agency, ntegrity, in partnership with McCrindle Research, as part of their annual research into the Australian digital marketing ecosystem. Researchers surveyed 319 Australian marketing professionals between January and April 2018.

It’s incredible isn’t it that the things that are most important to the success of an Australian business are the very factors that businesses are weak at. The tsunami of disruption that is coming down the pipe at all businesses is only growing in pace and veracity, yet people seem to be looking in the wrong direction. Heads in the sand.

Once the wave hits, as it will, and is, often you hear complaints from business sectors about how ‘unfair’ the competition is, or totally unrelated things are blamed, such as immigrants or trade deals or the number of seagulls on the pitch walking clockwise.

I suppose this breeds an industry of digital marketing agencies. Certainly, all those I know in this industry – who know what they are doing – are doing very well, thank you.

It’s going to be be interesting to see how this all pans out.

Tech that did not exist 20 years ago, and tech that will dominate the next 20

20+ years ago my wife and I moved to Perth, and, although the locals would still regard me as a b$#@ding Pom, we are well and truly settled. Perth’s been great to us. We love the place. We now have 2 Aussie kids, who are privileged to be able to grow up in paradise.

20 years has flown by, but looking back over the last two decades, it’s incredible to think what’s happened around the world and how all our lives have changed during that time.

For example, the following 25 tech businesses and services simply did not exist when we stepped off that plane in mid 1997 (the year each one started is shown):

  • 1997 – Netflix, Yahoo Mail
  • 1998 – Google, PayPal
  • 1999 – Alibaba, BlackBerry, Emojis
  • 2001- Xbox
  • 2002 – LinkedIn
  • 2003 – Android, Skype, Tesla, iTunes, WordPress
  • 2004 – Facebook
  • 2005 – Youtube
  • 2006 – Twitter, Spotify, BuzzFeed
  • 2007 – iPhone, Fitbit
  • 2008 – AirBnB
  • 2009 – Uber
  • 2010 – Instagram, iPad
  • 2011 – Snapchat

How many of these do we totally rely on every day? Imagine life without any of them. That was only 21 years ago.

The question now is: what emerging technologies will dominate the next decade or more?

Many analysts seem to think it will be the following…

  • Artificial Intelligence (AI) and Machine Learning
  • Internet of Things (Iot)
  • The Blockchain
  • 3D Printing
  • Mobile devices and mobile internet
  • Autonomous vehicles
  • Robotics
  • Virtual and Augmented Realities (VR/AR)
  • Wireless power
  • Nanotechnology
  • Voice User Interfaces, Virtual Private Assistants
  • 5G

And of course, loads of other things that we have not even heard of yet. None of us had heard of the top list 20 years ago.

Leadership means leading, not turning a blind eye

A leader asks not commands, says ‘let’s go’ not ‘go’, develops people rather than orders people… a leader sets the tone, the culture, demonstrates the core values, which begets behaviour.

A leader can’t be everywhere, do everything. So it’s crucial that they communicate clearly what they want the organisation or team to do, what the goals are, how we are going to get there, while also listening and learning.

Perhaps their most important job is to select the best people and let them get on with it. Which does not mean you turn a blind eye to things, nor have no control. Quite the opposite.

Effective leaders know what’s going on, what’s happening, and how to judge and analyze. They walk around and listen. They engage. They are open and approachable. They ask good questions.

Bad culture

So when analyzing the recent failure of leadership among the Australian cricket team, one might ask how did it come to the point that they felt cheating was the answer?

When the “leadership group” (which seemed to be code for David Warner) decided to cheat, gets his young opening batsman colleague to cheat; when the captain asks ‘what are you two up to?’ (knowing its nefarious) and then says ‘I don’t wanna know’ then the culture has become one where winning (or the fear and perceived humiliation of losing) seems greater than the importance of playing the game within the rules.

There’s never any disgrace in playing hard and fair, and knowing you’ve done your best, yet always have things to improve on. Sometimes the opposition plays better as a team. You can’t win everything. No one does. Losing provides valuable lessons. Failure is knowing you could have performed better, and didn’t. That’s when you go away and put in the hard work.

Events like we have seen recently are not one off isolated incidents. It’s the result of a build up of an organizational and team culture. Many have argued that it stems from a humiliating defeat in Nov 2016 in Hobart against South Africa. Incidents and issues have grown since. The snarling and sledging have been on the rise.

Pushing the line between right and wrong, bending the rules as far as they can go, to get an edge, means that, unchecked, an event like this becomes inevitable.

When the leadership is so bereft of ideas that they resort to cheating to turn around a game, then the leadership has given up on leading.

Reap what you sow

And so the leaders and those directly involved have been stepped down. National disgrace has resulted. Tears of shame have been shed. The public humiliation has perhaps been far worse than losing a game of cricket. They have lost lucrative overseas contracts including the riches of the IPL. They will forever be known as cheats. It’s been a very public, global story.

Something tells me they are more ashamed of being caught out, than the actual things they did. This speaks volumes in itself.

Naturally, there’s been a backlash from supporters and those who cannot accept the sentences handed down. Or feel it’s a bit over the top. Mainly this has come from former players. QED.

No doubt, authorities wanted to stamp down on this and be seen to do so. They had to be seen to be doing something dramatic. A 12 month ban seems harsh, except there is little international cricket in the next 6 months anyway, and so all they miss is next summer’s home internationals. They will all be available for next year’s World Cup and Ashes in England. If they’d been made to miss that as well, then perhaps you could argue it was a strong punishment. But something tells me, Cricket Australia would like to be competitive in what are the two major prizes that only come around every 4 years – a world cup and winning the Ashes in England (the latter being something they’ve not done for what will be 18 years).

‘A little cheating’ is still cheating

While part of me sympathizes with the players involved, and the situation that drove them to take this action, I am someone who firmly believes that when you know you’ve edged the balled to the keeper, you walk. In the same way if you knocked the ball to any other fielder and they caught it, you’d walk.

I was stooped in the spirit of the game being as important as the laws of the game. HOW you played the game was the appeal, as much as winning or losing. Losing graciously, and winning graciously for that matter, was a life lesson.

I think everyone would agree that you’d look a bit stupid standing your ground if you smacked the ball directly to a fielder, who caught it, so why is a little nick (that you know happened) any different? Because you might get away with the latter, that’s why.

Exactly.

Push the boundaries between fairness, justice and law and you will then look to push them a little more, and a little more. The end result is sandpaper being taken onto the ground and being used to tamper with the ball to effect that damned illusive reverse swing, and who knows what else happened in the lead up to this that we don’t know about?

To me, not walking and ball tampering are both cheating, plain and simple. You are trying to get an illegal edge over the opposition, and cheat. It’s got nothing to do with how skillful you are with bat and ball.

A little cheating is still cheating. In the same way you can’t be ‘a little pregnant’ (you are either pregnant or not) it’s no defence to say it’s just a ‘little cheating’.

I also loathe sledging (repeated personal abuse of the opposition). Let the bat and ball do the talking. If you’re not winning with that, acknowledge the opposition played better. Shake their hand and have a beer with them after the game. Then go away and learn how to get better.

Aussie cricketing friends of mine cannot fathom my belief on walking (or sledging). They never walk, and if you do walk, you are weak. It’s part of the culture.

Precisely.

~~

“The Spirit of Cricket (from the MCC)

Cricket is a game that owes much of its unique appeal to the fact that it should be played not only within its Laws but also within the Spirit of the Game.

Any action which is seen to abuse this spirit causes injury to the game itself.

The major responsibility for ensuring the spirit of fair play rests with the captains…”

(Emphasis added.)

The fake fake news debate

Rather than put up an informed debate, all you need now do is roar ‘fake news!’ at anything you don’t like. How has it come to this?

Right off the bat let’s be clear what ‘fake news‘ is. It’s pure fabrication, invention and lies dressed up as a news story. It is intended to deceive. Anyone doing rudimentary fact-checking could expose the lies fairly easily.

Two things fake news is NOT…

  1. It’s not a new phenomenon. There are examples stretching back to Roman times and before. It is said Mark Anthony killed himself due misinformation spread about him by his opponents.
  2. It’s not news you don’t like. News you don’t like may make you feel uncomfortable. That’s OK. That’s how you learn new things. But that don’t make it fake.

New vs Opinion

It’s also important to distinguish between news and opinion.

The mainstream media publishes news (well researched and balanced facts) as well as opinion pieces (the author’s viewpoint).

Basically put, anyone is entitled to their own opinion, but no one is entitled to their own facts.

Facts are facts.

Put it another way, opinions are cheap, facts are expensive. Facts need checking. The truth is not always obvious.

Thank goodness for real journalists. I have worked with them. I know one when I see one. I can also spot a charlatan, dressing up their opinions as facts.

When we employ journalists, we are not interested in their opinion. We are interested in consuming a well thought out, clear statement of fact. The story. The main headline, the actors involved, and how it might impact on us and others.

At the same time, we are entertained by opinion writers. We are interested in their views. They present facts, but line up an argument, usually one way or the other. We may disagree, we may be convinced, we may already concur. But we should be made to think.

In life, we need facts in order to make decisions: where and whether to buy or sell a property and what type, or whether to start or sell or invest in a certain type of business or even who to vote for… perhaps our most important act.

Fundamentally, we need to distinguish what is fact, and what is opinion. In order to trust our media organisations, on which we base these decisions, we need to be comfortable that they are telling us the truth, as best they see it.

If we are reading opinion, this needs to be clear. We need to know the difference between this and news.

Authors should also provide disclaimers if their ‘news’ story was paid for by an interest group. That makes it an advertisement, not a news story. Not even an opinion.

Writers should also declare a personal interest. If they are writing about Telstra, they should mention they own Telstra shares if they do.

Why publish fake news?

Due to the long standing ‘trust’ in our mainstream news organisations, and their behaviour hitherto (exposing lying politicians, or scandals in the Church, or whatever) we take information written about someone or some issue in an editorial context as being more powerful than advertising (that is known to be ‘paid-for’ communication).

News has the whiff of gravitas (‘it’s there in black and white‘). It has been considered considered, prudent, weighty. Certain laws exist to protect someone being libelled in the press, and news organisations are careful to check facts before committing to pushing the publish button.

So, if you can dress up biassed opinion – or even downright lies – as news, you might be able to persuade people. If a story says something bad about a politician you don’t like, it can confirm your opinion. If it’s about someone you don’t like, you may find a way to ignore it, or even attack the source.

What if that story was totally bogus? A few years ago, the self-defense mechanisms in our democracy may have corrected the situation. The media organisation could be sued, or challenged to print a retraction, or provide compensation.

Times have changed. Fundamentally, and possibly irrevocably.

Over the past decade or so, journalism has been under attack. The business model of the news media companies has been disrupted. Many editors, journalists, sub editors and photo journalists have lost their jobs. A whole industry has been run almost to ground.

Few media organisations have found “the way” forward.

Maybe NY Times (which has put on 1M+ new subscribers since the last election), Financial Times and, locally, Business News have found a way forward by persuading subscribers to pay for their news and data content through paywalls. In this way they have aligned their information with their readers.

It’s a brave path forward, but perhaps the only one if we are to protect good journalism. If people value it, they’ll pay, If they pay, the media businesses survive. Trust is paramount. If paying subscribers feel they are being dished rubbish, they’ll not pay.

By the same token, if we expect news to be free, then that’s what we’ll end up with –  opinionistas who tell us what we want to hear. I’m a blogger, after all – this is my opinion. It ain’t news!

Faced with depleting revenues, some ad-model news media have had to run sensationalist headlines to cut through and make money. It’s a race to the bottom. Clickbait. A mug’s game. They are failing. It’s not the way forward. (In my opinion!)

Meanwhile, people get their news in all kinds of ways, many of them highly dubious. Few of them are actual news organisations.

Taking advantage of the situation

Among all this maelstrom you have politicians who now seem to get away with telling lies, knowingly, for effect. (‘He/she tell sit like it is. Says what we’re thinking.‘) I’m not going to name them, but you can guess to whom this refers.

[By the way, since when should we only listen to people who tell us what we are thinking? What’s the blooming point of that?!!]

Debate has now been dumbed down to Twitter rants and trolling. Sound bytes. Pre-staged photo opps and ‘door stops’. Lies, exposed fairly quickly by an exasperated media, are ignored as the entertainment moves on to the next distraction. No one takes responsibility, and political discourse has been damaged.

Worse still, our democracy is weakened. For if the people cannot gauge easily what is fact and what is plainly made up, as it whizzes past them on their Facebook feed (which itself is manipulated based on what you already like to see) then those same people can’t make informed decisions. People get elected on lies. And worse, the worst people could get elected to high office.

How should we respond?

The media has to call lies out, shine the light and expose lies when they are there. It’s their job, in a democracy, to do so. They speak truth to power. They clarify and explain.

But that’s not enoogh. They also have do a better job of getting people to pay for news. To subscribe. To make the case for this. And we, the consumers, need to front up and pay. Yes, I know you can get free news anywhere, but in the same way you have to pay for your shoes, food, water and shelter, you need to pay for your news.

The alternative? We’re living it everyday.

I’d prefer ‘power to the people’. Which is literally what the Greek word ‘democracy’ means.

The most important skill? Perception switch.

You’re rushing to a city meeting. You hate being late. The traffic lining up to enter the freeway this morning is particularly heavy, and cars are inching their way, preserving their position, as you all shuffle forwards.

At a traffic light, on red, you all stop. To your left side is a petrol station, from which some people are trying to exit and join the queue cityward or cross our lane to travel in the other direction. You pull up allowing plenty of space in front for the line of cars to cross over your two lanes or to move in front. The car on your inside lane decides to jump forward and claim its position ahead, lest anyone get in front, presumably. This actually gets the car no closer in time, as the light is still on red. All it does is make it harder for the line of cars trying to get out of the garage. Some of them manage to sneak around carefully, and then out past you to the other side, and away. A few minutes later, you are on green, and you all move forward together.

After traversing the city and finding the last available nearby car park spot, you realise why it’s still free – two tradie vans on each side of the spot have parked near or over the white line, leaving a sliver of space for your car.

‘Can I get my car in there?‘ you ponder, as you size it up. ‘If I don’t take this one, I’ll be late for my meeting.‘ So you try very carefully to squeeze in, and make it. Getting out of the car is hard. The driver door just about opens enough to extricate yourself, and as you rush to the ticketing machine you glance back and wonder if it was such a good idea taking that spot in the first place.

‘Will one of those vans scratch my car getting out? What if they leave and then someone else comes along and presumes I’m the guilty party in the way I parked?’

The sun is shining off the grey ticket machine window making it really hard to read the instructions. You see that it’s $4/hour, and the meeting is going to be 2 hours. The maximum for the day is $13, so you flick the time forward to the end of the meeting, plus 10 minutes or so, and the reading shows $21. This does not make sense, the maximum should be $13. ‘Agh well‘, you think, ‘No time to argue with a machine’. You tap the credit card, get out of there and up to the meeting. You make it just in time. Next time, leave earlier!

A few minutes into the meeting you realise you must have paid til 10.40pm at night, not morning, and that’s probably why you’ve overpaid. In a rush, and with the sun glare, you’d not noticed the PM on the display. And anyway, you made the meeting on time. Next time, breathe.

The meeting is now in full swing. 15 minutes in, the doors open and a latecomer enters. With a mumbled apology and sympathetic smiles around the room, they sit down, and the meeting continues. A few people have laptops open, but can be seen reading the agenda or relevant papers on them. Our latecomer fires up their laptop, and with cursory acknowledgement of the meeting itself and those speaking, begins to tap loudly on the keyboard. Why the tapping? Surely they are not just replying to emails or scanning social media. This same person continues to interject, talk at every opportunity, too long in most cases, and certainly too often. When they are not talking, they are tapping away loudly. It’s as if they are the only important person in the room, and only their time is valuable.

Towards the end of the meeting, in which 20 or so are in attendance, this person has probably spoken for about 40% of total airtime. They are oblivious to the chair who is trying to give everyone a turn, or the few with their fingers up looking to talk next. The latecomer butts in whenever they like ignoring the hints and quiet reprimands over their ever growing answers. Everyone else is too nice or self controlled to behave like this, and endures it. In a 2-hour meeting, each person speaks once, or maybe twice. You know who has spoken about 20 times.

The meeting ends, and you escape back to your car and a busy day of catch up. The car is unscathed. You had paid til 10.40pm after all. ‘Stupid boy‘, you think. Smiling ruefully you drive away, amazed at some peoples’ lack of self awareness, and inability to put themselves into the shoes of others.

The trend is your friend

The Sydney Harbour Bridge was opened in 1932, and took eight years to build.

In 1926, you could see the large pillars on either side of the harbour, from which the famous steel arches would start to appear a few years later. By the end of 1928, the entry roads were clearly visible leading up to these pillars, but other than that there was no ‘bridge’ (yet), and ships and ferries could pass by through the opening as they had done for decades. [In fact, if you look at the photo above, you can see exactly that in 1930 and 1931.]

By 1931 most of the arch had been completed, and the future bridge could be imagined. A year later, in March 1932, the bridge was officially opened by the then Premier of NSW, Jack Lang.

In a film clip of the event, you can hear the cheers of the onlookers and the commentator saying “Can you hear those boats? Can you hear those sirens? What a great day this is…”

Not so merry for the ferry

Many Sydneysiders know the saying ‘Seven miles from Sydney and a thousand miles from care‘. This slogan was coined by the Port Jackson and Manly Steamship Company in the 1920s to promote its ferries on the Manly run. Without a bridge, a ferry was the only way to get from one side of the harbour to the other.

Yet, once the bridge construction had been agreed on, and building commenced, you could literally see the thing being built above you and across the 1km+ span of the harbour.

Before the bridge was opened in March 1932, ferries took 30 million passengers a year. After, ferry patronage plummeted to 13 million.

I tell this story to remind all industries that disruption to their mainstay business is often dramatic, yet can be foreseen. But in this case, the disruption was clearly visible to the ferry companies as the bridge was literally being built above their heads!

Often disruption is not that visible. It’s slow and inexorable, eating away at your business like white ants under your floorboards. Ignoring the problem does not make it go away. Putting one’s head in the sand does not protect you from its inevitability.

You may as well assume disruption is the norm. The more safe you feel, the more worried you should be. Check for white ants. Do your research. Think.

The good news is that you may have time on your side. Sydney’s harbour bridge took 9 years to build. Google took about that time to really take hold and make an impact on local advertising revenues. Same with Facebook.

It may have been that one day you looked around and suddenly Facebook and Google was all pervasive, but they took years ‘pushing the flywheel’ before they were so impregnable.

So, what are you doing in your business, in your industry, to prepare for your inevitable disruption? How are you positioning yourself so you can take advantage of the changes that are coming? Are you researching the possibilities of AI, bots, drones, AR, VR or the blockchain? All these, and more, are visible right now and making their creeping impacts.

Don’t be the ferryman, ignoring the inevitable while the seed of your destruction is being built around you. Get on a trend, because the trend is your friend.

Why Startups are easy, hard and mostly fail

The romance of cycling into a co working space, armed with a skinny latte, tight jeans and hipster looks can draw many to the promise of giving a startup a go.

It could have been precipitated by being chucked out of that corporate job you always hated. Maybe you’ve struggled with an itch you just have to scratch. It might be the allure of untold riches that some startup founders accumulate.

Be forewarned, startups (and I mean a disruptive, scaleable tech startup here, not a Mum and Pop café business or some gardening franchise) are about the riskiest business you can set up.

Setting up your startup is the easy bit.

For some, raising money can be a breeze too. You either have some savings, can go a few months without earning anything or can convince some investors to pop some money in.

Spending that money, well, that’s easy too. We made this mistake when we set up our tech business many years ago. We raised money, quite quickly, and then we spent it. We had an office, some staff, a website… Ta Daaa, we had a startup!

Except we had no business. We had no clients. Well, none that would pay us anything. For a while at least. They were on free trials. And when they did pay, it was small bikkies compared to our monthly costs. Cash crises, sleepless nights and arguments ensued. We almost went under, a few times, but ultimately were saved by our investors, who propped us up (put more money in) while we shaved costs (me and my fellow cofounder took no salary for months) and worked out how to make it work. This was when the business really began.

Disrupting an industry, and the way it has been doing things, is hard. Change happens slowly.

But one thing is central, and never goes away, even when people forget this during the hype and excitement of a new business or disrupter.

You are only going to succeed in business if you find a big problem your customers will pay you to solve.

That’s it.

I have met so many (too many) startup founders who have forgotten this central truth – as I did, when I set out.

Because unless you solve a problem for your customers, they will not pay you, and if they won’t pay you, you haven’t got a business.

Too many founders like to tell me the wonderful features of their app or website, gushing about all the things it can do for its users. Too few tell me what problem they are solving, and how customers will pay them to solve it.

CB Insights have published a report into why startups fail, based on 101 post mortems.

What’s top of the list? No market need. 42% of failures cited this as their number 1 reason for failing.

In other words, the customers were telling them they weren’t going to pay for whatever service was being provided, in sufficient numbers.

The number 2 reason? Running out of cash. Which is the same reason as #1. You need to allocate funds wisely, and be sensible, but overall if you had enough customers willing to pay you to solve their problems, you’d find a way to stay in business.

#3 is “wrong team”. Businesses are run by humans after all, and if they can’t get on, or work together, or have complementary skills, then things can get tougher than otherwise. But you should be able to get rid of the bad people, and hire better ones.

#4 is “being outcompeted”. Someone else beat you to it. Their product is better made or sold or solved the customer problem better (there’s that customer problem again).

#5 was “pricing/costing issues”. Do you offer a free trial, for how long? What packages will then be on offer? How good is your onboarding, and conversion of free to paid? It’s a dark art, and also a science.

Most of these and other reasons are all versions of the same essential issue – not understanding the customer and their problem.

Interestingly, the venture capitalist Bill Gross gave a TED talk in 2015 on this subject. His research showed that the single biggest reason startups succeeded was timing.

Too late, and you’re dead. Too early is better than too late, but it can be hard. Getting the timing right, when the customers and industry are ripe for the disruption you bring, is gold.

Timing, says Gross, is more important than getting the right team together, or the brilliance of your idea, plan or business model, the execution of the strategy or adaptability and resilience.

Rebekah Campbell, Hey You and Posse founder,  writing last week in the Fin Review argued that her startup mistake was raising money in the first place. Don’t raise money at all, she said, but get out there nice and lean, and be close to your customers.

You can argue and debate all this until the cows come home, but in the end, it’s all about the customer. Don’t even think of setting up a startup until you have cracked the big, hairy problem your customers are going to pay you to solve for them.

The rest will then follow naturally.

The full top 20 list is below

Freedom means a free press that you pay for

Have a look around the world at the less democratic countries, and there you will see a neutered or government-controlled press.

I was in a South-East Asian country last year on assignment, and the ruling government managed to put one of the main independent newspapers out of business declaring it had not paid its correct amount of tax. Within days, the owners had either fled the country or were in police hands. The paper was duly shut down. All staff were out of work. Within a few more weeks, the same government ruled the opposition party was illegal, and it was duly shut down. There are elections this year, it’s a slam dunk for the ruling party. It’s a sham for democracy and the people.

Having worked at a media company, I know what it is like to be inside a news operation, striving every day to ensure the correct facts are published. Readers have a right to know what is going on, which is why they are drawn to news media. Often the ‘truth’ is ambiguous, out of reach, fuzzy. It takes hard work and time to uncover it, especially when some people would prefer it left uncovered.

Opinion is cheap. Truth is expensive.

News media, run well, will hold the government and powerful of the day to account, lest they run amok. Politicians may not like the freedoms and protections of the press, the intrusions into their lives this entails, but they understand in their hearts that this is important in a democracy.

Great travesties of justice have been exposed by a free press, be it the Vietnam War (so beautifully portrayed in ‘The Post’ movie), or Catholic abuses of children (2015’s ‘Spotlight’ movie), or Watergate (‘All the Presidents’ Men’). In fact, it is interesting that these David and Goliath investigatory battles all make for dramatic movies.

In many ways, the press has it hard. Not only can information be blurry, but with the leach of classified ad income to the internet, the newspaper industry has also lost its ‘rivers of gold’ revenue. Faced with declining income, they have been forced to cut back on editorial staff, the very life blood of any upstanding news organisation. The rush to ‘click bait’ and hits has seen a rush to the bottom, allied to the polarisation of media such that viewers only switch on to – or read stuff – that affirms their preconceived ideas. The ‘truth’ is now not so important. Readership, and holding on to your readers come what may, is all that matters.

Thomas Jefferson once famously said:  “Were it left to me to decide whether we should have a government without newspapers or newspapers without a government, I should not hesitate a moment to prefer the latter.

Or, as the supreme court famously ruled on the Pentagon Papers case, “The press is to serve the governed, not the governors.”

No wonder dictactors and coup leaders take over the TV and news organisations first. Putin has Russia Today, and Trump has Fox News. Anything else, is fake news.

With a weakened press (around the world), the splintering of media and consumers just seeking what they want to hear, media is in about as weak position as it as ever been.

In order to grab attention, media organisations scream sensationalist headlines in order to cut through the noise. The rush to publish, by less trained and lower paid  juniors, means the ‘lie is half way around the world before the truth has got its pants on‘ (as Winston Churchill once opined).

As one Congressman said a few years ago, “You are welcome to your own opinion, but you are not welcome to your own facts.

Facts are facts. Proven. Scientific. Sourced. Part of history. Full stop.

People are switching off ‘The News’ as it’s always about bombs and deaths and disasters (fear). Fear sells. But it also puts the audience off, who want to be informed without being alarmed all the time.

In many ways, our world is safer than ever. There are less wars, less deaths, less die from disease and hunger, yet you would not know this from the TV news.

Something has to be done to save media (real media, one that seeks truth and holds truth to power) before it goes down the gurgler forever. For that’s where it’s heading. Slowly, but surely, the news industry is dying. Journalist jobs are disappearing, and once gone, are not coming back. It’s a race to extinction in ever decreasing circles.

One ray of hope is in the recent example the New York Times. Harangued by the US President (as the ‘failing NY Times’), the paper has actually put on an extra million paying subscribers over the past year. They now have more than 3.5M, that’s double the number of just 2 years ago. Thank goodness too, as their print ad revenue continues to decline.

What’s happened here is interesting, for the more the President rails against the ‘fake news’ media organisations it does not like, the more people flock to them and support and pay for the very same mastheads. The more the President is seen to be telling untruths (over 2000 in this first year alone, reportedly), the more people want to know the truth from a reputable source.

Asking people to PAY for news is incredibly brave, as there are thousands of web sites out there that give away news for free. So to see the NY Times do so spectacularly well behind a paywall is encouraging not only for their future, but also for the future of the medium overall.

I worked for a news organisation that made the bold step to put up a paywall way back in 2002, and erect an even stricter one in 2013. The result? Traffic to the site ROSE five-fold over the past 4 years and subscription income became the largest single revenue source (larger than advertising or events). So it can be done.

I would therefore argue that a free press is essential in a democracy (the so-called ‘Fourth Estate’), and that the only way to ensure its survival is to create content that readers value and pay for. In this way democracy flourishes. For without an informed public, how are we going to know who to elect? The US are discovering this the hard way right now it would seem…

Take it from Eddie Izzard – Quality is more important than Speed

Over the break I read Eddie Izzard’s excellent ‘Believe Me, a memoir of love, death and jazz chickens‘. Bill Gates, of all people, had recommended it as a top read, and I thought ‘now why would a serious bloke like Mr Gates be into the autobiography of an English cross-dressing comedian?’

Then I reached page 306, which I quote from heavily below.

Eddie Izzard was born a year before me, and was packed off to an English  private boarding school aged 6 after his mother died suddenly of cancer. He grew up with the same TV shows and music as I remember from the early 70s, and went to uni around the same time (although he dropped out to pursue his dream of performing).

As a teenager, while still at school, he decided one day to take a bus and a pay a visit – uninvited – to Pinewood Studios, just west of London (where they made James Bond movies and the like) walking right through the side door and exploring around all day pretending to be busy and part of things.

During his ‘lost decade’ of the 1980s he took various failed shows up to Edinburgh Fringe, then spent a few years as a street performer before finally getting into stand up. He explored and created, and slowly honed his craft. He put on shows himself, producing them from scratch and co-writing inventive nonsense with friends. Most of it simply did not work, but slowly he found his own voice and style and confidence and audience.

From the 1990s his stand up act took off and then he made it into films and TV. Now, in his mid 50s, looking back, his advice for creating new business is crystal clear …

“When I was 25, the direction of my career suddenly became shaped by my ‘Field of Dreams’ rule – if you build it, they will come. ‘It’ being quality and imaginative shows.

“Previously, this had not been my thinking. Quality was not high on my list. Speed was. But who the hell cares if you get somewhere fast? The only person who cares is you. 

“If you could get somewhere faster, then you’d just have a lot of money, a big house, a fast car and a big cat. The individual is the one who wants to get somewhere quickly. It’s what you want when you’re young. At nineteen I thought I would begin to cut through within a few years, but this was not the case. At 25 I was racing to get somewhere fast but getting nowhere.

“So I turned the plan upside down: don’t get somewhere as fast as possible. Get somewhere as good as possible.

“No one ever says, ‘This piece of creative work is crap, but it was made in a couple of weeks, so let’s go check it out.’ Contrariwise, no one ever says, ‘Now, this piece of creative work took 10 years to make and a lot of care and attention – so I must check it out because it took so long to make.’

“There is something fun about a fast trajectory, someone’s career taking off quickly. It’s all about the wind in their sails. But in the end, you want your work to last. And to do that, your work must be good…

“(My career) took 12 years to appear, and to me it felt like a bloody eternity… there was something I had to learn. It was stamina. And it was also the idea of quality over speed.

There is an eternal truth in this passage.

Do your best work, not your quickest work. It might take time. In fact, if you’re doing something new, wacky and disruptive, it will definitely take time. More time than you’d like. But in the end, only the best work wins. Keep plugging away, find your audience, keep innovating.

This experience and advice has obvious crossover to business and particularly startups. I think I can see why Bill Gates admires Mr Izzard.