August 16, 2016
Some products just shouldn’t be turned into businesses. Plenty of people don’t believe this fact, or think that they’re an exception. However, there’s no magic behind why some product-first businesses can’t find their legs. Once broken down, the causes are often pretty simple.
That’s why I’m glad we have Des Traynor, cofounder at Intercom, to explain why some product-first businesses fail. Here are four reasons, pulled from a recent post he wrote, and why each one can torpedo an otherwise perfectly healthy and smart startup.
1. The Problem Is Both Rare and Small
Any startup needs to solve a problem in order to attract customers. Sometimes the problem is common and a big deal. If it’s rare but a big deal, you’ll still get a few customers who will pay a lot. And if it’s a small issue but it’s wide-spread, you’ll have a large-scale audience base that will each pay a small amount. But if it’s a small problem and is rare? Forget it, Traynor says:
“Ultimately, you can succeed as a product but still fail as a business if you find yourself in this trap. Some problems persist because they’re quite simply not worth solving.”
For instance, the social analytics startup ThinkUp was forced to shut down in June due to tightening API constraints from major social media platforms. As the service’s co-founder explained:
““Why are we doing this? The biggest reason is it’s become impossible from a technical standpoint to keep gathering data from all of the social networks. From a business standpoint, there simply aren’t enough ThinkUp subscribers to cover the cost of investing in the massive amount of development that would be needed to deal with these technical challenges.”
2. The Product Is Cheap But Complex
If your product is offered at just five bucks a month, you won’t be able to afford plenty of perks: Customer acquisition costs must be very low, user support must be very low, and the on-boarding process must be painless. In short, it needs to be very simple. If the customers don’t get it, they’ll demand special attention, which can’t be supported on a thin budget.
As Traynor puts it, “You should do lots of things that don’t scale, but building a business model that doesn’t isn’t one of them.”
3. The Audience Doesn’t Know They Need You
I know I would never pay for 99% of the new apps I see. It’s not because they don’t work. It’s because I don’t care. Plenty of legitimate problems will continue in this world simply because no one cares to accept a solution.
4. You Can’t Experience Your Product Personally
Any good update or fix needs to be made by someone who understands what the original problem is. Any product-first businesses who hope to win need to create their product from a place of knowledge.
Don’t say “companies need to share information internally,” say “companies need to store & share FAQs, Policies, Legal Documents, and How-Tos. They need to keep them up to date. They need to announce any changes, and have to control access to some information.”
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