Blog
Comment
Peter Quintana
The central point of minimum viable product is the word 'viable'. It is not a ...
JeanetteHay
The problem with this bootstrapping method is that some entrepreneurs release a ...
Bootstrapping as a business strategy
Maheen Hamid
7/19/2012 8:51 PM EDT
“It is the obvious which is so difficult to see most of the time. People say 'It's as plain as the nose on your face.' But how much of the nose on your face can you see, unless someone holds a mirror up to you?”
― Isaac Asimov, I, Robot
― Isaac Asimov, I, Robot
I recently read an article on a business method espoused by Silicon Valley entrepreneur Eric Ries in his book titled, The Lean Startup. He urges businesses to hit the market with a viable product as soon as possible and not spend too much time on perfection.
Read: Manage costs.
Ries suggests that startups refine the product through product testing in the market and getting feedback from initial customers. His model is taking the business world by storm: The book hit bestseller lists, creating an almost cult-like following in the entrepreneurial world.
It is always interesting to see ideas such as his catch fire, especially when they are based on simple common sense. Bootstrapping is a smart business move, period. It manages risk at every level, starting from the business owner and employees to the end user.
Breker Verification Systems, the EDA startup I co-founded in 2003, is built on a similar principle, setting itself apart from the typical high-tech startup that raises loads of money to figure out if a viable product can be built. From there, the startup raises more money to actually build the product and then raises even more to create hype around the product. By the end of the process, the founders’ and employees’ holdings are often diluted to a pittance, and many times investors start dictating the technical roadmap, even if it is not the best thing for the future potential of the technology.
Breker is an example of the value of bootstrapping as a management practice. It remains one of the few surviving startups of its generation in the EDA industry and only recently took Series A funding to scale operations, expanding sales, support and R&D.
What then does “bootstrapping” mean as a business practice? I define it as a business management discipline that forces a startup to build and grow the business from within, allowing market forces to shape the long- and short-term strategy. Within this discipline, the three buckets to manage are cost, sales and exit.
Perhaps I am stating the obvious that good business management demands that the entrepreneur knows how to optimize assets, realize when the product is good enough and understand when to quit.
Next: Cost: Optimize assets
|
|
|
|
|
Navigate to related information
Bert22306
7/19/2012 9:22 PM EDT
Honestly, most of the time I don't get how some books get their cult status. And this is definitely one of those times.
How is the idea of putting out a product as soon as possible, and then refining it over time, remotely innovative? For a startup, it's a no-brainer. But certainly this also applies to established companies. If there's a market for a new product, what self-respecting company would not want to get it out there? And then refine it over time, if successful?
Examples of this are practically infinite, since I can't think of a single product that emerged fully refined. But for sure, on this forum, people know that the original Microsoft DOS product developed for IBM was hardly like Windows 8, yes?
Doesn't this apply to any industry? Even new restaurants operate this way, expanding their menu as they get experience.
From my perspective, GM, especially in the past, was notorious for putting out subpar automobiles, and then letting the customers provide the necessary testing. So they actually took these ideas to the extreme, to their detriment.
Two legendary examples being the Chevy Corvair and the Pontiac Fiero. By the time these cars were developed into something quite good, and getting favorable reviews in the automotive, they had garnered such a bad reputation that production had to cease.
I don't think this ideas is new.
Sign in to Reply
elPresidente
7/20/2012 4:05 PM EDT
Um...no. The Fiero became a threat to the high margin Corvette and got canned due to internal GM politics. The instant Pontiac engineers showed off their twin turbo V6 Fiero prototype, the model got the axe. It was a great little commuter car, got fantastic gas mileage, and had rustproof body panels. The C5 Corvette caught up to this a decade later - for three times the money.
Sign in to Reply
Bert22306
7/20/2012 4:13 PM EDT
Not how I remember it at all, Presidente. The link below is to an article that describes this bit of GM history exactly as I saw it, at the time, by reading the automotive press.
http://ateupwithmotor.com/sports-cars-and-muscle-cars/201-pontiac-fiero.html
Sign in to Reply
peter.clarke
7/20/2012 11:30 AM EDT
There are two approaches epitomized by two different sayings.
"If it's worth doing it's worth doing well."
In a business or product case this implies checking, refining and polishing something until is close to perfect and then putting it out there -- but at the risk that will have been beaten to market by someone else.
The alternative phrase is:
"If it's worth doing it's worth doing badly"
This implies get the product/service out there even if it is a rough round the edges.
It relies on the belief that there is no better feedback than customer feedback and being first to engage with a customer is worth far more than coming along second or fifth with the supposedly "perfect" product/service that has not been refined in the heat of the marketplace.
Of course, it is not a case of one or the other. But applying intelligence to avoid the extremes of each.
Sign in to Reply
elPresidente
7/20/2012 4:06 PM EDT
if you have forever to enter the market, or can deal with a sluggish growth rate, bootstrapping is fine. For a technology entry, where markets can go fickle within three years, bootstrapping is a recipe for disaster.
Sign in to Reply
prabhakar_deosthali
7/21/2012 7:13 AM EDT
It is OK to introduce an unfinished product in the market if you have a definite road map as to how it is going to be refined, not just based upon the market feedback but your own knowledge about in what areas the product needs improvement. This will hep you to steer the product in the right direction and not play in the hands of the investors.
Sign in to Reply
Luis Sanchez
7/21/2012 12:01 PM EDT
I think there's no perfect rule to this. First, we can think of trying to find the equilibrium point. Not too fast, not to slow. Time to market and quality perhaps are in the opposites side of the balance and you must not be too late to release the product and must not deliver a product with such a bad quality that customers will throw it to your face. Also, cost increases with the longer investment in work and development of the product.
Perhaps the right sentence here would be something like "If it's worth doing, it's worth doing well, but hurry up!".
Sign in to Reply
Duane Benson
7/21/2012 3:28 PM EDT
The biggest problem with this strategy is that too many companies use it as license to sell horribly buggy products. "It's okay, because it's only version 0.5", we'll upgrade it later. Of course, it's not only start-ups that follow this strategy.
Sign in to Reply
JeanetteHay
10/5/2012 12:07 AM EDT
The problem with this bootstrapping method is that some entrepreneurs release a product that is so far from finished that it doesn't manage to please any customers and soon fails before it is given another chance. Some people might even think they fell for a scam product due to the bad build. Bootstrapping is good to manage costs but you have to set a certain standard before release.
Jeanette - http://www.lyonessscamreview.com
Sign in to Reply
Peter Quintana
12/24/2012 3:51 AM EST
The central point of minimum viable product is the word 'viable'. It is not a new approach - Toyota developed lean manufacturing, on which lean start-up is based - but it is radical. Too many companies with spend fortunes developing something to 'perfection' only to find nobody wants it, or someone else has beaten them to market. If a product doesn't please any customers, surely it's best to get feedback quickly and to refine, redevelop or change direction as needed?
Sign in to Reply