Avoid These Eight Deadly Mistakes of New Software Product Development

This is the first article in the series "Are you Sure Your Software Business is Ready for Growth?" Incorrect focus is a top growth obstacle. As your business evolves from stage to stage, your organization's focus and skills need to follow. 

This series will help you spot the warning signs that it is time to shift gears, and give your business the chance it deserves. 

You might be in a startup. But you do not have to be a startup to find yourself in the startup phase. 

Not every company has to reinvent itself and its products every couple of years. Only those that wish to survive in today's competitive environment.

Starting on a new product is exciting. It breeds new energy and enthusiasm throughout the organization. There's lots of ideas. Developers let a big sigh of relief from legacy. 

At the same time, it is one of the most risky endeavours. There is no sure recipe for success. 

At least, watch out for these 8 mistakes that could kill your new initiative. 

Mistake #8: Entering without Real Commitment

The most frequent approach is to start on the side. With the enthusiasm inherent to the early phase, you scramble the energy to work after hours.

But the flow of ideas and things to do never stops. You will inevitably go slow, and you risk a burnout.

And this is not easier in an existing, running business. Startups will envy your income, but your commitments towards your existing clients and employees can make it even harder for you to set the time aside. 

The time you absolutely need to put in to build a product that you can sell to many customers. 

Therefore, you first need to make sure you create the space you need to really work on your new idea. This may mean seeking funding. But also in the pre-funding phase, make sure that you can have at least 2 days per week to do the initial research and validations of your idea.

Mistake #7: Trying too Many Things 

Often, you will have accumulated a number of ideas over the years.

Choosing feels like losing. Which one to choose? How to be sure you are betting on the right one - when so many new business initiatives fail?

If feels safer not to put all your eggs in one basket.

Unfortunately, that alternative - trying a bit of each idea - can be much worse. You will be struggling to get one product off the ground, let alone several. You will end up doing a bit of everything, but not nearly enough for any of the individual projects.

At the same time, it is good to take a step back, consider alternative ideas. Zooming in too early may make you blind for a bigger opportunity. So here is what I'd advise you to do:

  • Take a week or two to brainstorm, analyze and research different ideas
  • Use simple criteria (e.g. market size, customer pain level, profitability, scalability, competitive advantage) to evaluate your ideas, and then pick one to focus on

Mistake #6: Being too Ambitious - or Overcomplicating it

You have limited time and resources. You will never be able to start with a complex product or a complicated business model.

That is not to say you should not have a big vision. But very soon, you will need to think about a small and feasible version to start from.

And by that I don't mean writing a first line of code of a complicated product.

I mean, simplifying your product until you have something that can be implemented in 1-2 months - if not weeks - that is already useful to your customer.

And making sure the customers agree. And are willing to pay for.

Mistake #5: Not Creating the Freedom Required to Search for a New Business Model

Existing companies are generally optimized for executing their existing business model. That is why we call the top management "executives".

But a new product or technology may require a very different business model in order to succeed in the marketplace. And the job of the entrepreneur in charge is to search for this new business model. Doing that within the same organization will inevitably case frictions in priority, decision criteria and processes.

Xerox is the most (in)famous example of rejecting many innovations coming out of its renown Xerox Parc research center. Simply because they did not fit their business model of renting out copy and print machines. Many of these innovations found an alternative business model outside Xerox. Some even outgrowing its parent company! (e.g. Adobe, 3Com and SynOptic). Professor H. Chesbrough has written a lot about this case.

You therefore need to ensure that the new initiative has enough resources and freedom to search for a new business model. Either as a separate business unit or even a spinoff company.

Mistake #4: Building a Product No One Wants

"Build it and they will come" used to be the mantra of software startups during the late nineties Internet bubble.

Unfortunately, many such startup initiatives failed.

Google Wave, technical superior product, pushed out with big fanfare (supported by the Google marketing budget) failed to fill the real need in the market

Those that survived didn't get there by persisting with their initial plan.

Flickr started off as online game. Photo sharing was just a side feature, but it was what users really wanted. It started picking up faster than the game. The founders fought for a while trying to stick with their original idea, but it soon became obvious where the real interest was.

The focus should therefore be on validating the need for your product, often before even building it. And being ready to change direction based on the feedback from the market. The end goal is a product-market fit.

Mistake #3: Premature Scaling

After analyzing surveys from 3200 startups, Startup Genome concluded that 70% of startups fail because of premature scaling.

According to Nathan Furr, premature scaling is investing money in growth before nailing the product-market fit.

Premature scaling leads to several problems:

  • Burning the cash too quickly and reducing the time the startup has to figure out market misfit, and adapt its direction
  • Growing into a less agile organization focused on executing the original vision instead of finding out its pitfalls, and fixing them quickly
  • Heavily promoting the product that hasn't reached the product-market fit can result in perception of mediocrity, that will be difficult to change later on

Mistake #2: Not Searching for an Early Adopter

Even the product with the biggest user base in the world - Facebook - didn't start with everyone. They targeted the students of Harvard University. For quite a while, they were just growing from one university to the next.

New products need special kind of users. Users with a big need, willing to tolerate immature technology and incomplete products with a minimal set of features. They are called early adopters.

Or earlyvangelists, as Steve Blank calls them. Steve provides you 5 characteristics that should help you recognize an early adopter:

  1. They have a problem.
  2. They understand they have a problem.
  3. They are actively searching for a solution and have a timetable for finding it.
  4. The problem is painful enough that they have cobbled together an interim solution.
  5. They have, or can quickly acquire, dollars to purchase the product to solve their problem.

Mistake #1: Building a Product Instead of Building a Business

Building a product people want to use is crucial. But not enough.

GeoCities was one of the first ways for broad audiences to create their Web pages. It grew into a very popular service: in 1999 GeoCities was the third-most visited site on the web. Unfortunately, it failed to monetize successfully. In April 2009, approximately ten years after Yahoo! bought it, the company announced that it would shut down the service.

Startup is much more than the product alone. At the end of the day, a startup is a business. And a business is there to make money.

Therefore, the best way to start is to think about different aspects of your business model surrounding your product and answer these questions: who is your customer? why would they buy from you and not from someone else? how will you reach your customers and how much will it cost you? how will you make money? how big is your market? can you make a viable business case?

I hope you enjoyed the article. We coach many startups and new product development initiatives in existing software companies. Why not book a free meeting with our experts now?