Getting Up Close & Personal With The Marketplace: What Startups Can Learn From Prostitution (& Banking)!

The Cultureship Practice
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A guy called Fred came to see me yesterday and he told me a lovely story about what he would like to see happen but I was not at all sure that it might all work out like that. It wasn’t a fairy story, exactly, but it did contain a considerable amount of wishful thinking and a fair few leaps of faith.

So this is a note on earlier stage business about Proximity.

Let me explain:

Proximity is my term for an assessment of the contingent stages of your offering between value-add and customer.

Let me explain some more:

I once saw a business which was about selling blinds and curtains franchises. The business was based around an existing blinds and curtain outlet in a capital city. But it did not make its product. The blinds orders were fulfilled by a company in the same country, the curtains by a curtain manufacturer in another country.

The idea was that a package of samples and a modicum of design and specification expertise would be promoted to other home furnishing outlets in the country’s regions which did not currently offer made-to-measure blinds and curtains.

Those shopkeepers would present the samples, take measurements and an order, and remit these to the central business, who would then pass them on to their two suppliers for manufacture. The blinds and curtains would then return to the franchisor, be shipped on to the franchisees, and then installed to the end customer, probably by local handymen with some skills in this area because it tends to be a rather fiddly job.

This is an example of proximity at the outer edges of unworkable. What might be capable of being presented as a logical and interlinked series of business process steps was flawed with multiple steps whereby error, misunderstanding, mistake, limited margins and incompetence would almost inevitably compound into chaos which rendered the system unworkable. And so it was. It fell victim to terminal proximity issues.

It’s not difficult to spot looming proximity issues when they are delineated as clearly as they above across geographical and regional boundaries, different products, distinct business processes, various people and skilled fulfilment requirements.

But it can all get beguilingly buried when it comes to early stage propositions within the digital and IT worlds. Don’t get me wrong about Fred – one day he may well be a superstar. He is very clever, skilled and has enough experience that, with guidance, he will hit on a winning proposition before long. I’m going to stay in touch with him through this process – Freds and Fredas are the future.

His current idea, however, committed cardinal proximity sins. In his initial pitch I detected a series of about six uses of “and”, which would have been better articulated as “if”. Each one of these was a “stop-go” matter of technology delivery and/or fresh adoption behaviour by proposed customers. The exponential impact of this extended proximity series is that I had to tell him that the odds were overwhelmingly stacked against any meaningful success.

You get many of these loosely networked notions masquerading as finished business propositions. The situation is compounded by the prevailing there’s-an-entrepreneur-in-everyone and made even worse by an enterprise support industry that is remunerated by the volume of its contacts, not the accuracy and insights of its advice.

And where does prostitution come into this? Ethical issues aside, selling one’s body for instant remuneration is about the ultimate in proximity closeness.

Ethical issues aside once more, banking is pretty close – lender, borrower, commission……tight as it gets in the profitable transactional exchange. It’s bang, bang – product and customer coming together without any impediments or extended chains of intermediaries. Every extra intervening step is a huge extra risk It is not always practical to have no distance at all in the complexity of today’s marketplaces but it is my rule of thumb that I rapidly lose interest in early stage proposals which carry more than one additional stage of proximity between production and consumption.

It is possible for sophisticated and established businesses to experiment and to leverage multi-channel, multi-partner and networked distribution models. But these tend to be more about extending market dominance, not marketplace entry. All this ties to Minimum Viable Product – getting something into someone’s hands quickly and profitably: speculative chains of uncertain routes to market do not work for startups.

It is useful to remember that Microsoft in its glory days of seemingly endless growth was guided by a very decisive sales model – sell to, sell with and sell through. The first activity was about full promixity; the other two stages only allowed for one extra layer in the process.

It all sounds so simple – line up something that people really want, will pay for now, and which is something you can produce within your budget and within a timely period.

But every day I see business plans which demonstrate lack of proven appeal, no established marketplace and a fudge of never extending R&D intentions in place of the crisp delivery of a compelling service or project.

Don’t sell your body and soul to a fractured and unproductive future; make sure you are selling yourself to people who want to pay for you now. It’s the oldest business model in the world – and it’s the one that still works best.

     Author Malcolm Evans is a business funding and business angels specialist.


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