Partner Types - How to Build a Startup

Summary

The video script discusses the importance of strategic alliances for startups, emphasizing the concept of the 'whole product'. It explains that startups cannot initially provide a complete solution to mainstream customers due to limited resources. Instead, they should complement their core product with additional services through alliances. The script uses the example of Starbucks partnering with Pepsi to distribute Frappuccino. It also cautions startups about the common mistake of targeting mainstream customers too early, highlighting the role of 'earlyvangelists' who are willing to assemble a complete solution themselves and provide valuable feedback on the product's feature set.

Takeaways

• 🤝 Strategic alliances are crucial for startups to complement their core product with additional products or services.
• 🚀 The concept of the 'whole product' is essential for startups to understand, as they cannot provide a complete solution to mainstream customers on day one.
• 💡 Startups often lack the resources to fulfill every requirement on a Fortune-1000 company's checklist or RFP, hence the need for strategic alliances.
• 🌐 Examples of strategic alliances include Starbucks partnering with Pepsi to distribute Frappuccino®, leveraging Pepsi's extensive distribution network.
• ⚠️ A common startup mistake is assuming they are selling to mainstream customers immediately after their first product release.
• 🔍 Early-stage startups are typically selling to 'earlyvangelists', customers who are similar to the startup founders and willing to assemble a complete solution themselves.
• 🛠 Earlyvangelists are valuable as they can provide feedback on what constitutes a complete feature set after they have built the product themselves.
• 📈 Startups should not rush to have all business development activities ready by the first customer ship; they can be deferred to after securing earlyvangelist customers.
• 🛑 It's important for startups to think about the order in which they develop and implement strategic alliances and business development activities.
• 🔑 The term 'earlyvangelist' highlights the unique role of these initial customers who are not only adopters but also contributors to the product's development.
• 📝 Startups should focus on building strategic alliances that can enhance their product offering and provide a more comprehensive solution to attract mainstream customers.

Q & A

What is the concept of strategic alliances in the context of start-ups?

Strategic alliances refer to partnerships that start-ups form to complement their core product with additional products or services from other companies. This helps start-ups offer a more complete solution to customers by leveraging the strengths of their partners.

Why is the idea of the 'whole product' important for start-ups?

The 'whole product' concept is crucial because it acknowledges that start-ups cannot provide a complete solution to mainstream customers from day one due to limited resources. It emphasizes the need to use strategic alliances to enhance the core product with additional offerings.

What challenges do start-ups face in providing a complete solution to Fortune-1000 companies?

Start-ups typically lack the time, money, and resources to fulfill every requirement that a Fortune-1000 company might list in a checklist or RFP. This is why they need to form strategic alliances to access the necessary resources and services.

Can you give an example of a strategic alliance that complemented a start-up's core product?

An example is the partnership between Starbucks® and Pepsi™ in 1996. Starbucks® leveraged Pepsi's™ vast distribution network to bottle, distribute, and sell Frappuccino®, enhancing their product offering.

What is the common mistake start-ups make regarding mainstream customers?

A common mistake is that start-ups often believe they are selling to mainstream customers as soon as they launch their product. In reality, they are initially selling to early adopters or 'earlyvangelists' who are willing to assemble the complete solution themselves.

Who are 'earlyvangelists' and what role do they play in start-ups?

Earlyvangelists are early adopters who are enthusiastic about a start-up's product and are willing to put in the effort to assemble a complete solution. They provide valuable feedback to start-ups on what features and services are needed for a complete product offering.

Why should start-ups not rush to have all business development activities ready by the first customer ship?

Start-ups can defer certain business development activities until after they have secured their first earlyvangelist customers. These customers will often build the product themselves and then provide feedback on what constitutes a complete feature set.

How should start-ups approach the order of business development activities?

Start-ups should think strategically about the order in which they implement business development activities. Instead of trying to have everything ready by day one, they should focus on what is most important to their earlyvangelist customers first.

What does the term 'earlyvangelist' imply about the customer's attitude towards the start-up's product?

The term 'earlyvangelist' suggests that these customers are not only early adopters but also advocates for the product. They are willing to invest time and effort to use and promote the product, even if it is not yet a complete solution.

How can strategic alliances help start-ups in the long run?

Strategic alliances can provide start-ups with access to resources, expertise, and distribution channels that they might not have otherwise. This can accelerate growth, enhance the product offering, and ultimately help start-ups reach mainstream customers more effectively.

Outlines

00:00

🤝 Strategic Alliances for Whole Product Development

The first paragraph introduces the concept of strategic alliances in startups, emphasizing the importance of complementing a core product with additional services or products to create a 'whole product'. It explains that startups cannot initially provide a complete solution to mainstream customers due to limited resources. The example of Starbucks partnering with Pepsi to distribute Frappuccino is given to illustrate the concept. The paragraph also cautions startups against assuming they are selling to mainstream customers immediately, as early customers, referred to as 'earlyvangelists', are often willing to assemble a complete solution themselves. These earlyvangelists can provide valuable feedback on what the complete feature set should be, allowing startups to defer certain business development activities until after they have gained these initial customers.

Keywords

💡Strategic Alliances

Strategic alliances refer to partnerships between companies that are formed to achieve a common goal or to complement each other's capabilities. In the context of the video, strategic alliances are used to enhance a startup's offerings by incorporating additional products or services that are not provided by the startup itself. An example from the script is the strategic alliance between Starbucks® and Pepsi™ to distribute Frappuccino®, which allowed Starbucks to leverage Pepsi's extensive distribution network.

💡Whole Product

The concept of the 'whole product' is central to the video's theme, emphasizing the idea that a startup cannot initially provide a complete solution to mainstream customers due to limited resources. The whole product includes not only the core offering but also additional elements like training, installation, and service that make up the complete package for customers. The script mentions that startups should aim to develop the whole product by forming strategic alliances to complement their core product.

💡Mainstream Customers

Mainstream customers are the general market consumers who typically have more comprehensive needs and expectations from a product or service. The video script points out that startups cannot cater to these customers from day one due to resource constraints. Instead, they initially target early adopters or 'earlyvangelists' who are willing to assemble a complete solution themselves and later provide feedback on what constitutes the complete feature set.

💡Earlyvangelists

Earlyvangelists are a specific type of early adopter who not only embrace a new product or service but also actively promote it to others. In the video, it is mentioned that startups often mistake these earlyvangelists for mainstream customers. Earlyvangelists are crucial as they help startups understand the complete solution needed by assembling the product themselves and providing feedback.

💡Resource Constraints

Resource constraints refer to the limited availability of time, money, and other resources that startups typically face. The script highlights that these constraints prevent startups from providing a complete solution to mainstream customers right away. Instead, they must rely on strategic alliances and the feedback from earlyvangelists to gradually develop a whole product.

💡Complementary Products or Services

Complementary products or services are those that add value to a core product and enhance its appeal to customers. The video discusses the importance of using strategic alliances to provide these complementary offerings, such as training, installation, and service, which help to create a complete solution for mainstream customers.

💡Fortune-1000 Company

A Fortune-1000 company refers to one of the top 1000 largest corporations in the world, ranked by revenue. The script uses this term to illustrate the extensive requirements that such companies might have when considering a product or service, which a startup cannot fulfill initially due to resource constraints.

💡Checklist

In the context of the video, a checklist represents the comprehensive list of requirements or features that a mainstream customer, such as a Fortune-1000 company, would expect from a product or service. The script advises startups not to feel pressured to meet every item on this checklist from the outset but to focus on developing strategic alliances to gradually build up to it.

💡RFP (Request for Proposal)

An RFP, or Request for Proposal, is a document used by organizations to solicit proposals from vendors or service providers. The video script mentions RFPs as part of the extensive requirements that startups cannot meet on day one, emphasizing the need for strategic alliances to address these requirements over time.

💡Bus-Dev (Business Development)

Bus-Dev, or business development, involves activities aimed at growing a company's business, often through partnerships, strategic alliances, and other initiatives. The video script cautions startups against rushing to establish a head of bus-dev and all the necessary solutions on day one, instead suggesting a more phased approach based on feedback from earlyvangelists.

💡Feature Set

A feature set refers to the collection of features and capabilities that a product or service offers. The script points out that earlyvangelists, through their own assembly of the product, can inform startups about the complete feature set that is ultimately desired by mainstream customers.

Highlights

Strategic alliances are an interesting concept for start-ups to consider for partnering.

Start-ups should focus on the idea of the 'whole product' to provide a complete solution to customers.

It's impossible for start-ups to provide a complete solution on day one due to limited resources.

Strategic alliances can help complement a start-up's core product with additional products or services.

Strategic alliances can provide access to resources like training, installation, and service.

The concept of surrounding a product with a 'cloud' of other resources is introduced.

Starbucks and Pepsi's partnership in 1996 is cited as an example of a successful strategic alliance.

Start-ups should aim to develop the 'whole product' to deliver a complete solution to mainstream customers.

Start-ups often mistakenly believe they are selling to mainstream customers right after their first product launch.

Early-stage start-ups are typically selling to 'earlyvangelists' who are willing to assemble the complete solution themselves.

Earlyvangelists are crucial as they can provide feedback on the complete feature set required.

Business development activities may not need to be ready by the first customer ship, but can be deferred.

The importance of strategic alliances is emphasized for start-ups to think about the order in which they establish partnerships.

Start-ups should not rush to checklist all solutions on day one but consider the sequence of establishing strategic alliances.

The transcript highlights the value of strategic alliances in complementing a start-up's core offering and reaching mainstream customers.

The transcript provides practical advice for start-ups on how to approach strategic alliances and business development.

Transcripts

So let's take a look at the types of partners.

One of the most interesting concepts is strategic alliances.

One of the concepts in start-ups that is important to remember

is this idea of the whole product.

It turns out there is no possible way on day 1

that your start-up could provide a mainstream customer

with a complete solution; you just can't.

You don't have enough time or money or resources

to fill out every possible thing someone in a Fortune-1000 company

is going to put on a checklist or an RFP for you to provide.

So the idea is to use strategic alliances

to complement your core product with other products or services.

It could be training, could be installation, could be service,

that is to surround your product with a cloud of other resources

to address mainstream customers.

For example, in 1996 Starbucks® partnered with Pepsi™

to bottle, distribute, and sell Frappuccino®,

which gave them access to Pepsi's™ enormous distribution channel.

Now, one word of caution.

You understand that the phrase I used was to develop the whole product,

to deliver a complete solution to mainstream customers.

The mistake start-ups often make is thinking

that they're selling to mainstream customers the day they first ship.

It turns out that for most start-ups not in an existing market,

you're not selling to mainstream customers,

you're selling to crazy people just like you.

It turns out that those people, which we called earlyvangelists,

are more than happy to assemble the complete solution themselves,

so all the bus-dev activities that start-ups scramble to get ready

by first customer ship actually could be deferred in most ventures

to actually after you got those first earlyvangelist customers

because it's the earlyvangelists who will, once they build the product themselves,

actually tell you what the complete feature set is.

So, think about strategic alliances.

Don't just checklist "I need a head of bus-dev

and all these solutions on day 1."

Think about what order they come in.