In the last few weeks, we have discussed the wisdom behind writing a business plan and identified some good questions to start with before creating the plan. In this blog, we compare the process of building a business to that of building a house, and look at why it is important to understand the market landscape before the business is built.
Would an architect build a house on ground that couldn’t support it?
One would certainly hope not. In the same way, it doesn’t make sense for an entrepreneur to build a business in a market that can’t sustain it.
Back in the day, it wouldn’t have been uncommon for someone to find a piece of land, slap up a few boards and call it a house. Nowadays, however, that wouldn’t fly. What we do see a lot of these days, however, are businesses being slapped up like a rickety, old shack on a cliff, ready to be blown over at any moment. Entrepreneurs everywhere startup their venture without any real knowledge about the landscape they are building on.
Before we go any further, we need to clarify what market knowledge is. What it isn’t, is a Gartner market report and a few positive reviews from close friends. What it is, is deep, validated insights derived directly from the market. To reach this point isn’t easy, it requires some tact and determination.
So how does an architect gain knowledge of the landscape they are building on?
They put on their hard hat, roll up their sleeves and get out there. While a shack that moves with the wind may have been considered good enough a hundred years ago, it won’t fly now. Architects develop a great understanding of the landscape they’re building on before the house is built. With this on-the-ground knowledge, they are able to create a detailed blueprint that dictates how the house will be constructed.
In the same way, entrepreneurs need to put on their hard hat, roll up their sleeves and get out to survey their market landscape. This means getting to know your customers and your competition, the two major forces that shape your marketplace. Talking to customers, learning about the competition, and scoping the trends that affect the environment around the business, these are all essential steps in ensuring that the landscape is properly mapped out. These insights are then used to formulate the business plan, which details how the business will be built.
With a blueprint in his hands, an architect has an idea of the big picture direction of the housing construction, which he can share with contractors and construction crews. It includes what materials to use, where to build things and what dimensions to build each item. With this information, it is easy to estimate all the costs and expenditures associated with the construction. Similarly, an entrepreneur needs a business plan to lay out the long-term direction of the business and communicate to employees.
Let’s just imagine what would happen if an architect built a house off of a lousy blueprint because he didn’t survey the landscape. Sure the house would get built and people would move in, but inevitably problems would start to arise. Without any knowledge of the landscape, it would be very difficult to identify the source of such issues and small things would turn into big problems.
The same disastrous results can happen to the entrepreneur who doesn’t know about their marketplace. Unforeseen problems will arise that can’t be properly understood, leaving the entrepreneur in a weak position when they are forced to deal with them. Suddenly, these small issues get bigger and bigger, until it all comes falling down.
At Lumos, we understand that knowing what to do and how to do it are two separate things. There are several tools and ideologies for how to go about this process, but sometimes they make it even more confusing. The best thing you can do is get out there, experiment and learn. Knock on a few doors, fire off a few emails or put up a website. The key is to develop your insights and gain traction based on real industry feedback.
And remember, excessive market research can actually do more harm than help. Our blog on the blind men and the elephant is a great lesson about why you need to just put it out there and get the market’s reaction. If you’re sitting in the ivory tower, endlessly dreaming, planning and researching an idea, get out.
In the future, we will be digging into greater depth on some of these topics, including ways to research the competition and find new customers. Until then, put on your hard hat and get out there!
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