Author and entrepreneur Steve Blank describes the business start-up process as having two phases.
In the first, entrepreneurs learn about their customers and what they want. This can be thought of as a series of experiments with real customers. It eventually leads to a business model that can be used to build a sustainable venture.
Once we learn what our business model needs to be, we can begin the second phase, which includes attracting more and more customers and building a company.
It is essential that we take our time before moving to the second phase to make certain we’re building our company around a business model that can lead to successful growth.
Nashville-based Aloompa is a great example of a business that’s taking its time to get things right.
In a visit to my business school class at Belmont University, two of the founders, Kurt Nelson and Tyler Seymour, told how they developed the business model for this relatively young company.
The original vision was to develop apps that would allow streaming of live videos directly to the iPhones of concertgoers. But this proved to be more difficult than they thought. However, their experimentation with the business model led to recognizing a more promising opportunity that still involves apps for music events.
They approached the Bonnaroo music festival about developing an app for attendees. To prove to Bonnaroo that the app would be something of value, they gave away the first year’s version.
They used that first year to prove that the app had value and to test what features fans at the festival truly wanted.
Their success with Bonnaroo led to the sale of more music festival apps. With each new app they continued to engage the market, all of which helped them learn more about their business model and their customers.
A big, early breakthrough for Aloompa occurred when they were asked to develop a new app for country artist Kenny Chesney. This showed them that their business model could be much broader than just developing apps for music festivals.
They still weren’t finished experimenting with what their emerging app business could become. Recently, they moved into developing apps for the Rally to Restore Sanity staged by comedians Jon Stewart and Stephen Colbert, as well as for the popular conversation game Table Topics.
Nelson said Aloompa isn’t ready to hire a full-time staff and build an organization. The partners are keeping operations lean and flexible because they expect the business model to continue to evolve.
The Aloompa story illustrates that even when the market seems to be accepting a new venture, and sales start to grow, owners still shouldn’t move too quickly to formalize the business. Be patient. Continue to experiment with customers. Tinker with the business model until you’re ready to scale up the venture.
I think this post brings up a really important issue, especially for young entrepreneurs who are eager to see “growth” in traditional ways: hiring on new people, acquiring an office, investing in equipment, etc. That type of growth doesn’t allow for much flexibility in the growth and evolution of the business model itself, as you pointed out. And in today’s rapidly evolving business environment, capitalizing on the flex in your business model could make all the difference!
I agree Jeff – it takes time – you need to evolve both your product and business model together based on validating your product. In our case, we carefully listened for over a year to develop a solid strategy, which eventually involved migrating from an award winning desktop solution to a SaaS model that enables our business model to be better tied to consumption of most valuable services.
I totally agree that you must be patient. I was in one of the classes that the founders of Aloompa came to speak to, and hearing their personal story of starting up their business was a perfect example of being patient. The best part about it is that it proves that being patient is benefical and actually works in the long run! Listening to Kurt Nelson and Tyler Seymour was a great oportunity to learn from somebody that started right where Belmont students are right now! I believe it also opened the eyes of students and gave them the reassurance that starting a business while in college is possible!