The ABCs of Start-Ups

From Small Business Management: Launching and Growing Entrepreneurial Ventures, 14th ed., 2007, by Justin G. Longenecker, Carlos W. Moore, J. William Petty, Leslie E. Palich, pages 67-68:

Many startups develop from what we will call Type A ideas–those concerned with providing customers with a product or service that does not exist in a particular market but that exists somewhere else. Randall Rothenberg, an author and the director of intellectual capital at consulting powerhouse Booz Allen Hamilton, says that this type of startup idea may have the greatest potential: "There’s ample evidence that some of the biggest businesses are built by taking existing ideas and applying them in a new context."

Many small businesses are built on this platform. Filmmaker Christian D’ Andrea was making a documentary on Special Forces when he saw a soldier chomping down an energy bar issued by the United States military, which had been developed specifically to provide the extra boost those in uniform need on the battlefield. D’ Andrea recognized an opportunity to take the product, which civilians couldn’t buy, to a whole new market. He and his brother, Mark, signed a deal in 2004 giving them license to use the science behind the product, and they used it to create the HOOAH!! Bar, a pick-me-up snack that today sells in thousands of stores and online outlets. Business is good, and growing; in fact, their Los Angeles-based startup, D’ Andrea Brothers LLC, recently expanded its product line to include an energy drink based on the same formulation. With sales poised to cross the $1 million mark, it is clear that tapping "military intelligence" to take an existing product to the civilian market can yield impressive results.

Some startups are based on Type B ideas, which involve new or relatively new technology. This type of startup can be high risk because there is usually no model of success to follow, but it can also have tremendous potential. In 1998, Richard Mayer and Malcolm Currie launched Currie Technologies, a Van Nuys, California, venture that produces electric bicycles and scooters. Within five years, the company was employing 40 people and had revenues of $10 million, but that was only the beginning. With the spike in fuel prices and escalating concerns about global warming, the company’s products make more sense than ever. Perhaps one of Currie’s executives best captured the essence of the business: "Clean, green and no gasoline!"

Type C ideas, those based on offering customers benefits from new and improved ways of performing old functions, probably account for the largest number of startups. In fact, most new ventures, especially in the service industry, are founded on "me, too" strategies–they set themselves apart through features such as superior service or lower prices. Laurie Johnson’s effort to redefine the common crutch fits into the Type C category. As founder of LemonAid Crutches, Johnson found a way to take some of the sting out of having to be on crutches after an injury. Her design crutches were born of experience. While Johnson was recovering from a broken leg sustained in a small-plane crash that took the lives of her husband and two-year old son, her sister tried to cheer her up some by spray painting her crutches and trimming the handles in fabric. Her response? "I sat there thinking, ‘Oh my gosh, this is so silly, but they make me feel better, too.’" In mid-2005, she launched her venture to sell a variety of fashionably functional crutches, with prices ranging from $140 to $175 a pair. With expected annual sales of $150,000, Johnson’s startup will be on solid footing.

Comments

  1. A Type D idea is a small business of writing about types of ideas.

    A Type E idea (“E” for emergency, excessive stress, or energy loss) is that from perceiving the genuine needs (not just “wants” or “leanings” of a group of people) and responding genuinely, effectively. It’s not a re-applied idea in a different context … the context is grim and persistent. It’s not re-packaging a solution and adding a marketing spin. “If it quacks, it’s still a duck.” It’s not fancy-ing up an old solution to a problem … because the problem still exists and only the costs (and new, perhaps mild, pleasures) have changed.

    A Type E idea significantly (yes, statistically, and at the 85% level of confidence) reduces wastes; captures and stores adequate water; reproduces photosynthetic processes; uses safely radioactive waste; provides design of minimally effective family housing; develops monitoring and inventory systems for the individual human condition (radio-activity, toxicants, etc.); blocks addictive tendencies; provides incentives to and/or motivates learning; clarifies and improves parenting; reduces phosphorus use on food and forage crops (its essential but in limited supplies); gains new nitrogen sources for plants; monitors and supplies feedback from ecosystems; transposes history to the future for applied timely uses; rewards lasting, personal, energy use; and clarifies the illogic and neuro-physiology of knowledge of “life after death.”

    A Type F-1 idea was a failure, a really good idea (maybe even Type E)that could have worked out, did work in stage-one, occurred at the wrong time, wrong place, where there were inadequate risk takers, inadequate funds, too powerful nay-sayers, or just one missing "straw" at the time that "broke the camel's back." One guy; one mishap; one catastrophy did it in. Now, maybe we could …

    A Type F-2 idea is an F-1 without a record. F-3's are personal and un-discussible … maybe later.

  2. Anne:

    Could you blog about this post on my site… Fwix coming to our region….

  3. Thank you, Stuart Mease, for your news. I posted a blog entry here:

    http://www.handshake20.com/2008/08/stuart-mease.html

  4. Robert Giles, you continue to be the most thoughtful, thought-provoking, and generous commentator on this blog.

    I didn't realize the limits of my thinking–A and B and C–until you offered E and F and scenarios beyond. Thank you for reminding me to be open to the wisdom of experts but not to be circumscribed by it.

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