I am part of a startup right now — three founders and our first real employee. Prior to this, I was at a rapidly growing tech company that recently went public.
My prior company, an established player in a defined market, looked at several dimensions when evaluating new markets (see my earlier post). My existing company, a small startup just getting under its feet, is looking at many of the same dimensions as we evaluate markets (and product-market fit in those markets). That said, there are also definite, and desirable, differences in how the two companies perform these evaluations.
An established company has an established brand, products, and services that can give the company a foothold and competitive advantage in areas directly adjacent to what they do well today. Likewise, an established company’s strategic trajectory may make some really interesting opportunities a poor fit because they are significantly orthogonal to their core mission — making an otherwise good opportunity (for someone) more of a distraction than a benefit.
I have no doubt that self-driving and alternative fuel cars are great opportunities, but are they a good fit for Barnes & Noble? That is an extreme example, but most of us have seen variations of this that leave you scratching your head.
The new startup has to think about brand, products, services and mission but before they are widely known and established, there is more elasticity in shaping these while the company narrows down their market. While there is “more” elasticity here for the startup, this elasticity is not “unlimited” and the company still needs to be careful about what they pursue, when they pursue it, and how they go about it.
This seems pretty obvious, but I am guessing that we have all seen established companies ignore organizational fit in order to pursue opportunities (including acquisitions) that just don’t seem to make any sense. And, likewise, many have probably witnessed startups that never successfully narrow down their market and close shop before executing on a successful business idea.