Start-ups must focus sharply. Everybody knows that! And the reason for that is very clear: they are always limited on resources – money, management attention, time… so they simply cannot afford to spread it too thinly. In that case, is it at all possible, and even more interesting – is it at all worthwhile for start-ups to pursue multiple market opportunities simultaneously?
Parallel is not a dirty word
As we found in a research studying early market choices of over 300 new technology ventures, the answer to these questions depends on the specific conditions that the firm faces, and surprisingly – it is not always negative. In fact, such parallel strategy may actually turn out to be beneficial if done under proper conditions!
The main condition for the suitability of parallel strategy is acting in highly uncertain markets. When customers’ needs are not sufficiently clear, and founders cannot articulate the features and usage of their product, you can consider pursuing two market opportunities in parallel, to balance your risk and limit the chances of failure. Alternatively, if your initial idea offers limited potential for value creation or long time to revenues, you can bundle it with an additional opportunity to improve your performance.
Think carefully about your bundle
Yet…the only possible way for new ventures to actually benefit from this mitigation strategy, is if they carefully identify, evaluate and choose to pursue markets that are closely adjacent. Adjacency between two market opportunities means that they are tightly related on two aspects: the development of the product, and the delivery of the product.
While technology entrepreneurs usually think thoroughly about the development of the product, they often tend to underestimate the required capabilities for the delivery of the product in the market- which might be just as challenging, if not even more.
Tight relatedness between two markets will enable start-ups to grow and leverage the resources and capabilities that they are already developing for one market, and use them for succeeding in the other. It is the only way to overcome the scarcity of resources that founders face in these early days.
The case of through-wall visioning
One example of successful parallel strategy is a company named Camero. Camero developed a pioneering technology for through-wall visioning, and aimed to address both police forces and militaries from the very beginning. This was possible because the development of the product, and bringing it to the market, required relatively similar resources and capabilities. It thus enabled the new venture to mitigate the risk of slow adoption and long sale cycles, without spreading themselves too thinly. Indeed, it turned out to be a significant strategic decision for the successful future of the company.
Overall, while a focused strategy is – with no doubts – a critical element for start-ups’ growth and success, you may consider and even benefit from a smart parallel strategy when it is highly critical for your performance. Pursuing tightly related opportunities will enable you to balance risky moves yet stay focused, as the resources and capabilities that are required to succeed in both are almost similar.