Taking new technologies to market is a tough challenge and one that is exaggerated significantly when the team attempting it is a start-up with little track record. Add in the complexities and price-pressure of operating in the Automotive market, and it can turn a tough challenge into an insurmountable problem.
The UKs automotive industry is a highly competitive place to exist and is dominated by established, global players operating at high volume, with large balance sheets. But let us not forget, that the most valuable automotive company on the planet is a relative newcomer, Bugatti is now owned by a company just 14 years into its lifecycle, and billions have been raised globally by new energy start-ups to deliver new battery products to market. It’s easy to underestimate the importance of SMEs.
By reorienting the innovation process towards early adopters, relentlessly focusing, thinking broadly about the business being developed, and listing to outside advice, start-ups can supercharge their investability and their route to commercialisation
The term SME doesn’t help much either! First, let's be frank, it’s a boring acronym, and second “Small to Medium Enterprise” covers all manner of different businesses. From 100-year-old manufacturing companies to medium-sized engineering consultancies to a new tech start up on day one after registration, to high-potential high-ambition tech scale-ups. APC has had the opportunity to support all kinds of SMEs through all our funding programmes, and we have seen how the challenges that companies face vary significantly depending on their point in the business life cycle.
A particular area of focus for us here at APC is supporting Start-ups and Spinouts through our Technology Developer Accelerator Programme (TDAP) which supports SMEs with combined grant funding, technical support, and business mentoring.
Whether they are born out of a talented engineer setting up a new business to develop an idea, or a PhD graduate spinning a company out to commercialise their university research, we have understood that the challenge for companies taking new technologies to market is not all about technology. Many factors involved with developing a business alongside the technical concept become critical, our big 5 are:
- Developing a commercialisation strategy and roadmap
- Intellectual Property protection strategy
- Becoming investor-ready
- Developing the management team leadership approach
- Developing the product prototype and engineering process
They are in a sense, all linked. In this blog I’ll focus on the first, developing a commercialisation strategy.
Tech start-up founders can be all about tech: “If we can make it work, if we can deliver this amazing technology, then customers will come.” Then after a few hard years of development, it becomes clear that “the market doesn’t quite want what we delivered,” or “we couldn’t get enough commercial traction to convince investors,” or “we are just not ready to engage with our big target customers.”
In 2011, Eric Ries published “the Lean Start-up” to tackle these issues, and since then an entire management philosophy has developed around how best to take a start-up to market. Through TDAP we have adapted and added to these processes and developed the following principles to help boost companies on their route to market. Here are just a few principles that underpin our support for companies developing new tech for automotive.
1, Focus: as start-ups, our strength lies in our ability to test things rapidly and execute quickly, but we are resource poor. As such, laser-like focus is a must-have. Strategy is all about what we say no to, and to be effective we need to say “no, not now” to most possibilities to focus our efforts.
2, Value proposition <> Customer need: Technical features are important, but they do not necessarily translate into ‘something someone is going to buy’. Notice that there are two important variables here, the “Who” will be the customer, and the “What” they want to buy. Targeting innovation on a specific lead customer is critical. Too many innovators develop their concepts in a way that ‘opens up possibilities for the future’ when in reality, potential is not valuable unless it converts for that lead customer that will make the first purchase. Second, we mustn’t forget that it's not technical features that really interest customers, it is the value that these deliver that is most important: What does the product enable our customer to do, and what cost does it enable them to save?
3, Target market: Getting to market is everything. For companies it can be natural to assume that we should aim straight for the largest possible market. Yes, there are many innovations that could be deployable in the high-volume passenger car market, but it is also important to understand how likely it is that you will be able to supply to those blue-chip customers. Ultimately, it’s the fact that someone is willing to pay which validates that the product has potential, not necessarily the size of the first order, so picking the right ‘early-adopter’ customer is critical and it might not be on wheels! We have found that balancing ease of entry with the attractiveness of opportunity leads companies to target otherwise ignored niches as a proving ground for their new products.
4, Listen, don’t sell: No one likes to be sold to. ‘Hard selling’ creates a natural suspicion and distrust. Instead, asking questions that enable potential customers to reflect on their challenges will often lead to them telling you what they want and why they want it. Listening can enable start-up leaders to find that the value of their innovation is very different from what they thought and that their customers want it delivered in a different way than that proposed.
5, You are creating a business model, the product is just one part of it. There are a variety of tools such as business model canvas and lean canvass which invite innovators to brainstorm the other elements of their business beyond simply the product and how amazing it will be. Whilst these are useful, the real value is to stand back once completed and challenge. Examples include “Where are my assumptions? What do I need to firm up to increase my confidence? Do I really understand my revenue model? Are there links between my partner and my sales channels? Are my target customers really in the same segment, and are they really all served by the same model?”
6, Be open to challenge: No one has all the answers. So being open to challenges, external feedback, hard criticism, and mentoring can enable leaders to get a broader, richer view of the route ahead. Of course, it is then down to founders and leaders to select the advice or challenge they will react to, which they will not, and crucially – Why?
We believe that by reorienting the innovation process towards early adopters, relentlessly focusing, thinking broadly about the business being developed, and listing to outside advice, start-ups can supercharge their investability and their route to commercialisation. Having seen the 100 or so TDAP alumni go on to raise over £250m investment is hugely rewarding, and if APC has played even a small role in helping them to succeed it will have been time well spent.
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