Willem Bulthuis ends his lecture at the Beyond Tech event with an example that clarifies the real heart of innovation. He takes us back to the time when the first settlers tried to build the city of Boston. “The story goes that the whole road system of that city was based on the paths that were made by cows looking for the best meadows”, he explains. “Because they kept on choosing the same paths, these routes became the easiest way for humans as well to get from one place to another. And ultimately, these people just paved the paths, so they could be used for vehicles as well as pedestrians. If you look at how unreasonable the city of Boston looks like now, you can see that this is one of the best examples of what innovation should not be like.”
Of course, the Boston cow path story is a modern legend that has already been refuted in the nineteenth century. But for Bulthuis, it is a thankful way of telling the difference between what is and isn’t considered an innovation. Willem Bulthuis, the CEO of WBX Ventures, is focusing his lecture on how a start-up can select its initial target market segment and identify its lead customers. “Do you go with a broad or razor-sharp approach? Do you acquire small customers and build a solid foundation first, then tackle large customers? Important questions that can be the difference between survival and failure”, says Bulthuis, who has recently been appointed as Investment Manager at the Pre-Seed Fund of UnternehmerTUM at the Technical University of Munich.
First of all, he asks his audience at the High Tech Campus Eindhoven, why would a start-up need customers at all? “To get some cash and to gain traction, of course. But the most important part is to get feedback. For that purpose, customers are much better than investors.”
And talking about finding those first customers, there are a couple of things to keep in mind, Bulthuis convincingly explains. “Most founders keep looking at the solution they found. The product, the technology. But it’s much more important to have a good problem, than a brilliant solution. So you should first want to determine what the burning need of your potential customer is. Without solving this, there won’t be any business at all. People or companies don’t spend money on you just because there’s new technology. They only come to you if you solve their problem and your solution is a number of times better than the alternatives. Especially when you are a start-up, so you can’t build on trust from the past.”
But even if you are ten times better than the rest, business is not self-evident. Your value proposition has to be absolutely clear, you must understand the decision processes at your customers or clients, and you have to be aware of the existing budget for your product. “And even then, you will have to be able to convince the investors or customers. They can only spend their money once, so be aware of the other stakeholders. And think ahead: what I see very often is that the owner of a start-up compares his product to that of a potential competitor, but what he should do is to compare his solution to the ones this competitor is still working on.”
After explaining the difference between a front-loaded and a back-loaded value chain (which is important in order to decide which part of that chain will be your best target), Bulthuis throws in the ‘risk-reward-game’. “It is possible to be a small player in a big market, but you need to understand what your position can be. Do you focus on the end-user or on one of the suppliers? Which one to pick as your first lead customer? Of course, this depends on a lot of circumstances, but I can tell you one thing for sure: you shouldn’t immediately choose the one with the largest market share. Although it certainly feels good if you can say that you work with a big and famous brand, in the long run, this won’t help you. Better choose the second or third tier, they are more willing to take a risk. Go with the guys that are eager. And flexible. And forgiving – because as a start-up you will probably not be doing everything perfectly from the start.”
And most certainly, don’t choose the ones that are paving the cow paths.