When Bill Gross said timing is the single biggest reason that startups succeed, he was not talking about luck.
Bill Gross from IdeaLabs gave a very famous TED Talk a couple years ago about ‘timing’ being the single biggest reason for startup success. Many entrepreneurs feel that this means that success and failure is significantly based on luck. This isn’t really the case.
I’m sure you’ve heard the saying, “don’t try to time the market.” Timing the market in this context is about predicting when the broader stock market will increase or decline in a step-function fashion. Although it is sound advice to not try to time the broader stock market, it is absolutely essential that you work hard to time the market as it relates to the potential explosive growth of your target market in a startup.
In almost all cases with the launch of a new product or service in a startup, there is a broader ecosystem that must be emerging or in place for your business opportunity to have great potential. As far as market opportunities are concerned, you’d like to “drive on a paved road” as opposed to “chopping through the jungle with a machete,” so to speak.
So how do you understand and predict if your business opportunity has good timing? It really relates to your ability to assess the broader ecosystem of things that are needed for your business opportunity to ignite.
When it comes to market timing, you can be lucky, or you can be good.
It is possible to have good luck and intersect a great market opportunity, but it is always better if you can ‘look over the horizon’ of the market and see broader trends that will positively or negatively impact your ability to drive a rapidly growing business. One of the tools that I have found incredibly valuable in this context is change factors analysis, which is sometimes called PESTEL analysis.
PESTEL stands for political, economic, social, technological, legal and environmental factors that can impact your market. Another tool, popularized by Harvard Business School professor Michael Porter, is Industry Structure Analysis, also known as Porter Five Forces Analysis.
How to tell when a market is ready to ignite.
Although you can never predict with pinpoint accuracy when a market will ignite, you can have a pretty good idea within a couple of years. It is essential that you understand in great detail the specific ecosystem factors that impact your target customers’ willingness and ability to adopt your solution.
In a startup, you don’t want to be a salmon. You want to swim with the stream and not against the stream. You also want to take advantage of the incumbent competition’s inability to address the customer pain point because it would destroy their current business. This is the case even if the current solution to the customers’ problem is doing nothing or doing something in a vastly inferior way than what you are providing.
Being a little early is okay, but being late is a disaster.
As a startup, it is okay to be early to market as long as you aren’t massively early to market. If your product is available within 12-24 months of the perfectly ripe market conditions and you have delivered a best in breed solution with a significant price-performance advantage versus alternative solution, you have executed with very good timing.
As a startup, if you are late to market, you will likely lose. Only fast followers that differentiate primarily based in a superior cost structure due to scale can win as a follower.
Work hard to understand the PESTEL factors that positively or negatively impact your markets. Understand what is inside your control or sphere of influence, and understand what you purely need to monitor.
Look at your industry structure and how it can effect adoption of your solution. If you do this, you can make your own luck as it relates to timing.
This article originally appeared in Inc Magazine.