Every startup embarks on a unique journey, influenced by its specific business model and goals. In the world of startups, there are a couple of predominant journey models that guide them toward maturity. To better understand these models, let’s first define some key terms:
Projects: A project is a focused endeavor with specific objectives. It is aimed at completing and delivering a solution based on a predefined specification. Projects are often tailored to address a particular application or problem. While projects may seem similar, each one inherently carries some degree of variation. They lack flexibility and customization options, primarily existing to fulfill specific requirements. The constraints associated with projects often necessitate creative workarounds. Project solutions are typically unique and, as a result, tend to be on the expensive side. Customers are willing to pay a premium for projects, recognizing their critical nature.
Project Services: Project services encompass everything described above but are often bundled together to offer a comprehensive set of services. For example, event management or a series of complex, interrelated activities may be packaged as project services.
Products: Products, on the other hand, are well-defined offerings with specific features designed to meet particular customer needs. They are usually pre-packaged and not customizable, though some products are modular, allowing customers to purchase additional modules to align with their specific requirements. Even within this modular framework, modules adhere to standard specifications.
If you’re a startup looking to enter a potential market space but aren’t sure where to begin, one of the most straightforward paths is to explore projects. Projects, unlike product development, involve creating bespoke solutions for clients. Customers in the project context are often eager to collaborate with you, the vendor, and provide valuable insights into their industry, challenges, and pain points. Projects tend to have a higher customer pull factor compared to selling products, making them a relatively accessible starting point for your entrepreneurial journey.
When it comes to launching a startup, the journey can take many forms. However, starting with projects is often hailed as one of the most effective ways to bootstrap your company. Why? Because projects provide a steady cash flow while allowing you to experiment with your customers’ funding to solve real-world problems. Let’s delve deeper into why projects make for a solid foundation for your startup journey.
Learning and Experience: Engaging in project design, development, and implementation is like conducting an invaluable experiment funded by your customers. It provides you with a wealth of knowledge and experience about your industry and, more importantly, your customers’ pain points. This deep understanding is the bedrock upon which successful startups are built.
Scalability Challenges: It’s essential to recognize that projects, in their essence, are not scalable, at least not without increasing the size of your organization. Each project has its gestation period, and while sales might come relatively easily, the sales cycle can be lengthy. Furthermore, managing projects requires a constant cycle of resource ramping up and down, making it challenging to maintain a fixed workforce and infrastructure. Project teams are also tethered to specific locations, necessitating changes in customer interaction processes with each new project.
A Path to Product Development: Paradoxically, projects serve as an ideal pathway to develop products frugally and through bootstrapping. Many companies begin their journey as project-centric organizations, learning from their project implementations. Over time, they identify niches within these project contexts and generate product ideas. This evolution leads them to transition from project-based startups to product companies.
Standardization and Scaling: Successful startups that follow this trajectory often employ effective processes to make the most of their resources. They build strong customer relationships and gain profound industry insights, allowing them to standardize their solutions. This standardization eventually leads to the creation of shrink-wrapped, standardized products that can be offered to multiple customers, enabling scalability.
Migrating from Projects to Products: While transitioning from projects to products is not a straightforward journey, it’s one of the best models for testing product-market fit and validating the myriad hypotheses that every startup must confront. Projects grant startups access to customers and their genuine challenges, pain points, and desired outcomes. By closely collaborating with customers during the project phase, founders can identify product niches and transform their ventures into product-centric endeavors.
Mindset Shift: Managing projects and products requires different mindsets. Projects thrive on finding unique problem-solving approaches without constraints on methods or costs, as they are typically one-off endeavors. In contrast, building a product demands an engineering mindset focused on standardizing systems and subsystems, with a holistic approach to cost reduction and optimization. Products must zero in on specific market segments, which may mean excluding certain features to maintain cost-efficiency and user-friendliness.
Defining Your Product: To succeed in the product space, it’s crucial to clearly define your offering based on classic criteria. Consider the jobs your customers need to be done, the pains they currently endure, and how your product will alleviate those pains. Additionally, outline the gains your customers will achieve by choosing your product.
In conclusion, if you’re wondering how to launch a bootstrapped venture and enter the market successfully, consider the Project to Product route. It’s a proven strategy that many founders have followed to achieve success in the world of startups. Starting with projects not only sustains your cash flow but also equips you with the knowledge and insights needed to evolve into a successful product-oriented company.
A J Balasubramanian is a serial entrepreneur, with over three decades of startup experience in founding companies, mentoring / incubating startups and writes regularly on topics of interest to startups.