How to Fix your Founder Myopia, easy 6 steps you can start today
If you are a founder with 8 minutes available, continue reading the whole piece: the context of how I defined the myopia and the story of the founder that triggered this piece. If you are a founder with only 3 minutes, go directly to the last paragraph “How to fix Myopia” and start directly from more direct hands-on advice, although it will feel a bit generic without the context. Whichever you choose, thank you for your time.
Recently I was invited to be a power mentor to a university incubator, that I gladly accepted because it was in my hometown. I must say, I felt super happy and energized after all the sessions, but one thing bugged me that triggered this whole thread. I was talking to an industrial hardware inventor/founder, that claimed; his team, with many years of experience, have developed a 10x solution for a particular sector. They claimed their new solution would increase capacity, decrease energy costs, allow for better estimation and forecasting, at 1/4 the cost of the current alternative. He was very happy because he would still be making 40–50% gross margin. That was when I wanted to jump off my chair and scream. I partially jumped off my chair but instead of screaming I started asking questions to the founder.
1) Can you provide evidence to your claims of savings? The answer was yes
2) Can you quantify the impact of the added capacity increase in revenue? The answer was yes
3) Can you build & sell this at scale? The answer was yes.
Then I asked why is not selling this 2 times more than the current price but 4 times less? Which he was puzzled with. My calculation and reasoning were simple, he was giving a 2–3x increase in revenue to his client, with 50% less unit cost. The significance of this invention was not served well with the pricing & delivery model of the product, and there were a handful of reasons. So what were my observations and gaps about this founder?
1) The founder had no idea about value-based pricing but always focused on making modest profits based on a margin he calculated over costs. (Teachings of a classical Engineering Mindset)
2) He had no idea about positioning and how price would be an indicator of quality and perception. (Teaching of a Product Fetish where they are not taught Marketing Makes Kings)
3) He had never thought of other business models because all he was focused on was to build and sell a product. (Product of a non-competitive Business Ecosystem in Turkey)
4) He had never searched for emerging business models and how large co’s like Hilti had transformed their business by focusing on their strengths and competed against price driven competition from no-name producers although they had a strong brand. (Product of the many cookie cutter pre-accelerators and so-called mentors that ‘teach’ the Business Model Canvas wrongly as a tool for execution not as a tool for discovery and testing)
Maybe there are other reasons, but these were the common ones I had seen in many other startups especially from emerging countries. I think they are completely curable yet so much embedded in the mindset of founders that I see. However all these, I believe are the result of a broader problem which I call as Founder Myopia.