Startups. Glance through any major news publication or online business resource and you’ll see the headlines:

“How to Come Up with Startup Business Ideas in the Digital Era”
(Entrepreneur, 5/21/19)

“Startup Investment to Keep Soaring After Record Year” (WSJ, 7/19/19)

“Companies That Don’t Partner with Startups Will Become Irrelevant”
(Bloomberg, 1/18/19)

Considering the impact that startups have had on the business world and global economy, the topic is definitely worthy of this press coverage.  The convergence of multiple macro trends across the globe has elevated the startup world to its current status as the Holy Grail of economic growth opportunities.

A Little History on Startups

Although a standard Google search will yield numerous descriptions of what a startup company is, for the purposes of this article, Wikipedia’s one-sentence definition will suffice:

A startup is an entrepreneurial venture which is typically a newly-emerged, fast-growing business that aims to meet a marketplace need by developing or offering an innovative product, process or service.

Despite the fact that entrepreneurship in one form or another has existed for centuries, the word “startup” in the sense that we know it today, is a relatively new one. Sources credit a 1976 Fortune magazine article for first using the term to describe emerging business enterprises, and one year later a Business Week article referenced “startup companies.”

Online word trackers show that usage of the word grew steadily during the 1990’s, then dropped off significantly after the burst of the dot-com bubble in 2002, only to regain its popularity after the financial crisis in 2008. In the last decade, startup activity has expanded across the world, due in part to the emergence of small business incubators and accelerator programs.

Post-Recession Slow Down

Given all the media attention on the startup culture and healthy U.S. economy, it is somewhat surprising to find that startup rates in the U.S. have in fact been declining for some time across all industry sectors. In fact, the startup rate is one of the few economic indicators that has barely recovered in the years since the financial crisis of 2007-2009.

A variety of explanations have been offered for this, some of which are: demographic shifts (declines in birth rate and population growth; aging Baby Boomers), low unemployment levels, more stringent patent-eligibility requirements, and “developments rooted in policy, competition, financial markets, and our tolerance for risk.”  (Economic Innovation Group, 2019)

Nevertheless, pockets of accelerated startup activity can still be seen across the country.  While the U.S. as a whole continues to start and scale new firms in smaller numbers than it did prior to the Great Recession, several metro areas are experiencing healthy rates of entrepreneurship and business creation.  Some of these so-called “surge cities” are Austin, Raleigh, Nashville, Orlando, Phoenix, Denver, Salt Lake City, San Francisco and Detroit.

At the same time, there has been a massive increase in venture capital outside the U.S.  Advances in technology and communications — the proliferation of mobile devices, the explosion of cloud-based services, the efficiencies of 3-D printing – these are all contributing to rapid expansion of startup activity globally. The number of entrepreneurs globally has been climbing steadily – with predictions hovering around the 1 billion mark in 2025.

Optimistic Outlook for Product Innovation

Despite the post-recession decline in the rate of startup activity here in the U.S., there are reasons to be optimistic that things will turn around.

As Millennials’ pursue their passions and gain more work experience, and as their tolerance for financial risk increases as their college debt shrinks, these well-educated and well-connected individuals could breathe new life into the stalled startup scene.

Additionally, national statistics on startup activity may actually be underrepresenting a significant segment of the startup population.  Consider this:  while the startup rate is floundering, entrepreneurship is actually on the rise.  How can this be?  Because when counting startups, some tracking organizations only count startups that have more than one employee.  Sources estimate that there are millions of “soloists” in the U.S. who may well be responsible for job growth in the years to come.  And there are certainly people who the Census currently shows as being “employed by somebody else” …who are in fact entrepreneurs just getting started.

Having the Right Stuff: Human-Centric Product Design

For those hoping to make a go of a startup, be warned, such an undertaking is not for the faint of heart.  Studies have shown that three-out-of-four venture-backed startups eventually fail.  With all the “how to” resources available to aspiring startups, why the low success rate?

In the book Where the Jobs Are:  Entrepreneurship and the Soul of the American Economy, the author lists the five biggest challenges of building a business:  insufficient access to capital, difficulty finding people with the right skills, immigration policies that keep talent out, onerous taxes and regulations, and economic uncertainty.

While those challenges are legitimate, they don’t explain why startups actually fail.  As it turns out, the reasons for failure are well documented.

The Top 10 Causes of Small Business Failure

(Source: https://smallbiztrends.com/2019/03/startup-statistics-small-business.html)

What catches our attention on the above list?  As noted in the article, “Why Startups Fail” (Forbes, 5/1/19):

Nine of the top 20 reasons for startup failures – and five out of the top 10 – were related to customers – not meeting customers’ need, not listening to them or even ignoring them.

The folks at eCrowds, a web content management system company, admitted not prioritizing customer input, saying, “We spent way too much time building it for ourselves and not getting feedback from prospects — it’s easy to get tunnel vision.”

Similarly, VoterTide founders wrote, “It’s easy to get tricked into thinking your thing is cool. You have to pay attention to your customers and adapt to their needs.”

Startups fail to the same degree that they dismiss or underestimate the value of empathic design and user-centric design research. Design Research, especially, is the mechanism by which Startups can extract insights and feedback from their users, and which is sadly missing in many cases.

Here at SF, we are approached on a fairly regular basis by entrepreneurs and funded startups who recognize the need for design, prototyping or engineering services as they prepare to bring their product to market. These are people who are passionate about their ideas.  They have done their homework and used many of the resources available to them to develop a business plan showing anticipated sales, revenue, expenses, etc.  All are convinced that they have a good idea…and their preliminary research confirms that.

The problem is, having a good idea is not enough.  They aren’t going to be selling an “idea” – they are going to be selling a product.

It’s Not Just a Product.  It’s an Experience.

Every legitimate list of “Startup Guidelines” contains some version of this message:  Know Your Customer.   Translation:  You need to conduct research beyond your family and friends.  You need to immerse yourself in the right kind of research with the right people.

What does that mean?  It means you should take the time and make the investment necessary to understand not only your target user’s reaction to the concept (like/dislike, high interest/low interest), but the full spectrum of potential interactions the user will have with that product, i.e. the complete user experience.  Where will it be used?  Under what conditions, for what purposes, how often and in what settings?  Although getting the basic operational elements right is essential, it’s important to recognize that “usability” also includes product handling, storage, maintenance, even recyclability and disposal.

As early in the process as you can, give your target user something they can touch and feel – even if it’s a rough prototype at first.  Beyond concept appeal – you will want feedback on how the product looks, feels and works; what the ideal interface would be.  How you execute on those levels can make all the difference in converting a “nice to have” product to a “must have.”

When building a minimum viable product (MVP) to refine and validate the product concept, it is critical to expose that prototype to the right people – potentially “lead users,” – individuals with a vested interest in, passion for, and/or extensive experience in the category. These people could be “early adopters,” but not necessarily.  In fact, some of them could be extremely loyal users of a current product.  You want participants who care enough about the category that they will provide critical feedback; people who are in a position to evaluate whether you’re actually “on to something” or not.

Ideally you would have multiple target user touchpoints during the product development process – from early exploratory investigations, through concept ideation, MVP usability testing, design refinement (including styling) all the way to final product design evaluation.

We Can Help Your Startup Achieve Success through Human-Centric Product Design!

At Sundberg-Ferar, we recognize that design is a process and we live and breathe Design Thinking principles.

Many people, including startups, mistakenly believe that the product design process starts with an “eye-candy” kind of product concept, and ends with a production-intent prototype. That’s only part of it.

At our design studio, our multidisciplinary team does in fact design rough to beautifully refined product concepts. We also do engineer functionality and product mechanics, and we prototype low-fidelity models up to production-intent product models. However, before looking at designing the aesthetic beauty of a product, or even thinking about getting it ready for manufacturing and production, we ideally get into innovation strategy: Taking a deep dive into global macrotrends, trends within your product category and adjacent categories, making supported hypotheses about what new business opportunities might exist for your product or company, and then synthesizing that information to find the best innovation pathway to take. Even before Innovation Strategy, however, we begin in the world of Design Research – investigating if the product is really useful, usable, ergonomic, and intuitive for its multi-users.

Successful product design hinges on understanding the user’s vision for the ideal functional and emotional attributes associated with the full product experience, and then creating a physical embodiment and interface that delivers on those ideals. This is true across any category, whether doing design research for a medical product, consumer product, automotive product or beyond! We achieve this using a variety of design research tools that we tailor to each unique project, from usability research, to competitive product analysis, to qualitative focus groups, and quantitative surveys.

Adoption of new products, much like new technologies, begins with category leaders (enthusiasts, influencers), who embrace the “new” and in turn legitimize it for others.  Our Design Research team has the knowledge and experience to help startups identify, locate, recruit and learn from those key users.  Our designers, engineers and model-makers are experts in their fields and can provide support as needed and when needed, in all stages of the product development process.

Throughout its 85-year history, Sundberg-Ferar has preached that instead of designing a product to be “Everything to Everybody” the secret to market success is designing a product that is “Something to Somebody.”   In today’s highly competitive market, we firmly believe it is imperative that a startup comes to market with a product that is “Something Better… to the Right Somebody.”

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