planning to identify potential customers, their needs, and so on. It also involves laying out the strategy through which the company plans to compete with others for its share of the intended market. The nature and methods of strategic planning will be described in Chapter 6.
Develop Products and Services . The second task of an entrepreneurial organization is “productization.” This is the process of analyzing the needs of present and potential customers in order to design products and/or services that will satisfy their needs. For example, the founders of Google, Larry Page and Sergey Brin, met in 1995 while they were PhD students at Stanford University. They saw the need for an Internet search engine “to organize a seemingly infinite amount of information on the web.”13 By 1996, they had built a search engine (initially called BackRub) that used links to determine the importance of individual webpages.
Although many organizations are able to correctly perceive a market need, they are not necessarily able to develop a product that is capable of sustainably satisfying that need adequately. For example, Myspace (an online social networking service) was one of the first of its kind. It was launched in July 2003 and by April 2004 it had 1 million unique U.S. visitors. It was later acquired by News Corporation; but over time it lost its cool image and was abandoned by users. Myspace was overtaken by Facebook in the number of unique U.S. and worldwide visitors in May 2009.
Similarly, there were many companies that developed coffee bars or cafes such as Peet's Coffee, Coffee Bean and Tea Leaf, Gloria Jeans, and others; but Starbucks has grown to dominate this market. Thus, being the first to recognize a need and the so-called “first mover advantage” can be useful but is not necessarily sufficient for sustainable success.
The productization process involves not only the ability to design a “product” (defined here to include services as well) but also the ability to produce it. For a service firm, the ability to “produce” a product involves the service delivery system, the mechanism through which services are provided to customers. For example, although coffee is nominally the core product of Starbucks, the real product is the coffee experience provided by Starbucks' cafés. The company called EAS (Experimental and Applied Sciences), founded by entrepreneur Bill Phillips, markets and sells performance nutrition products. However, the company is also committed to providing education and information (provided through articles that appear in their magazine Muscle Media and The Sports Supplement Review) on what people can do to become more physically fit.
The development of successful products depends to a great extent on effective innovation and strategic market planning. This involves understanding potential customers, their needs, how they buy, and what they perceive to be value in a product or service.
The success of productization depends, to a very great extent, on success in defining the company's market (i.e., its customers and their needs). The greater the degree to which a company understands the market's needs, the more likely that its productization process will be effective in satisfying those needs. Productization is the second key development task in building a successful organization.
These first two tasks of organizational development can be thought of as the entrepreneurial building blocks of the enterprise. They are required for proof of concept of the business; that is, whether the business has a valid market and product. Once they are established, the next tasks relate to organizational scale-up, which involves acquiring the resources required for growth and developing the operational systems needed for day-to-day functioning of the enterprise.
Acquire Resources . The third major task of developing an organization is acquiring and developing the additional resources it needs for its present and anticipated future growth. A company may have identified a market and created products but may not have sufficient resources to grow. For example, once Starbucks established proof of concept of its retail/café, it required resources to grow. Stated differently, “No bucks – no Starbucks!”
An enterprise's success in identifying a market and in productization creates increased demand for its products and/or services. This, in turn, stretches the organization's resources very thin. The organization may suddenly find that it requires additional physical resources (space, equipment, and so on), financial resources, and human resources. The need for human resources, especially in management, will become particularly acute. At this stage of development, the organization's very success ironically creates a new set of problems. These are the problems of organizational growth and scale-up.
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