Over-investment in product at an early stage is another common problem we encounter. New product adoption now requires significant behavior change. No one needs a new app or website. Our phones (and our lives) are already full. It's becoming exponentially harder to achieve traction with a new product, even when you already have an engaged community of users.
Because effecting behavior change is hard, it's advisable to start small and build the simplest possible version of your idea and assess the response from your target audience or customer base. Our experience is that, if it fulfills a pressing need, people will engage even when the execution is primitive. All too often we see a great product idea lost within an over-engineered feature set that obscures the core value.
From an investment perspective, it's more sensible to build your initial product with web technologies that are accessible by anyone, demonstrate solid traction, then invest in native versions once the product opportunity has been validated. Native apps are powerful vehicles for delivering customer value, but the wrong vehicle for early stage experiments.The upfront cost of building apps for both platforms (iOS and Android) is substantial and regular upgrades by Apple and Google mean maintenance costs are high.
Over-investment in product also occurs at the expense of marketing and promotion. Too often we see significant investment in software accompanied by an expectation that users will find it and use it on their own. The vast majority of apps are abandoned after a handful of sessions
, nearly a quarter are used only once and many are never downloaded at all. It's vital to have a communication plan in place that drives the necessary behavior change that precedes long-term adoption.
If you plan to generate additional revenue from a new product, ensure you conduct a realistic assessment of the available monetisation options. We often encounter the misguided notion that monetisation can be 'figured out downstream', once a product has been developed and deployed.
Although technology has witnessed rapid advancement in the last decade, revenue models have remained comparatively static. The most valuable tech companies monetise via models that are at least 150 years old. Our advice is, don't expect to 'discover' new monetisation models as (chances are) they don't exist. Focus on ones that are already established (charging for downloads, software as a service, advertising) and, if you can't foresee a path to profit, then question the value of the investment.
The value proposition of digital transformation within tech-enabled companies is substantial. It can increase valuation multiples and opens doors to capital. Most management teams understand the value proposition of transformation. But the path to achieving this transformation is not always clear and is frequently perceived as high risk. This is why a Digital Partner
can be the right route for some.
As a Venture Services firm, Castle has helped dozens of companies realize their digital opportunity and ensure their investment in product is returned. If you're unsure how to respond to disruption in your industry, or how to start the process of 'tech-enabling' your company, then we'd love to chat. As partner and investor
we think we can create significant value together.