Substitute Products: What Solution is Your B2B Product Really Replacing?

Though rarely perceived as a competitor, Microsoft Excel is almost always an actual competitor for software startups.Joshua Porter, Ex-HubSpot Director of User Experience

In large companies, the core business functions are well served by technology vendors. There’s Intuit for finance, Taleo for recruitment, Salesforce for CRM, and Microsoft for almost everything else.

But, Intuit, Taleo, Salesforce, and Microsoft didn’t start with large solutions addressing the needs of every customer. They started with a subset of what their products can do today.

As a small and scrappy startup with limited resources, you must identify where your solution fits in the market and how it works with your prospects’s technology platforms. The best beachheads come from capturing emerging processes and opportunities.

Are businesses quickly changing the way they do marketing? Are there ways to capture those new processes?

It’s good to have a vision for the end product, but early on, you won’t be able to go for the big win. Unless you’re bringing some kind of disruption to the market, you can’t position your solution as an all-in-all platform. You need to find the gap you’re going to fill.

Startups that solve real business problems always have to replace some kind of solution.

Maybe it’s a manual process, an Excel spreadsheet, or a legacy solution that never quite solved the problem completely. To find your gap, you have to understand the substitute products (your competition), and what you’re enabling (your solution’s value).

Examples of Substitute Products
Is Your Solution Competing Against Excel, Manual Work, or Other Substitute Products?

In other words, you must figure out how your solution is differentiated and whether that differentiation is valued by prospects. This, in a lot of ways, is a perception game. Often times, perceived comparables and perceived value matter more than real competitors and real value.

How to Compete Against Substitute Products

You can have the greatest product in the world, but if your prospects think your solution is just like Dropbox, you’ll have a hard time charging more than Dropbox. Your perceived comparables matter more than how different you think your product really is.

In the same way, if prospects don’t perceive your solution as valuable, it won’t matter what benefits it provides. The only value that matters is the value that prospects perceive from your product. What impact do they feel it has?

Think less about the direct competitors and more about how your solution can fit in their technology mix. For startups, substitute products and the status quo are typically more dangerous competitors than large incumbents.

Understand the technology mix, play nice with the existing solutions, find your fit and beachhead, and then expand to take over the world.

What Can B2B Entrepreneurs Learn From Solopreneurs in 2019?

For the longest time, there were only two major paths for tech entrepreneurs:

  • A. You raise capital, and you’re expected to grow fast;
  • B. You self-fund your business and can grow at your own pace.

These paths weren’t mutually exclusive, and they both had advantages over one another but, overall, those were the options for founders.

Either you went big, or risked being labelled a lifestyle entrepreneur.

Now that the costs of building new products have decreased, generations (and mentalities) have changed, and business gatekeepers have lost some of their leverage, new and more diverse paths have become real options for entrepreneurs. Enter solopreneurs:

What Are Solopreneurs?

Solopreneurs are business owners running their businesses alone. They can work in either B2B or B2C, in tech or in other domains, and have modest or grand ambitions.

The core difference between entrepreneurs and solopreneurs is that solopreneurs choose to build their businesses alone.

Solopreneurs – Interest Over Time
Google Trends – Growth in Interest for the Term ‘Solopreneur’

Although this post focuses on solopreneurs in technology, what’s particularly interesting with solopreneurs is that they embrace the constraint of being solo.

As Lean and B2B entrepreneurs, there’s a lot we can learn from their approach and mindset, specifically:

1. Solopreneurs Use Constraints to Define Their Businesses

We’ve already talked about the importance of the entrepreneur fit in building and growing a startup.

With solopreneurs, the entrepreneur fit is at the heart of their decision to start up. By limiting the scope of the business ideas they evaluate, and being keenly aware of the lifestyle they’re trying to have, they’re able to make better decisions as to what the right business is for them.

B2B entrepreneurs need to learn to keep the entrepreneur fit front and center. Building a business you’re not uniquely qualified to build can lead to de-motivation and the feeling of being estranged in your own business.

To achieve speed and success, it’s usually best to build for your unique competitive advantage(s).

2. Solopreneurs (Often) Use Quick MVPs to Validate Their Businesses

A rising trend among tech solopreneurs is the idea of building really quick MVPs and throwing them out into the world for validation.

Although this requires distribution channels to get visibility and it won’t work for enterprise or mid-sized businesses, I’m not convinced that it’s a bad way to get a quick feel for a business idea.

The reality is that, if it takes longer to conduct interviews than to ship a minimum viable product, it’s probably best just to ship the product and see how users react.

By building something quickly – say 12 startups in 12 months – and putting it out there for the world to try, you limit the scope of what you’re building and avoid getting too caught up in your idea.

Executed properly, this approach allows you to learn and pivot quickly after failures.

3. Solopreneurs Embrace Codeless MVPs

Another interesting trend pioneered in part by solopreneurs is the idea of creating codeless MVPs:

With the rise of Application Programming Interfaces (APIs) and Web Services, people of all backgrounds are now able to build tech products. This means that teams can now create (and iterate on) basic versions of their products without or before hiring (or partnering with) development talent.

This approach can change your team structure, the business dynamics, and speed up your product-market validation.

For B2B entrepreneurs, it can help transform your early mindset from “Can we build this?” to “What external services can allow us to create and validate this quickly?”

4. Solopreneurs Can Only Focus on the Essential

There’s only so much you can do as a solo founder. Put too much on your plate and your run the risk of burning out. Put too little (or too much of the wrong things) and your run the risk of stagnating.

When you have a team, it’s easier to stretch and assign unessential tasks to co-founders or employees. You may not bear the brunt of it, but these tasks can destroy productivity, team morale, and slow down your growth.

Solopreneurs are constantly forced to re-evaluate and re-prioritize tasks. This helps keep their focus on the truly essential tasks, and forces them to embrace the lean methodology.

5. Solopreneurs Start with Lower Expectations for Their Businesses

For some reason – be it media or culture – we don’t hear the same kinds of stories about solo founders that we hear about startups.

Because they don’t have a team and generally haven’t raised large sums of capital, solopreneurs experience less pressure for their business to sell, grow big, or morph into something else. This helps keep their expectations in check.

Considering the time it takes to get a B2B business off the ground (18 to 24 months), and the Long, Slow, SaaS Ramp of Death, it helps to have the right expectations at start up.

The Mindset Stays, the Title Doesn’t Need to

With more types of entrepreneurs comes more potential paths to success.

Maybe you want to start as a solopreneur, but eventually, as your business grows, you decide to hire a team. Or maybe, you follow the reverse trajectory.

Chief among the lessons learned with my previous startup, HireVoice, was the fact that it’s best to be solo during early customer development and large pivots.

If you have a team and/or co-founders, compromises might lead to the creation of a business everyone is ok with, but no one loves. Worse, you may create useless work just to keep the team engaged, which is absolutely not lean.

Overall, there are a lot of things we can learn from solopreneurs. The more models we know, the better equipped we’ll be to handle what’s up ahead.

B2B Consulting: Can Consulting Help You Build and Validate a Business Faster?

Maybe the most challenging part of the customer development process is being able to get enough face time with prospective buyers.

It’s challenging because it means:

If you can’t do that, your business will have a hard time gaining momentum.

Overcoming Inertia with B2B Consulting

“Speed of learning creates speed of growth.”Jason M. Lemkin, Entrepreneur and Investor

Now, what if there was a way to drastically cut the time it takes to get this information from organizations?

Although they’re often kept separate, B2B consulting and tech entrepreneurship don’t have to be mutually exclusive. In fact, consulting may be the fastest way to learn about a market or a business opportunity.

In its simplest form, product-market validation means…

  1. Finding 5 early adopters in organizations;
  2. Pre-selling them on a standardized pilot project;
  3. Delivering on the value sold;
  4. Iterating on feedback;
  5. Reaching product/market fit;
  6. Leveraging case studies to attract additional customers.

Seeking out consulting engagements within a single vertical (e.g. construction, banking, etc.) allows you to do customer discovery while working, map the organization, build trust and relationships with influencers, and hone in on their specific pain points. All that while actually getting paid for work.

If your expertise is related to the product or technology you’re hoping to build, B2B consulting engagements give you a first crack at validation. Can you (at least) get paid by organizations if you solve their problem manually?

B2B Consulting: Can Consulting Help You Build and Validate Your Business Faster?
Can B2B Consulting Help Speed Up Product-Market Validation?

No Idea, No Problem with B2B Consulting

Once you’re in the organization, you’ll have the opportunity to ask questions, test hypotheses, map processes, and dig into their business problems.

With several clients in the same vertical, you’ll also be able to learn about the commonalities between client accounts, map the spending, and understand the rationale for selecting specific vendors or solutions.

Casual chats will help you uncover both explicit and implicit problems; the problems business stakeholders are aware of and actively looking for solutions for, and those they may not be aware of.

Keep your eyes out for the most painful problems, those with a high potential impact on the organization and a buyer with budget and buying authority.

B2B Consulting: Productized Services vs Technology Products

Whether you’re looking to turn your B2B consulting into a productized service – a value-added, systemized, “done-for-you” service, packaged as a product with a defined scope and price – or software, the key thing you’re looking for is repeatability.

Are there ways to provide the same value…

  • …to different organizations?
  • …to different departments within the same organization?
  • …in a repeatable manner – monthly, quarterly, yearly, etc – to the same organization?

Starting off with a service business will help you understand how to reach the buyers and create an effective distribution strategy.

In B2B, more proximity and face time with buyers and organizations means faster learning, testing and validation.

B2B consulting allows you to generate income, explore multiple organizations at once, and build relationships.

If your goal is to bootstrap your business and keep your costs low, validation through B2B consulting may very well be your fastest path to product-market validation.

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