The Product Is Not Your Business - A Critical Lesson for Startups

Startups often begin with a spark of innovation—a product or service that promises to disrupt the market or solve a pressing problem. Founders pour their passion, energy, and resources into perfecting this product, sometimes believing that the quality or uniqueness of their offering will be the key to their success. However, while the product is central, it's not the business.

I have picked a picture of a coke can to illustrate this article as its a perfect example of not focusing on the product. Coke is one of the most popular products in the world, but much of its global success is due to its branding, marketing and its distribution strategy.

Many Startups fail because they focus too much on their product and not enough on the essential elements required to build and grow a sustainable business.

The Allure of the Product

For many Startup founders, especially those coming from technical backgrounds, the product is their baby. They spend countless hours refining, debugging, and improving features. This obsession can lead to tunnel vision, where the success of the product is seen as synonymous with the success of the company. In this mindset, if the product is good enough, the business will take care of itself. The ‘If you build it, they will come’ mentality.

This product-first approach is common but I’m afraid it’s misguided. While a great product is a significant asset, it’s only one part of the overall picture. In reality, businesses don’t succeed on product alone; they thrive on how that product is marketed, sold, supported, and scaled. Steve Jobs famously said, “It’s not about the product. It’s about what people do with it.” This perspective reminds us that product excellence without proper business strategy is not enough to survive.

The Risks of Over-Focusing on the Product

Neglecting the Market Fit

Startups can fall into the trap of focusing too much on building the “perfect” product without verifying that there’s a market demand for it. Eric Ries, author of ‘The Lean Startup’, emphasized the importance of validating assumptions about the product-market fit early on. A product can have impressive features, but if it doesn't solve a real problem or meet a market need, it won’t generate revenue. Customer feedback and iterative development are critical to ensuring that the product is aligned with market demands.

Underinvesting in Sales and Marketing

No matter how groundbreaking the product is, if no one knows about it, it won’t sell. Startups frequently invest heavily in product development but underinvest in marketing and sales. The assumption is that the product will "sell itself." In reality, marketing is essential to create visibility, build brand recognition, and generate leads. A strong sales strategy helps convert those leads into paying customers. Even Apple, with its iconic products, invests heavily in marketing, PR, and retail strategies. Startups must do the same to break through the noise.

I have lost count of how many companies I have consulted with in the past where the marketing budget was whatever was left when everything else is paid for. If people don’t know about your product, they will not buy it. It’s that simple.

Underestimating the Importance of Operations

Building a company requires more than just delivering a product; it requires creating systems and processes to ensure smooth operations. From customer service to financial management, logistics, and legal compliance, there are many moving parts in running a business. Startups that over-focus on their product often neglect these areas, leading to problems as they scale. For example, a fantastic product with a broken supply chain or poor customer service can ruin a Startup’s reputation and growth prospects.

In my experience working with innovators and start up founders, the distribution chain is almost always taken for granted. They assume their product is so good that retailers will be falling over each other to stock it.

The reality is very different. One big issue is retailers only want to deal with distributors, not individual companies. So you now need a distributor for your product. Second big issue is for your product to get onto a shelf, some other product has to come off. How do you convince a retailer that your new product with no sales history is going to outsell an existing product that does have a track record? An issue I ran into with product distribution is that distributors and retailers need to know the fail rate of a product. For every 1000 products sold, how many are returned with a problem? How can you know this if you haven’t sold any?

Distribution issues apply to digital products too. Getting your App on the App Store is not as straightforward as just uploading it and then thinking millions of people have access to download it. Every app goes through a rigorous validation process before being published. Have you thought of that?

Failing to Focus on Cash Flow

A Startup might have an exceptional product, but if the business is not making money or managing its cash flow, it will fail. Entrepreneurs often lose sight of financial fundamentals like cost management, unit economics, and cash flow projections. Ensuring that the business remains financially viable is just as crucial as product development, if not more so. Cash is the lifeblood of any business, and a great product without financial discipline will eventually run into trouble.

Building the Business Around the Product

Startups need to treat the product as just one piece of the business puzzle. Successful companies are built on a combination of a compelling product, strong business acumen, and a keen understanding of the market. Here's how Startups can strike a balance:

Focus on Customer Development

Before over-investing in product development, Startups should invest in understanding their customers. What are their pain points? How do they make purchasing decisions? Startups need to engage with their target audience early and often, building their product around real customer needs and feedback. This ensures they’re not building in a vacuum and helps prevent the pitfall of product-centric thinking.

Again, The Lean Start Up is good guide here, but also check The Disciplined Entrepreneur by Paul Cheek.

Develop a Go-to-Market Strategy

Having a go-to-market (GTM) strategy is critical. It outlines how a company will reach and acquire customers. This includes everything from pricing models, distribution channels, and sales processes, to marketing campaigns and customer education. A well-executed GTM strategy ensures that even a good (not perfect) product can reach customers and begin generating revenue.

Invest in Marketing Early

Marketing is not a post-launch afterthought. Startups should begin building their brand, audience, and customer pipeline long before the product is fully developed. This could mean creating educational content, engaging in social media, attending industry events, or building a waitlist. The goal is to generate buzz, build a community, and create demand so that when the product is ready, there are customers lined up to buy.

If you create a waitlist and don’t get many sign ups – either your marketing isn’t reaching the right people, or you don’t have product/market fit. Use that as a warning sign, don’t dismiss it.

Scale Operations Alongside Product Development

While product innovation is important, Startups should scale their operations in parallel. They need systems in place to handle customer inquiries, manage orders, track inventory, process payments, and provide customer support. Automation tools, customer relationship management (CRM) systems, and streamlined workflows can help Startups avoid operational bottlenecks as they grow.

Start Ups are almost always behind the curve on having a team big enough for their operations. This can lead to dissatisfied customers, which is not a good look.

Financial Discipline

The overall financial situation of the company, as distinct from cash flow. Startups often operate in a cash-strapped environment, so financial discipline is key. Understanding cash flow, burn rate, and runway helps founders make informed decisions about product development, hiring, and marketing spend. Startups that manage their finances well are better positioned to navigate the inevitable challenges of scaling.

As a rule of thumb, always start looking for new funding before you need it. Securing funding will always take longer than you think and starting too late leads to difficulties.

Building a Strong Team

As the business grows, the demands on the team will expand beyond product development. Startups should hire talent not only for technical skills but also for business roles such as marketing, operations, and finance. A well-rounded team can ensure that the Startup thrives on all fronts, not just in product development.

Conclusion

For Startups, it’s easy to become enamoured with the product and pour all energy into making it perfect. However, success requires more than just a good product. Founders need to take a holistic approach, focusing on customer development, marketing, operations, and financial health. Ultimately, the product is a key component, but it’s not the business.

Building a business around the product, with a focus on sustainability and growth, is what leads to long-term success.