Disproved: Stealth mode helps me crush my competition starting from day one
Ahh, the late nineties.
A few guys in a basement or a garage. A desktop sitting next to you as the server. Slinging code and trying to get it to customers. At my first startup, we didn’t even have an internet connection – we developed on a local LAN, and transferred the deliverable to the clients via FTP from home, or sometimes even via disk. We got a few customer and rented an office space, and then had 6 guys in 3000 square feet of open space with a few folding tables. Later, we were able to build out walls, hire more people, and make it a real office….Post launch, we quickly went public, had lots of paper numbers next to our names. And then it all crashed. [Dave Armstrong]
All of the pre-launch effort was done in “stealth mode”. Namely, company officials made sound like they were doing something absolutely groundbreaking, largely to get as much PR as possible (for free). So if you read the glossies about what these guys were doing, the picture in the press would have been totally different than the above. This hyped up a product they were working on, often while still figuring out what they needed to build in the first place–but in a vacuum of feedback.
The emphasis rested on information about what they were doing, especially around the competitive threat this implied. The assumption was that anyone could potentially catch wind of their idea, and replicate it, and take the market before them. So it was better to not let anyone know what is going on.
In fact, overfocussing on your competition wastes a lot of your attention and resources in places that aren’t particularly important at the early stage. It’s largely a distraction, unless if all you want to do is license an invention. And in that case your “competition” is basically your client, anyway.
The fact is: most early stage business fail due to internal factors, not external ones. There’s lots of data points on this one:
Venture capitalists in one survey attributed 65% of failures within their portfolio companies to problems within the startup’s management team, according to Harvard’s Noam Wasserman in Founder’s Dilemmas.
Or premature scaling: over 40% of startup failures are caused by building something nobody wants. Corporates have a similar track record on both counts. Both of these from CBInsights’ picnic in the innovation graveyard.
Notice how competitors are conspicuously absent from the above.
What is competition exactly and why does that matter?
Your competition is defined by who you are selling to. They are selling roughly the same value proposition to the same people. It’s not everyone with a pulse. That’s a really common early stage prioritization problem, which the Hero Canvas is meant to help with.
And this can vary significantly by product type or sector. For books and lower $ value products, many people buy a few items at once. Like a books on a new topic they’re exploring. So authors don’t really compete with one another, at least from the perspective of selling books. From a business model perspective, they can become partners, a distribution channel, a complementary offering. You name it. Of course, not every industry is like this, and I don’t want to be suggesting this is the only way to do it. But it’s useful to think this way in completely disparate industries like power turbine engineering, based on discussions with my clients and friends.
There is a very human tendency to compare yourself to others doing similar things. But for a totally new type of product, before you have:
- validated the product
- confirmed the market
- made sure that people are happy enough with your product to recommend it to others
The competition is largely irrelevant. Yes, you need to get through these steps, and then once you are thinking about growth, then competition starts to matter more. Until then, just get everything lined up first.
So what about stealth mode is a bad idea?
It keeps you from interacting with prospects and customers. So you don’t get product feedback. Which can kill your product. It keeps you from aligning on the team. You risk creating something irrelevant which needs to change massively after you do go live.
But primarily, it’s a distraction. The benefit of not alerting your competitors usually doesn’t matter. For large competitors, you are a “rounding error”. For small competitors, they’re struggling to get validated and to start growing too. So just get on with it and start speaking to people!
- Build the right team and validate the need for your product first
- Be healthyfully mindful of competitors, while keeping a distance to this topic until you start really focussing on growth
- Be open to collaborating and specializing within your industry, as there are alternative business models
This might not matter to your larger point, but you misinterpreted what I meant by “went public”. I meant we started trading our company on the stock market. We were not in ‘stealth mode’. That wasn’t even a concept in 1999. On the contrary, when companies working on similar products heard about each other, we called each other up and compared notes. We even had many meetings and discussions about whether we should merge or keep doing our own things. In those days, there was more a spirit of camaraderie mixed in with the competition, which increased communication with both customers and competitors.
Ultimately, that strengthens your point even more, that stealth mode isn’t always the wisest move.
FYI, the website you linked after my comment is now offline – I’ll be putting it back online at some point, but for now you have a dead link up there.
Thanks for writing in. While you were out there slinging code, at the time I was just finishing college and reading the Industry Standard magazine with all of the gossip from the valley. It’s interesting that you say it was collaborative. Most startups getting a lot of PR were in “stealth mode” before launching. RealNetworks. Webvan initially. I think pets.com. Super well known and successful people getting together to work on product X, which they can’t tell you about because it’s still in stealth mode. So it looks like that press coverage was just elaborate posturing, to pique interest without actually revealing anything.
As for going public, I left that part of the quote in as a context sweetener, part of the 90s zeitgeist. You make a good point, though, that it’s a little unclear in the context of writing about stealth mode.
Thanks for the heads up about the website. Feel free to me a line later if you want me to link to a source.