The process of building a startup from a novel idea to a market competitor is difficult for sure but tracking the steps and the stages shouldn’t be. To gauge where a startup is in their lifecycle, Start Co. utilizes the Commercialization Framework which was first introduced to us by Mike Mozenter and his company BizLogix. Their system, now used in Cleveland and beyond, defines a business in terms of its technological and commercial capacities.
The Commercialization Framework: What is it?
The Commercialization Framework is made up of five phases: Imagining, Incubating, Demonstrating, Market Entry, and Growth & Sustainability. Each phase has a defining set of commercial and technological capabilities, goals, and objectives. Each phase’s unique sources of funding help a company move from idea, to proof of concept, to a working prototype, to paying customers, and beyond. Let’s explore each phase briefly:
Imagining: The Imagining phase begins at the conception of a new idea. Entrepreneurs must estimate the potential viability of the idea as well as what resources may be needed to move to the next phase. After thorough customer and market discovery, creating an acceptable proof of concept is a major checkpoint in the Imagining phase. Capital is primarily either self-provided or acquired through corporate research and development efforts, university funding, or government funding.
Incubating: During the Incubation Phase the skeleton idea moves into a prototype modeled after the proof of concept. The startup tests the functionality of their product in a controlled setting. The testing results in finding out which is the best way to optimize the product and measure its impact. When attempting to acquire capital at this stage, startups need to have effective measurements and supporting data that highlight the product benefits. Commercially, startups begin to solidify a business plan, determining exactly where their product fits in the market, the demographic it appeals to, the geographic location best suited for success, and potential competitors in their sphere of influence. Resource capital is still primarily provided by the founding team, friends, governments other public institutions, and corporations, but the Incubating phase does see some investment from private sources such as angel investors and early seed venture funds. Startup accelerators also help to support teams at this phase and beyond.
Demonstrating: Pilot testing is a major element of the Demonstrating phase. This allows the product to receive feedback from potential customers as well as gain traction. The feedback identifies flaws and other insights that are valuable as the team moves closer to a market-ready product. Startups begin to solidify their ability to manufacture or produce their product at scale, whether that includes outsourcing or acquiring their own facilities. The commercialization efforts of the project ramp up in the Demonstrating phase. Startups begin to create and finalize their strategies for sales, pricing, and financing their market entry. Private entities like venture capitalist funds and angel investors begin to invest more frequently into startups at this stage. These private investors are able to evaluate a tested product, initial customer responses, and a finalized go-to-market strategy.
Market Entry: The preparation of the previous three phases is put into action as the product enters the market in its close to final form. Startups begin to implement their business strategy, ensure that production is keeping pace with demand, all the while acquiring new customers. Once a product enters the market, the performance metrics become more clear. Startups evaluate the rate of customer acquisition, customer satisfaction, sales numbers, profit margins, and manufacturing statistics among a host of other metrics. Venture capitalists and corporations become the primary capital investors into projects at this stage. These investors still have the ability to receive a great return on their investment as the business is still in its infancy, but they have actionable data to better judge the quality of the business, thus decreasing their assumed risk. As businesses begin to meet or exceed their annual and quarterly sales and production goals, they continue to solidify a strong foundation, attracting more and larger investors.
Growth & Sustainability: The overall goal in beginning a startup from the outset is to meet a market need, build towards profitability, realize a sustainable business, and provide for your employees and community. Ideally, as the amount of sales and customers rise, so too do the business’s positioning in terms of market share. The increase of physical size opens doors into growth into new markets, which in turn might spark the necessity for the business to update their product, create new products or services, or expand their infrastructure and technological capabilities. Success at this stage is still determined by those classic financial metrics that became available as the product entered the market.
The Importance of Context
When evaluating the rate of progress being made by a startup, one must understand the context in which the project is being built. Does the team have the necessary knowledge to meet every goal, or is there the need for continued education or mentorship? What is the context of the resources available? The Commercialization Framework helps us to understand all these aspects and more. That’s why it is such a useful tool for us at Start Co.
Piecing it all Together
The Commercialization Framework takes into account the simultaneous development of the product and the formation of the business plan. It also provides us an idea of the resources needed at each stage of development. We’ve spoken about the stages as if they are concrete steps forward, but it’s important to remember that this is a very iterative process with its share of setbacks as well as steps forward. The path to success is different for every startup. The Commercialization Framework helps describe the current relative positioning of a startup on their own path.
