Growth Stages – Concept Stage Part I

The first stage in the growth and evolution of a prospective emerging company usually occurs well before the company, as a formal legal body, is formed and ready for recognition in the marketplace.  The emerging company begins with an idea identified by a founder or group of founders and this idea becomes the basis for developing and refining a plausible business concept—how the idea can be converted into a business and what they business will do to bring value to all interested stakeholders.  Accordingly, it is not surprising that this initial early period of contemplation and organization is referred to as the “concept stage.”  It is useful to understand the most common and basic characteristics of the business during the concept stage:

  • The founders will be heavily involved in identifying and articulating the overall goals and objectives for the company including clarifying and articulating their vision and mission statement, identifying and defining market requirements, selecting those niches within the identified markets that present the best initial opportunities for the company, and creating a plan for designing and building a sustainable platform that can be expanded in the future to include new products, services and markets.
  • The organizational structure will be informal, often virtual, since the founders may still be involved in projects for their current employers.  Lacking significant financial resources in many cases the founders may need to rely on outside parties to provide administrative assistance such as office or laboratory space.
  • Since it is unlikely that professional management, apart from any experience that area that the founders might have, will be involved at this point the predominant management style will remain “entrepreneurial” and the founders will be involved in every aspect of the polishing up the rough initial concept.
  • Specific activities with respect to products and markets should be focused on identifying, understanding and validating the needs for actual customers and determining what product or service characteristics will be perceived as being the most valuable.  For example, the founders need to determine whether customers are looking for greater convenience or whether they are most interested in things such as price, variety, customer service or durability.  Once this information is collected the founders need to gauge how those “desires” can be accommodated in the product or service design process.
  • In general, the concept stage is the time for “bootstrap” financing provided by the founders, their friends and relatives, and perhaps a supplier or customer with an interest in seeing the nascent product or service reach the commercialization stage.  As such, expenditures need to be tightly regulated and focused and this means focusing on R&D or licensing to procure the necessary technology and design and development of the initial products, services and applications.

In a future post we’ll take a look at some of the specific management challenges and problems that often come up during the concept stage. 

 

Food for thought . . . By definition a concept is vague and lacks definition and many would-be entrepreneurs may give up when confronted with all of the unstructured tasks that seem to pop during the concept stage.  This is the time to take a quiet weekend and sit down and list out all of the things about the new great idea that may have come into the minds of the founders.  Only then can you bring a refresh and clear head to the task and determine the most valuable use of the next moment in time.

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