New businesses and new lines of business create plenty of passion. Before you embark, be sure that you don't become an elegant solution looking for a problem. It needs to be the other way around.
Did you know that over one-third of all startup companies fail because they are an elegant solution looking for a problem?
Thirty-five percent (35%) of all new companies fail because there is no market need for what they are offering (CB Insights).
I was recently asked by a colleague to give my two cents as to what that means. Did this mean “lack of market research? Perhaps following a passion and trying to create a business, without determining market needs first?” she asked.
It’s a bit of both, but I lean more heavily on the latter. In other words, “no market need” is evidenced by the offering of products that fit in with what company management want but not many others do. Or offering solutions that tackle problems that are interesting to solve rather than services that serve a specific market need.
Thirty-five percent. Ouch.
Question: What’s Your Favorite Musical Genre?
The best way I can illustrate this is by asking you to select your favorite musical genre. Here’s a list of the Top 25 according to Strong Sounds (2022):
1. Pop
2. Rock
3. Hip-Hop & Rap
4. Country
5. R&B
6. Folk
7. Jazz
8. Heavy Metal
9. EDM (electronic dance music)
10. Soul
11. Funk
12. Reggae
13. Disco
14. Punk Rock
15. Classical
16. House
17. Techno
18. Indie Rock
19. Grunge
20. Ambient
21. Gospel
22. Latin Music
23. Grime
24. Trap
25. Psychedelic Rock
OK, now keep that in mind while we look at two artists that understand market demand and music from a business perspective.
George Duke
Some years ago, I had the privilege of seeing George Duke in concert before he succumbed to his battle with chronic lymphocytic leukemia in 2013. Duke’s first love was classical music (number 15 on the Strong Sounds’ list above) but was convinced to move into the jazz genre (number 7) because of his love for improvisation.
His commercial success came in the late 1970s and early 1980s from his three best-selling songs which were all in the R&B genre (number 5), the highest of which reaching 6th on the R&B charts and 78th on the pop charts.
Along the way, he became a music director, educator, and producer. In the jazz concert in which I saw him, he played to the audience…all jazz fans. After playing his best song ever (my opinion, of course!), a jazz piece called “Geneva” from his Snapshot album, he said he appreciated the jazz fan base and asked us to see if we recognized the first few bars of a song as he played the keyboards.
The song was “Let’s Hear It for the Boy” from the soundtrack of the movie Footloose – and most definitely a pop song (number 1 genre). The audience began to playfully heckle him for the definitely-not-jazz song (which he produced and on which he appeared as a musician). When we quieted down, he said, “Make fun if you want. That song bought me a house!”
The proof is in the pudding. The Footloose album made it to the top position of music charts in Austria, Canada, Iceland, New Zealand, Switzerland, and the United States, having certified sales of nearly 11 million units, with overall sales exceeding that number.
I suspect that the song bought Duke more than a house.
Jazz was obviously his passion, but the message is clear: Duke knew the market(s) and met the demand in several genres, having his greatest commercial success in the genre that had the largest demand.
Queen Latifah
American hip hop (genre number 3) artist Queen Latifah did something a bit counter-intuitive. Having four hip-hop albums to her credit, she made a big move in the opposite direction with The Dana Owens Album which is composed of jazz (number 7), soul (number 10), and R&B (number 5) covers.
Prior to that jazz/soul/R&B album, Queen Latifah’s top-selling album was Black Reign (hip hop, 1993) which had certified sales of 491,000 units. Her move to jazz, soul, and R&B with The Dana Owens Album brought success with certified sales of 730,000 units.
Her original fan base was not happy with the departure from hip hop, but her expansion into different genres gave her a larger target market.
Note that Queen Latifah is also an actress and film producer and by the time The Dana Owens Album was released, she had nearly 20 films to her credit and an Academy Award nomination for her role in the musical Chicago. Consequently, her market had already expanded, and she was filling a demand that another hip-hop album couldn’t.
Lessons from the Queen and the Duke
But back to our original data point: 35% of all new companies fail because there is no market need for what they are offering. As my colleague surmised, perhaps the entrepreneurs/management of those new companies were following a passion without determining market needs first.
Queen Latifah and George Duke obviously had a passion for their music in the early years, but by branching out to other genres, the message is clear:
They stayed with what they are good at.
Reasons for Starting a Business in the First Place
Every year, Guidant Financial makes a survey of small business owners to publish its Small Business Trends report. Here are some stats for you:
61% of business owners went into business for themselves because they wanted to be their own boss, and/or
48% went into business because they cited overall dissatisfaction with corporate work, and/or
31% wanted to pursue their passion.
There is a lot to be said for wanting to be one’s own boss, and with the Great Resignation underway, we are likely to see more professionals leaving corporate jobs in pursuit of something more satisfying and fulfilling. But take note of that last data point: 31% wanted to pursue their passion while 35% of all new companies fail because there is no market need for what they are offering.
Coincidence? I think not.
I believe that in pursuing their passion, new business owners are temporarily blinded by the motivation that passion brings. The business owner’s demand for “something new” may very well eclipse the actual demand for his/her offering in the market.
Maslow’s Hammer: The Law of the Instrument
In the field of psychology, there is a cognitive bias called the “law of the instrument” which describes the over-reliance on a familiar tool.
The term “the law of the instrument” was first formulated in 1964 by Abraham Kaplan, an American philosopher, who wrote:
“Give a small boy a hammer, and he will find that everything he encounters needs pounding.”
The law is more commonly known as “Maslow’s Hammer” because American psychologist Abraham Maslow wrote:
“I suppose it is tempting, if the only tool you have is a hammer, to treat everything as if it were a nail.”
Are You Calling Me a Hammer?
No. Not really. But you could be an elegant solution looking for a problem.
You’ve spent years if not decades in a certain industry or role. So, the obvious choice here is not to start something completely new but to meet an unmet demand within your current expertise.
For the New Business Owner
A client of mine once was a franchisee of a company that supplied portable toilets. He came to me because he said though having success in the port-o-potty business, he (understandably) was tired of the business of portable poop. His skillset (his “hammer,” if you will) is running a franchise. Today, he happily owns a franchise location of a national tire store.
Like George Duke moved from jazz to pop, and as Queen Latifah moved from hip hop to jazz, this franchisee moved within the same business type, the franchise, from poop to tires.
For the Established Small Business
Similar principles exist for the established business. There are synergies between certain lines of business and potential new lines. The trick is to do two things: (1) expand your current business in terms of market share, and (2) extend your built-in skill set to new markets. The lessons there can come from your competitors.
What are your competitors doing to take your existing customers from you? And what do some of your competitors offer that you do not?
Look Before You Leap
If you are currently an employee and looking to “follow your bliss,” take George Duke’s example. Queen Latifah provides a path for established small businesses looking for increased market share.
Be a Duke
You want to be your own boss. I get that. George Duke thrived on the freedom jazz brought him, but pop music paid the bills.
Before you make the leap, here are a few things you can do before you go out on your own:
Determine if there are any supplemental (non-competing) gaps in your employer’s offerings. If so, you have a good picture of market demand.
Look at your employer’s chief competitors—what are they doing to capture market share. Can you do that better as an entrepreneur?
Match your skill set (your “hammer”) with a different industry. Does that translate well into something else?
Be a Queen
With an additional role in the entertainment industry as an actress, Queen Latifah was able to capture another market for her original role as a musical artist—and she gave the new market what it wanted.
A little rephrasing of the above can be made for the established small business looking to expand into a new line of business or a new market.
On which attribute (access, experience, price, product, or service) do you dominate currently? Does that translate well into the delivery of another line or into a different market?
If you don’t dominate on a particular attribute, learn how your existing customers want to interact with you, and give them what they want. They will pay you handsomely for it.
A Parting Encouragement
Your true calling exists—it may not be in the package you envision…yet.
Steven Pressfield in his book Turning Pro, says:
“If you’re dissatisfied with your current life, ask yourself what your current life is a metaphor for.
“That metaphor will point you toward your true calling.”
Sources:
2022 Small Business Trends: A Look at the State of Small Business in 2022. Guidant Financial (2022). Retrieved from https://www.guidantfinancial.com/small-business-trends/
Crawford, F. A., & Mathews, R. (2001). The Myth of Excellence: Why Great Companies Never Try to Be the Best at Everything (1st ed.). New York: Crown Business.
Footloose (1984 soundtrack). https://en.wikipedia.org/wiki/Footloose_(1984_soundtrack)
Kaplan, Abraham. 1998. The Conduct of Inquiry: Methodology for Behavioral Science. New Brunswick, N.J.: Transaction Publishers.
Maslow, Abraham H. 1966. The Psychology of Science. 1st ed, The John Dewey Society lectureship series. New York: Harper & Row.
Mohsin, M. (2022). 10 Small Business Statistics Every Future Entrepreneur Should Know in 2022. Retrieved from https://www.oberlo.com/blog/small-business-statistics
Pressfield, S. (2012). Turning Pro: Tap Your Inner Power and Create Your Life's Work. New York: Black Irish Entertainment LLC.
The Top 12 Reasons Startups Fail. (2021). CB Insights, 2022 (August 3, 2021). Retrieved from https://www.cbinsights.com/research/startup-failure-reasons-top/
Waxman, G. (2022). 25 Most Popular Genres of Music. Retrieved from https://strongsounds.com/blog/most-popular-genres-of-music/