29 SEP 2021 | by Rachel Layne
After a successful launch, entrepreneurs struggle to anticipate the complexities of product upgrades, says research by Andy Wu and Aticus Peterson. They offer three tips to help startups avoid disastrous delays.
One might expect first-time entrepreneurs to pick up speed as they churn out more products, but new research finds that nascent firms typically launch second products six weeks later than originally planned.
What’s more, with each successive product, delays continue to lengthen. Firms risk running out of cash before solving the problem, Harvard Business School researchers write in Entrepreneurial Learning and Strategic Foresight, recently published in the Strategic Management Journal. For startups trying to hang on until their next funding round, this dynamic can spell doom.
“AS ENTREPRENEURS GAIN EXPERIENCE, THEY GET WORSE AT PREDICTING TIMELINES.”
Record venture capital investment and a surge of new businesses launched during the COVID-19 pandemic are raising the stakes for entrepreneurs. In a domain that prizes speed, failure to set accurate product timelines can become a liability for a startup founder, according to research by Andy Wu, assistant professor in the Strategy Unit at HBS, and HBS doctoral candidate Aticus Peterson.
“As entrepreneurs gain experience, they get worse at predicting timelines,” says Wu. “That, in itself, was surprising to us.”
Bracing for the inevitable complications
Though founders typically allow more time—and often buffer generous time-to-market estimates—they seem blind to the myriad interconnections and changes that subsequent products will require, the study found. That can mean suddenly needing new tooling on an assembly line, new shipping vendors, or even a new manufacturer.
The next generation of a product brings about new features that must align with existing features from the previous generation, making production timetables more complex and less predictable, Wu and Peterson say.
“WE EXPECT—WE WANT TO EXPECT—THINGS TO BE LINEAR. THAT’S JUST HUMAN NATURE.”
That leads to a “cascading effect” that is difficult for most people to anticipate, much like the way that the public was surprised by the speed with which COVID-19 spread in early 2020, Peterson says.
“Consider our own experience with the pandemic. When we saw a few cases starting, it was hard for us to imagine exactly just how quickly cases would blow up,” Peterson says. “It’s not a straight line. It’s a geometrically increasing curve. But instead we expect—we want to expect—things to be linear. That’s just human nature.”
The same is true of the complexity that entrepreneurs face when launching new products.
Understanding what went wrong
Wu and Peterson studied timelines from 314 entrepreneurs across 722 technology hardware projects from September 2010 through June 2019, all crowdfunded through Kickstarter. For each project, they examined comprehensive data from each Kickstarter project, including the comments from the customers and updates posted by the entrepreneur.
The researchers then manually collected data for actual delivery times and numbers of product features. They also cross-referenced funding information on Crunchbase, a database that tracks startup funding, with each Kickstarter entrepreneur. Of the 314 entrepreneurs studied, some 76 percent missed their initial deadline. Peterson and Wu followed up, interviewing 11 entrepreneurs in-depth to find out why each product was delayed.
Take, for example, a remote-control LEGO project. The product enabled customers to turn on motors and lights for different items, such as a car built out of the plastic bricks, with a remote control. However, once the entrepreneur added a feature that turns on lights automatically in darkness, the troubles began.
Even with a working prototype, the entrepreneur didn’t anticipate the many extra manufacturing steps—and the retooling needed to produce the new product. He wound up going through seven different manufacturers before he found one that could produce the specified feature.
“Of course, he then missed his predicted delivery date,” the researchers write.
Choosing quality comes with risks
Another observation from the study: entrepreneurs overwhelmingly choose quality over adhering to a timeline, the researchers discovered, which ultimately can bode well for long-term goals.
The researchers chose projects that relied on crowdfunding because, unlike venture capital or seed money, Kickstarter funds aren’t distributed unless a set fundraising goal is met. It also means promises like delivery times are made publicly and tracked by investors, many of whom are not shy about commenting.
The idea for the study grew out of Wu and Peterson’s own frustrations: Peterson’s as a venture capitalist and Wu’s as an entrepreneur.
“When people like me miss timelines, people like Aticus Peterson have to bail me out,” Wu says. “And so, we have a lot of conversations about that. And this is one of the many projects we’re hoping to do to better understand why that constantly happens.”
Three steps to avoid delays
So, what’s a first-time entrepreneur to do in the meantime?
Try to think non-linearly. Founders should consider what they know, what they don’t know, and what additional unknowns might be on the horizon.
“As you add new features to your next product, you need to do more than just linearly add time to your original timeline,” Peterson advises. “It’s going to vary project by project, and it’s hard to say if that’s 2x, or 3x, or 4x. But that is the right ballpark you should be thinking of as you plan your next timeline. As you do projects over time, you should gain some sense of how fast the complexity is increasing. Pad your timelines aggressively to account for the larger number of things that are going to go wrong.”
“BEFORE A HIGH-STAKES PRODUCT LAUNCH, APPLE WILL DO SMALL MANUFACTURING TEST BATCHES.
Start small and test. Founders would be wise to take a lesson from Apple, which tests products in small batches to figure out what might go wrong, then tweaks the design accordingly.
“Before a high-stakes product launch, Apple will do small manufacturing test batches. They take the computers, and they’ll shake them or expose them to a lot of heat or cold. There’s all these different environments,” Peterson says. “They want to figure out what breaks before it causes a delay down the road.”
Recruit people who think differently. Entrepreneurs should hire diverse teams, “in every sense of the word,” Peterson says. “You just don’t know who has the kind of upbringing or life experience that would be relevant to identifying the issues you need to anticipate and plan for.”
Wu adds: “It means both adding people and making sure their voices are heard.”