The Open Entrepreneur

A change in plans

We've been doing a lot of thinking recently about our options for Project 1. As we mentioned last time, we're saw quite a few competitors pop up. We weren't too concerned, as having competitors is just part of the entrepreneurial process. But then we started to see something else that caused us to rethink our plans for Project 1. 

It turns out that besides having a lot of competitors (we counted up to 8 at various times), the type of app we were thinking of making wasn't getting great reviews. We decided to reevaluate what we were trying to do.

Now, as we've said, the amount of competitors didn't bother us so much. But it turns out that whenever we saw our type of application mentioned, it was always in a negative way. At first, we didn't think much of it. but then it began to happen over and over again. And it got us thinking. Of all the iPhone apps we can create, why are we trying to make something nobody likes? Its not like there is a shortage of ideas in our heads for great yet simple iPhone apps. 

So we decided to pursue other ideas. We're not sure if the application will still be free, but we're leaning that way, as that will allow us to keep the same goals as before. 

With that change, we're also looking into how to get our application made. Our original goal was to find someone through our network and spend a small amount of capital getting the job done. But we're having a lot of trouble finding anyone with time on their hands. So we're going to look into another common way of getting the job done: outsourcing through a website. There are a lot of difficulties that can arise when doing this, but we hope to work our way through them one by one. Stay tuned for updates.

Updated Goals

We have updated Project 1's goals to include a new secondary goal: Have more downloads than our closest competitor. We have updated the original post accordingly, but here they are again.

Project 1 Goals

Main Goal: Achieve 5% market penetration.

Secondary goal 1: After Project 2 is developed, use Project 1 to drive sales of Project 2. 

Secondary goal 2: Have more downloads than our closest competitor. 

A Competitive Analysis

The App Store just launched today and we've had a chance to check out the competition. Pre-competition, I should say, since our application has yet to be built and accepted into the App Store. So what's the verdict? Not good. What's our response? Its going to be ok.

What is the state of the market?

The App Store has been up less than a day, and we already have four competitors. Our job has obviously gotten harder. Not only do we have to compete with four other (and possibly more by the time we're done) competitors, we also have to try harder to get people to switch. At the moment, that seems impossible, because once you install such a simple app, there is little incentive to switch. Its not like we're going to be running an ad campaign here.

So is the game up?

Not at all. A closer look tells us that even though we won't be first, second, third, fourth or possibly even fifth, we can still make a strong mark. Here's why:

First, three of our four competitors are priced at $.99, and one is free. Now, this is not an application that should cost $.99, by any means. I have no doubt by the time we launch that the price will have come down for some of those. But in the meantime, many are receiving negative feedback. Most of the reviews on one app, in fact, actually announce the availability of the free alternative and direct users there instead. Not something you really want to happen.  

Second, a few of them lack some polish. We can definitely improve on the user experience here. Not much, but we can. We can also improve on descriptions, icons, and the small pictures used inside the App Store. People are not always doing a good job of promoting their application, and sometimes it shows.

Finally, but most importantly, is our business model. We're going to be promoting this constantly, and using it to increase sales of Project 2. Just because there are other alternatives out there does not mean their develops are actively promoting or even working on them. In fact, its likely many will have likely forgotten about their own applications. Not only will we be promoting our app, we will actively be using it to drive users to Project 2 through a promotion inside the app (in the about us section, actually, which we think isis a great, non-intrusive way). We didn't see other people doing this. We like to think of it this way: every single person we get to adopt Project 1 is a free marketing opportunity for Project 2. 

Conclusion

Hey, we can't always be first, but we can definitely end first. This is officially an experiment in a come-from-behind victory. We have competitors, our goal is now to get ahead of them. The objective has been updated accordingly. 

The five words no entrepreneur ever wants to hear

So I was at the iPhone Software Developer’s meetup in NYC last night chatting with Julio, the organizer. I had just finished explaining my idea when he said the dreaded words no entrepreneur wants to hear. To paraphrase, they were “So you mean something like ___.” Six words, really, if you count the application he mentioned. Yes, someone else has already come up with the idea we did. 

I believe I took it quite well. No “oh shit” escaped my lips nor did a look of sagging despair cross my face. That’s not to say I wasn’t disappointed to hear that someone else had already come up with our idea, but it wasn’t a killer.

And it shouldn’t be for any entrepreneur. That’s because the existence of a competing idea is not the same as having a competitor. And not all competitors are equal. Some may just be in start-up, others may not have figured it all out yet, and still others could eventually be concentrating on other markets. Everything you are going through with your company, your competitors are going through with theirs. We all like to think our ideas are unique, but sometimes they’re not. That’s not a good enough reason to stop working on your start-up.

In our case, we’re going to have to rethink aspects of our strategy. (yes, this is a free application, but we’re taking this seriously). Will our competitor be working as hard to get their application into as many hands as possible? Is it even going to be in the App Store (right now its available for jailbroken iPhones). What features does it have? Ours will have exactly one feature (hey, it’s a free app after all).  All these are important things we’re going to reconsider.

We’re also going to have to rethink how the public will perceive us. Our idea is deceptively simple, we should not have thought it was ever unique. But we thought it up independently, so we’re comfortable with the idea that we’re not copying anyone. But what will the public think? We were planning on using a strategy of getting our idea our there first. But if its already out there, will the public think we’re the ones making a rip-off copy?

In essence, we’ve made our first mistake, and that was thinking our idea was more unique than it is. It led us to think no-one else had come up with it, even though it is painfully obvious that someone would. We didn’t look hard enough for competitors, and we should have. We even incorporated our false sense of uniqueness into our strategy, thinking it would help us, but its possible that very strategy will now be used against us (you’re very welcome, potential competitors). So now we’re going to take a better look and see what we’re up against. The important thing is to not let the existence of a competitor that’s ahead of us stop us from moving forward.

Project 1 - Description and Goals

Code Name: “Lantern”

Description: Project 1 will be a free iPhone and iPod Touch application distributed through Apple’s iTunes App Store. 

Main Goal: Achieve 5% market penetration.

**UPDATED**

*New App Idea in the works*

Secondary goal 1: After Project 2 is developed, use Project 1 to drive sales of Project 2. 

Secondary goal 2: Have more downloads than our closest competitor. 

Analysis of Goals

Five percent market penetration may not sound like a lot, but with an estimated 10 million iPhones out there by the end of 2008, to achieve a 5% market penetration means getting our application onto 500,000 iPhones and iPod Touches. That’s a huge undertaking. On the plus side, accomplishing that goal will give us a great user base to introduce Project 2. 

We also think our idea is killer and useful for almost every user, so its not limited to a certain market segment or demographic. Since the application is free, adoption will be quicker than that of a paid application (although we still need to test this hypothesis). However, there’s no hiding the fact that 500,000 users is going to be hard. 

Weaknesses

Some problems pop up immediately. Our application can be easily copied. Copycat applications could potentially flood the market quickly. We will need to develop a strategy to combat this. One defense is our application’s uniqueness. If our launch is successful, people will know that we were first and others are merely copying our idea, weakening their reputations and their brand. It will be very hard for someone else to develop an application like ours and claim the idea was independently developed. 

Our secondary goal of using our free application to drive sales of our non-free application is likely to cause us headaches as well. We’re unsure of how much cross-selling Apple will permit inside the App Store. That means we may be forced to promote our second application independently on the web, and then drive users to the App Store for the actual purchase. Increasing conversion rates will be key. So will brand identity and user satisfaction. 

Our job now is to get the application on track to be developed, and to brainstorm initial strategies for achieving our goals. 

Project One and Two – Introduction

For my first two projects I want to put myself in the place of a small iPhone App developer. Obviously, I’m excited about the platform (read my other blog) and would love to have real world experience to write about. The focus will be building a business around each project. Both projects will be very basic applications, I’m not looking to change the world here, just explain entrepreneurship. 

Here are the basic parameters for Project One and Two that I have developed so far:

Project 1 will be a free iPhone application. The goal will be to capture as much market share/installations as possible using ethical, non capital intensive means. In fact, the goal is to use as little money as possible. A secondary goal is to come up with an identity for a software company, which will be used to build a brand and encourage users to purchase future projects, like Project 2. 

Project 2 will be a simple iPhone application, most likely retailing for under $3. Project 2’s goal will be to explore the iPhone application economy. It will seek to explore how iPhone applications are adopted, what methods work best, what role advertising can play (if we make money to pay for it), how SEO affects adoption, and to establish best practices when it comes to promoting iPhone applications. Project 2 will attempt to experiment with conversion rates, press releases and other ways of getting a sale. Project 2 will concentrate on a basic revenue model, selling an application, rather than attempting to rely on an advertising, freemium/premium or subscription model. 

Project Zero – Code Name “Genesis”

What is the Open Entrepreneur, and why am I starting it?

I want to start a company, and then blog about the experience, releasing all data (or as much as possible), including sales numbers, expenses, and revenues. The blog will be structured after a case study, where I take an action and then study the result or analyze what went wrong (hopefully not, but it’ll happen). I’ll be tapping into some of my contacts at the University of Wisconsin-Madison Business and Law Schools, and I will contact entrepreneurs and companies to provide feedback or advice in areas that I struggle in. 

The original inspiration for the Open Entrepreneur came from reading articles from people like Norm Brodsky, who writes a column for Inc Magazine. He doesn’t just write about abstract concepts, but rather about his own business, and what has happened to him. Its not the summary of a defunct start-up’s failures, but an actual entrepreneur who explains his mistakes and successes as they happen. So many people go into entrepreneurship blindly, with only the advice “it’s a lot of work” to guide them. I want to show them exactly what goes on, to show people that success doesn’t happen magically, and failures don’t happen in a vacuum. 

The idea has now crystallized into an experiment that’s part case study, part inspiration, part explanation. How did I do it, why did I do it, what was the result, and hey, you can probably do it too. The focus is not to make money, even though I will try to make money, and I expect to make money. However, at times the purpose will be to explain why certain actions are wrong, and money will be lost. Sometimes the best lessons are failures. The blog will also have a strong ethics component, at all times trying to follow the best ethical path in terms of obtaining customers and maximizing revenue. 

A secondary goal will be to release data to encourage outside analysis that can be useful for everyone. I can’t do it alone, and sometimes I will be busy running my business. Other people can fill in and explore what my data means, and how other entrepreneurs can use it to advance their own businesses. For example, what would it mean if my website page views were going up but my conversion rate was going down? Why are more people coming to the website but less people buying? How would you reverse that? By encouraging outside users to get involved, together we could lay the groundwork for exploring problems and proposing solutions. I could then test the hypothesis to see if it will work. 

Each project will have specific goals to accomplish, either in terms of sales, revenues, users, or a specific business purpose. Some projects will not be stand-alone businesses, but will be created merely to experiment with an aspect of entrepreneurship that is particularly interesting or relevant. Projects will become more complex as I succeed or less complex as I fail, giving me inspiration to move forward, or letting me know when it is time to reflect on failures and mistakes. 

In essence, my start-up is about my start-ups. The time has come to stop reading books and start doing. I am twenty-eight, and there is no time like the present. Let the entrepreneurship begin. Now.