October 28, 2005

October 28, 2005 – Birmingham Business Journal - Two simple words have completely changed the way at least one member of the Birmingham Venture Club's latest Entrepreneur Accelerator class interprets his strategic business plan: market validation.

Like a doctor who treats a patient's symptoms without addressing the underlying condition, George Barckley says, Kreatek Inc. has been attempting to solve customer problems since its inception without curing market pains.

"We've been developing products and prototypes 'thinking' we have the knowledge of the pains we're trying to solve, but without a clear picture of what our prospective market is experiencing, we are fighting an uphill battle," says Barckley, Kreatek's president.

Kreatek helps organizations translate business strategies into action by improving the knowledge of their people and the decisions they make. The Gardendale-based company leverages business intelligence with information integration and reporting knowledge for the financial services industry.

"Our forward focus will be on packaging our integration and reporting (products) as defined by our market research and capitalizing on what we know today: Financial service businesses struggle getting consistent and accurate knowledge about their product, services and customers," Barckley says.

Rob Adams, author of "A Good Hard Kick in the Ass: Basic Training for Entrepreneurs," is largely responsible for Barckley's revelation.

Adams, who also founded AV Labs, the early stage venture fund affiliated with Austin Ventures LP in Austin, Texas, spoke to Barckley and his 11 Accelerator classmates Oct. 21 via video conference and clued the group in to how an aspiring entrepreneur truly knows what problem a particular market is experiencing.

"If the market isn't spending money on the resolution, then it's not a problem, period," Barckley says, paraphrasing Adams' presentation.

Discard old notions

Moreover, he says, Adams helped him realize businesses usually throw money at a problem by hiring more staff to fill the gap, so following the spending might illuminate the source of the problem.

"While you and the rest of your company are calling on your market of choice, ask the basic question of, 'What are your top three problems today.' You just may discover a new pain that requires your help to solve, and who knows, you might make a little revenue in the process," says Barckley, already putting his new knowledge to work for his business.

Accelerator classmate Glenn Phillips, president of Forte Inc., says he was "particularly glad" Adams provided specific sample questions to ask potential customers.

"(Adams) also offered some very brief and easy to understand primary success metrics that investors will typically look at. That sure beats the authors that write a whole book to answer this question," Phillips says.

He says Adams' discussion of getting a product or service to market on a global scale helped him understand the importance of gradual introduction.

"The first version will not be very robust but will prove out the market and be a starting point. Subsequent versions will each add more features," Phillips says.

Forte provides software development and systems support services to health care, insurance, manufacturing, utility and other companies.

"For me, (Adams') primary message was that before you start building a business, you must take the time and some money and absolutely, positively find the customer's pain and need. No matter what you think, you don't know as much about your potential customers as you think you do. And how do you find out? You ask them. A lot of them," Phillips says.

For instance, Accelerator class member Jennifer Skjellum says Adams stressed the importance of pre-product-launch marketing.

"(Adams) stressed the simple idea of interviewing 100 people and asking key questions related to the need for such a product in the market, and getting an indication that your product or service helps solve a problem or fill a need," says Skjellum, president of Verari Systems Software Inc., noting he also discussed how the best ideas don't reinvent the wheel but present a new approach to an existing business process.

"We often forget the purpose of developing products - hardware and software, in our case - is to make money, and the type of marketing research he described for start-ups needs to be carried through the entire life cycle of the company," she says. "Simple marketing research doesn't require a lot of investment, and before setting off in a new direction - whether it is a new product or feature enhancements - what seems so obvious after hearing Rob Adams speak is often forgotten or easy to short-cut."

Skjellum founded Verari, formerly MPI Software Technology, to market and sell high-performance computing software for clusters, other parallel systems and embedded systems.

Market 'misfires'

Accelerator classmate Trent Taylor, president of Plexcom Networks Inc., says he didn't realize before Adams' presentation how widespread the disconnect between business owners' perceptions of the market and reality can be.

"Consumer misconceptions and market misfires don't just happen in small companies but in large corporations as well when proper market validation is not performed," Taylor says.

Plexcom is a fixed-wireless broadband provider that offers customers high-speed Internet, voice-over IP, and point-to-point and metro area network services.

"Proper market validation will help you gear your products and services to your intended audience as well as help you get them to market sooner," Taylor says. "Knowing your customer will help you build a management team with execution expertise for your products and services, which plays a key factor in raising smart capital from the right partners."

Kelli M. Dugan can be reached at (205) 443-5628 or e-mail her at kdugan@bizjournals.com