Second Product Syndrome

By Parilee Edison
While Ben Horowitz and others have written extensively about “second startup syndrome”[i], I see as many promising startups that fall victim to the “second product syndrome”. Startup founders who have struck it out of the park with their first product have to figure out their next move. In the worst case, a fear of failure leads them to minimize brand and reputation risk. An overconfidence bias leads them to assume that they already know their customer. The startup’s existing fixed and sunk costs limit founders’ willingness to test iterations that don’t fully utilize their current infrastructure. In an attempt to leap the chasm early and move straight to their existing mainstream customer base, startups with great first products risk neglecting lean product development methodologies with their second product and, ultimately, releasing a product that hasn’t found product-market fit. Entrepreneurs need to test and validate hypotheses as devotedly on their second product as they did on their first.
With a second product, the vaporware, Excel mockups, and dead end landing pages that were reputationally risk-free the first time around face increased scrutiny from current and prospective customers – including those that are not early adopters. Promising and never delivering a new product or delivering a product that doesn’t meet customer needs (with or without a “beta” label) carries a cost in customer alienation. Fearing brand damage, startups test early hypotheses on a very small subset of existing customers and drive to have a solid offering before exposing many people outside the company.
Additionally, startups can rely too heavily on customer insights that were gained during their first product launch. That information is dated, tangential, and indirect and thus an overconfident entrepreneur can easily decide that they already know enough and not undertake a second, more focused, analysis. Early adopter segments for the first and second products of a startup may not overlap and the problems that companies are solving may have already been addressed or may be better addressed in an entirely new way – startups shouldn’t assume that work in a space fully informs them about all players’ needs.
Finally, with a fixed infrastructure, channel relationships, and design aesthetic, companies want to control costs by leveraging the same fixed cost base for the second product as for the first. This will only work if the second product is actually best consumed on the same infrastructure, distributed with the startups’ existing go to market model, and visualized similarly. Companies can easily fall victim to assuming that these sunk-cost assets are fixed for all future products. If they then only test solutions that can ride on those rails, they may miss drawbacks to the current system.
It makes complete sense that a company with vision and deep industry knowledge would want to leap the chasm pre-emptively and move straight to an early majority customer with a “minimum public release” rather than an MVP. However, vision and industry knowledge are complements to rather than substitutes for MVPs. Neglecting to validate hypotheses may wind up with either an un-adopted product or with costly late-stage changes. For a startup, the success of the second product may make the difference between building a company and selling a product, so founders should check their impulses and spend a bit more upfront to avoid a costly “second-product syndrome” later on. Otherwise they are falling victim to the same trap as their established company competitors – and where’s the fun in that?



[i] Ben Horowitz, “Second Startup Syndrome”, http://bhorowitz.com/2010/06/14/second-startup-syndrome/, accessed 2/20/2013.       



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