‘Our industry does not respect tradition. It only respects innovation’- Satya Nadella
The last decade has witnessed a change in the global business landscape. The DNA of businesses have altered, with a greater thrust on innovation, ideas and challenging the status quo. Technology is playing an increasingly significant role in turning those ideas into reality by drastically reducing the costs involved in setting up a business and the time to hit the market. Yet it is startling to see that nine out of ten i.e. 90% of the startups fail within the first three quarters of opening shop. Of those, 42% of them fail (making it the single biggest reason why startups fail) is because there is a lack of market need for their product. While there are ideas galore, what really ensures a sustainable business is an idea that solves a problem or addresses a need. The most successful ideas are the ones that create products and services that we use daily in our lives. These are the companies that come up with creative, innovative solutions and achieve billion dollar valuations in no time. The success mantra for a sustainable business lies in finding a solution for an existing problem ( Amazon, Uber, Paytm) or identify a latent need of consumers and bring it to the fore ( Facebook, WhatsApp, Instagram- addressing the need for people to connect, communicate instantly with people thousands of miles away). More than minting money, a startup must serve a purpose.
But is that enough? Like Buddha said “An idea that is developed and put into action is more important than an idea that exists only as an idea.” The driving force behind the business are the people, processes and inevitably the product.Structuring the first deal, fund raising are crucial and what segregates the best from the rest is the capability and the passion of the people involved. Many a great idea fizzle off due to a lack of planning and proper execution. It therefore becomes imperative to have people who can manage cash flows, inventory and reduce redundant operational expenses to sustain the business. In a world of many a me-too, it is these people who understand the purpose and can develop the business plan for moving forward.
Creating a ‘sense of purpose’: Any start-up would serve itself better to create a sense of purpose which stands bigger than meeting the next market share or revenue target. This is because market scenarios might change but if a start-up’s founders and its employees have firm conviction in their sense of purpose, it helps them to coast over such unfavorable times and maintain focus. This enabled Larry Page and Sergey Brin nurture Google to its current dominating position in their information-organizing mission rather than selling off to Yahoo for $3 Billion in 2002. This also helped Mark Zuckerberg to refuse offers from Yahoo and Google and focus on its mission to connect everybody. One can imagine what would have happened if the founders of these companies didn’t have an astute sense of purpose and sold off their companies before they could reach their potential.
Always put people first: A start-up should always put people first. People in form of its own customers, its employees and the general public.Its people that make companies and not the other way around. And in an increasingly customer-driven market, how a company deals with people who are not yet its customers but maybe so in the distant future also matters. One has to keep in mind that people always remember a company not for the revenue they made but for how they were made to feel when transacting with the company. This strikes a deep chord between a company and its current and future customers which can be the most effective competitive advantage at its disposal.
With the idea and people in place, the firm must seek customer validation i.e. find people who are willing to use the offering. The past five years have seen a boom in this space of startups and it thus becomes essential to differentiate yourself from the rest. While the product is the show stopper, it is about creating a buzz and enticing people to use your product. There are several ways a startup can adopt for this:
Offer Exclusivity: This implies that the product launches for a select few in the market triggering an instant buzz. People always want to be part of an exclusive club that makes them feel special. This is what Pinterest first adopted by sending out the invites to only a few people but allowed people to join in by requesting for an invitation. Additionally it also makes people feel that they are needed by the brand to build its image. The success of Pinterest proves this to be an effective driver for growth.
SEM or Search Engine Marketing: With a vast majority of the target audience going digital it becomes imperative that as a startup one gets noticed in the digital space. Google remains the hub of all searches including first time product searches. It is therefore a necessity that the website is optimized for search engines. While paid searches are often a strategy startups use however it is not sustainable in the long run.
Engage with audience over social media: With a change in the way businesses work, going from a transactional exchange to a more collaborative one with its customers, having a constant dialogue with them is required. It often becomes a platform for gauging the customer sentiments, taking feedback and exchange of ideas. There are numerous instances where technology companies launch the beta version of their product for their loyal customers for a brief period, understanding the acceptability of the new version as also the flaws.
Once the initial buzz has been created, any start-up needs to sustain its growth and we found the following to be some aspects that successful start-ups across industries have embraced to achieve the same:
Be flexible: In a constantly changing marketplace, it is imperative that start-ups be flexible in their operations. They have to be constantly on the lookout of customer feedback and alter their offerings accordingly. Sometimes it makes sense to shift from one idea or business model to another and it sometimes becomes necessary for a startup to go through many such transitions before it finally achieves success. For example, PayPal started in encryption, developed its expertise and capitalized on it before evolving to become the payment solution firm that we know it to be today.
Develop a sense of timing:Start-ups have to develop a sense of timing which is very difficult to define. Waiting for the opportune moment before arriving at a crucial decision might make all the difference between success and failure. Sometimes speed is of paramount importance; sometimes patience and perseverance is the order of the day. Knowing when to assume which stance is critical for success. An exhaustive understanding of its own offerings, its customer base, its competitors and the regulatory environment in which it operates can help a start-up to develop a better sense of timing decision-wise.
Embrace governance mechanisms:Hierarchies can stifle the freedom on which start-ups thrive but it is imperative to develop governance mechanisms as they help channelize the flow of momentum of the company. It might seem frivolous for a nascent company to embrace governance norms but standardizing and institutionalizing certain practices do help in maintaining financial and operational discipline. It also helps to establish standard operating procedures to deal with issues arising out of customer complaints or regulatory issues. And it might also help in identifying and rooting out redundancies thus leading to conservation of precious resources in terms of money, manpower and time.
Embrace Lean Principles: Lean principles can make the process of operating a start-up less risky. At the heart of the lean principles for start-ups is the fact that start-ups are not miniature versions of a bigger company. Whereas an established company executes a given business plan, a start-up is always on the lookout for a business model which is better fit for achieving its purpose. Hence, lean principles emphasize lesser importance on elaborate planning and fixation on five-year forecasts and more importance on experimentation, incorporation of customer feedback and constant incremental improvements in the product and service offerings of the company. It calls for lesser upfront investment to develop a full-blown prototype but more for developing a minimum viable product which can be pivoted to meet the constantly changing needs of the customers by timely incorporation of feedback.
Start-ups are playing an increasingly important role in our economy; creating innovative products and services while generating much needed wealth and employment. While there can be no recipe for success or a startup formula to succeed, a strategy revolving around the points mentioned above can help in providing a direction for a robust and sustainable growth trajectory.
The article has been written by Utsav Banerjee (@utsav_banerjee ) & Swarnim Pant (@swarnim) . They are presently pursuing their MBA from Xavier Institute of Management, Bhubaneshwar.
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