Few days
back I was changing my mobile phone plan seeking a faster Internet service.
There was no lack of options and the wait time between deactivating one service
and activating another was probably 48 hours. But in that interim I was not
connected to my business and personal contacts through WhatsApp; something that
I was not even using few months ago. It was a huge impediment in my otherwise
efficient way of working. I had to go “old
school” and email, text or call people whenever I needed something. That is
the power of startups; innovations which are disruptive and change the entire
rules of the game.
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A disruptive
innovation is an innovation that helps create a new market and value network, and eventually goes on to disrupt an existing market and
value network (over a few years or decades), displacing an earlier technology.
Source: https://en.wikipedia.org/wiki/Disruptive_innovation
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In this
growing climate of self – employment, business and entrepreneurship; startups
are often confused with small business. Let us clear the facts.
Startups are not small business. Entrepreneurship
is also not small business.
Startup Entrepreneurship vs. Small Business
This nation was built by men who took risks -
pioneers who were not afraid of the wilderness, business men who were not
afraid of failure, scientists who were not afraid of the truth, thinkers who were
not afraid of progress, dreamers who were not afraid of action. ~Brooks
Atkinson on America (American Theatre Critic for New York Times)
A startup entrepreneurship
is different from small business. There are three fundamental
differences –
1. Startups take shape due to an innovative idea
which has the potential of becoming a disruptor that changes an existing order.
E.g. How USB pen drives revolutionized
storage from CDs and DVDs.
2.
Startups are
pursued by entrepreneurs as they are ready to move out of their comfort zone
and past the tried and tested. Small business can be a beauty parlor or bakery.
The rules of the game are established. Business models are in place that can be
tweaked here and there to increase profitability. Where startups can take the
world by storm and function across borders, small business is restricted by its
geographic presence and reach. When Computed
Tomography (CT) was developed, that was a startup idea. Manufacturing generic
pharmaceuticals using a well documented master manufacturing formula is small
business.
3. Startup entrepreneurs are risk takers. When
they start off the vista is unclear. Learning happens along the way. But once
startups hit the tipping point, it simply grows in geometric proportions unlike
small business which continues to remain small.
The
difference is between doing something new and revolutionary or doing something
that is generic. As an individual ask yourself Are you aiming do something new
and disruptive or venturing into a tried and tested business model with few
advantages in your basket to create an edge and remain profitable?
How Startups Evolve
I have a
selective bias towards education and technology. Let us take the example of
Edutor Technologies (www.edutor.in). Their website says –
“Edutor's Augmented Classroom
Solution enables Schools & Coaching Institutes to leverage the power of
Tablets in engaging students – within the classroom and at home . The solution
is designed to lighten the school bags of students and drive effective learning
– through enriched learning materials and by facilitating individual attention
& focus from the teacher.”
We have all
been carrying heavy school bags during our childhood and there were no mass
availability and accessibility to computers till mid 90s in India let alone
tablets. Today the there is a technology available to address the issue which
not only reduces the weight of the school bags but makes learning more
enjoyable and interactive. All of us have learnt about the water cycle in
school. It was a simple diagrammatic representation that we drew in our
notebooks. Today students can see a video with a supporting audio to understand
the entire process in an interactive form. Which is more effective?
A startup starts with an idea. The entrepreneur (or the team) realizes that
not only there is a problem, but a probable solution to address it and convert
the entire experience into something more pleasant, efficient and superior
result-driven. Everything is in a state
of flux at this stage but the entrepreneur has faith in his idea.
Today
there is whole ecosystem available to support startups from its initial stage
till it scales up considerably.
The subsequent stage is conceptualizing the
idea for roll-out, testing,
and modifications followed by retesting. Here the entrepreneurs work out the
development of the solution, the delivery process, initial revenue structure
etc. Most of the startups slog through these stages with the founder
entrepreneur’s funds.
Using a
robust model, the startup entrepreneur now tries to convince the investors in
taking interest in the idea and support it financially. The model’s efficacy is
proven through data and analytics. An idea is an idea till it becomes
economically promising with a market ready to be served. Once a startup
achieves funding, it is ready to scale
up and grow rapidly taking the market by a storm. And as the product
reaches out to more audience, it is further tweaked to make it more lucrative
and desired. The way Google has evolved as a company and its product basket has
flourished need not be reiterated. Look at the success of Groupon or Zynga.
What Startups Need
What
startups need is freedom to dream and experiment. An idea can get strangulated
if it is not allowed to breathe. An established business with a tried and
tested business model that is profit-making can form a small subsidiary and
venture into a startup. Once it gains traction, funds can be channelized to
create momentum and fuel its growth. Another perceived benefit of this
structure is image and network. Interested investors know who is behind the
idea and that makes them feel secure about investing. This perception is
however debatable. In case of startups, it is the strength of the idea that
attracts investors not if a Fortune 500 company is behind it.
A startup
benefits enormously through business incubators and accelerators. There are
quite a few incubators active in India. Center
for Innovation, Incubation and Entrepreneurship in IIM Ahmedabad, Technology
Business Incubator at NIT Calicut, Indian Angel Network and National Design
Business Incubator at NID Ahmedabad are few examples. Edutor was incubated
by IIT Madras’s Rural Technology and Business Incubator. Germany has an
association of Business Incubation and Innovation Centers with over 200
institutional members.
The
incubation centers provide support and resources to entrepreneurs and startups
for myriad activities like accounting, marketing, labeling, designing, liaison
with banks and financial institutions to process loans and funding, technology
acquisition to name a few functions. They have a network of service providers
and they interact amongst themselves to learn and replicate services and fill
gaps. They are useful in all kinds of industries. The aim is to not only help
entrepreneurs gain a foothold but by helping enterprises survive they help in
creating jobs and general economic activity in the area and in better cases
down the line investments and entrepreneurship.
SAP pools in
their huge knowledge base and case studies gathered over the years of
implementation and interaction with clients all over the world into this
program to help entrepreneurs through mentoring and training. SAP Ventures is a
win-win proposition which has launched the Real-Time 100 Million Euro Fund aimed
at startups that are launching solutions for big data challenges leveraging SAP
HANA as their application database. The company is committed to investing at
the growth stage of IT startups with investments to the tune of USD 5 Mn
atleast!
Do you have an idea waiting to intensify?
If you have
a fantastic idea that can make a marked difference in people’s lives then this
is the age to work on it. Today we are at a stage where there is whole fertile
ecosystem that can support an idea and take it to a commercially viable stage. There
are investors looking for the next Twitter or Facebook which will create a
flurry of economic activities around it. These innovations have changed how
marketers are promoting their products or engaging with customers. There are
tools like Cloud solutions ready to help accelerate your idea at a rapid pace. Whether
you become a small business owner or start-up entrepreneur will depend on your
life’s objectives. You choose to setup a mom and pop shop or build the next device
which makes you a household name. If there are risks, so is the chance of
immense satisfaction and contentment.
While writing this piece one of my most favorite poems by Robert Frost came to my mind.
Two roads diverged in a wood, and I—
I
took the one less traveled by, And that has made all the difference. ~ Robert
Frost
