Have been interacting with “Gen X” , which includes my teenage daughters and it never ceases to amaze me about the enthusiasm with which they talk on the great ideas they have and how they will develop that into a product, a company and so on….
I never ever thought about such things at that age… But then they have grown up in a different world and have huge exposure to different things in this new ever-changing world.
As I keep hearing about this whenever they do any project or even a mini project it got me thinking … What would be a reference or a benchmark which would help them differentiate from an idea that could work from an idea that wouldn’t be sustainable?
Thus this article…
The Ten Commandments to differentiate an idea, which is worth taking forward
1. Unique opportunity which is not visible to others
The identified product or service should address either a key issue…or a segment, which has not been addressed until now…
Messaging services is a very good example. WhatsApp today commands the huge market share because it capitalised on enhancing the instant messaging experience by adding user-friendly feature after feature while the other players missed seeing this huge opportunity.
2. Right Timing
Most of the industry, product or service growth is also linked to the ecosystem that is available… Let us consider the earlier example of Amazon. However great a product or service Amazon would not have grown if the computing power of connecting devices like computers and smart phones had not grown. It would also not have grown if the telecom networks and the speed and range of mobile connectivity had not increased the way it has done.
Smart phones, which we are so used to doing almost anything and everything, today only succeeded because of the environment that was available with the required computing power. 3G and 4G telecom networks and environment of open software, which enabled the free development of apps to address so many requirements.
So the timing of when you should choose to launch something is critical, as the business ecosystem around you has to enable it to succeed.
3. People
The core strength of the founding members is crucial to make the idea into success…If we are making a technology company and if you do not have a founding member who understands and works superbly with the technology it will not reach the heights that you are aiming for.
Take the case of Microsoft…Bill Gates used to write the software himself
Or the case of Facebook where the codes were written by Mark Zuckerberg himself
In the case of Starbucks…the chain grew to what it is today because it changed track under Howard Schulz who had figured out the dynamics of selling coffee
4. Breakthrough technology vs incremental increase
This is probably the toughest…Of course if you come out with a breakthrough technology like what a Facebook or Microsoft did the chances of it succeeding are much higher…
However, history is also filled with examples like the Google search engine, which was the eighth or ninth search engine to be launched, but today commands an 80% market share in the search business.
On the other hand, Motorola was the first to come out with the mobile phone but Motorola is nowhere in the mobile phone market today…
So the catch is not that you should be the first in the market but the change that you bring about should be substantial of the 10x kind and not a small 20% betterment to what exists then.
5. Monopoly in the identified market
When we all work out a market segment to be addressed it’s so easy to look at a huge market and say if I capture 1% of that market we are at X number and with that X number we will have Y revenue and so on… But when the product is spread out so thin, the fight for market share will be very intensive with many players who would have better financial and people muscle than what a start-up has…
Therefore, it certainly makes sense to target a small market but capture a very sizeable market share in that market and keep progressing from there…
All the great successes of today be it Amazon or Google or Facebook started out with a small market and then grew from there.
Amazon for instance only sold books to start with but there is hardly any product category that they aren’t into today…
6. Production of your product or service
This I guess is more relevant if you are targeting a product related venture. With companies focusing on core competencies and the need for huge scale to bring down costs it makes sense also to ensure that your product manufacturing is subcontracted to someone who is already skilled in that job…The best examples of today is
Apple who have totally subcontracted their manufacturing but have been successfully able to ensure that the quality of their product is not compromised.
7. Distribution of your product or service
Assume you have a great product or a service…
The best technological breakthrough for the said product has to reach the customer through an effective distribution channel. So the end objective to make sure that customers buy the product and the distribution channel should be thought through well.
The biggest name today in electric cars is Tesla…It’s not that Tesla was the first company to make electric cars…But it was certainly the first company to make electric sports cars and premium sedans…So unlike the other companies like Toyota, Honda or Hyundai or Ford which has used third party franchises for the sales showrooms…Tesla has invested in the entire sales distribution channels on its own. Owning the entire channel helps you to have a better control and will certainly be able to provide a better experience to the customer.
8. Funding
This is where many start-ups lose out to bigger companies. Anticipating funding requirements for the product or service as it goes past different stages of its growth is almost impossible. We have examples of enough and more companies that had to sell out due to want of funds or totally collapsed due to the required funding not coming in at the right time.
One of the best examples of start-up funding have seen is by the Paypal founders…Not only did they manage to get the initial funding to acquire subscribers by paying each subscriber a certain price for logging in ..they also successfully anticipated the dotcom crash of the 2003 and secured the required funding to ensure that they stay afloat.
We are all seeing service after service or app after app offering crazy cash back offers just to ensure more and more subscriber’s try out their service. ..to gain market share..
We are also seeing the huge price discounting that is being offered by the online retailers to gain market share…
So companies need funding to operate and funding to burn cash like the above to scale up and reach the kind of market shares that they target…
9. Scalability
Well this would be the next stage after gaining sizeable market share in the small segment that any start up would start with.
The idea selected should be wide enough to be scaled to address requirements of a wider base, which also meets the criteria for disruption.
Where a smaller player enters a segment, which is not being addressed by the main players, gains sizeable foothold in that segment, fine tunes its product or service, starts moving up the value chain and attracts customers of all segments that we say disruption has happened.
So as all start-ups dream of disrupting a market the service or product being envisaged should also be scaled up to meet these.
10. Durability
The world that we know today is changing dramatically at an unbelievable pace. The market share in the areas that we are targeting as a start-up should be durable for a sizeable number of years to sustain and make more money after the initial bleeding to gain market share.
Today with governments and companies and institutions providing incubation facilities of various kinds to entrepreneurs to take their start up ideas to the next level start up is a key focus everywhere ..
Am sure there are several more points which can be added but these I believe are the key ones, which will serve as a reference and benchmark to differentiate the ideas worth taking to the next level.
For all those enthusiastic GenX and everyone else out there, hope it helps!
