A Startup journey: a race against time and uncertainty to achieve innovation. How to win
According to the Startup Genome Project’s report (Techli, 2012), an astounding 92% of startups fail. There are tons of articles and studies that analyse and posit why startups fail. Instead of going through these causes, I will focus, in this article, on the journey that startups I believe should follow to being able to not only survive but also to create high impact and, subsequently, attain real innovation. If you are an entrepreneur, forget about paths and routes: every startup should follow its own journey, but not without carrying some useful knowledge and key insights.
Innovation in well-established firms vs innovation in startups
So far, my articles have approached innovation from a corporate standpoint. Although the prime goals of innovation are the same for both startups and well-established companies, the way it should be undertaken is quite different, no extent of diverse obstacles and issues, but also of certain advantages. Whilst innovation is inherent in a startup’s DNA, in established firms, there is a complex ecosystem in which leaders have to deal with both the core business and innovation initiatives. I have covered the latter widely in previous posts, underlining the need for organisations to implement innovation management systems that can interface with business-as-usual operations to be able to approach innovation as a repeatable and efficient process.
How startups can achieve innovation
Growth velocity is what differentiates micro or small businesses and startups. Unlike startups, micro or small businesses do not pursue per see scaling exponentially. For startups, real innovation can only be achieved through such a growth rate, by launching successful, groundbreaking products, services or business models. By groundbreaking, I mean solutions that are 10x better, faster, or cheaper than any other existing solutions in the market. When these solutions enable an exponential growth rate to companies, impact in markets occurs, and real innovation is achieved. Conversely, when a startup fails, it fundamentally means that it was unable to attain real innovation on time. Why on time? Well, I like defining a startup journey as a race against time (which can be translated to money most of the times) and uncertainty to produce actual innovation. Even the best business ideas need money to be realised, fundamentally, to be able to overcome cash flow challenges (Barringer, 2016). According to CB Insights Research (2019), the second top reason because start-ups fail (29%) is that they run out of cash (the first one is no market need). Paying close attention to cash management is vital for succeeding when growing a startup business. Reid Hoffman, co-founder of LinkedIn and partner of Greylock Partners, smartly put this thought in different words:
“An entrepreneur is someone who will jump off a cliff and assemble an airplane on the way down.”
Reid Hoffman
I think it’s important to point out that I don’t refer to innovation as successful innovation because innovation is inherently linked with success, which implies causing a substantial impact in markets through exponential growth.
If I had to summarise the general strategy for any startup, I’d put it, mimicking Jedi Master Yoda, as follows:
Focus on the problem leads to solution hypotheses.
Validating hypotheses quickly and iteratively leads to fast learning.
Fast learning leads to product/market fit.
Product/market fit leads to growth.
Exponential growth leads to impact.
And impact is the path to innovation.
Yes, I know, perhaps it’s too long, but I hope you caught the idea. It is not a rule of thumb, but it shows the milestones that any startup must consider when articulating not only its business strategy but also their day-to-day focus.
Key dimensions for startups
There is a number of dimensions that can determine the success or failure of startups. These dimensions are core elements that startup founders must take care of carefully to increase the chances not only for survival but also to achieve innovation. I believe that these are the team, the problem, the solution, the business model, the culture, and the runway. I don’t think that other elements, such as strategy, becomes a crucial factor, as long as entrepreneurs bear in mind the aforementioned Yoda-ish statement. I think that for early-stage startups, in which one month becomes one year, a strategy doesn’t make much sense in the exploratory and learning endeavour that these companies must go through in the realm of uncertainty.
These dimensions comprise crucial aspects to treat carefully in order to be able to build a robust, operational and optimal innovation engine. The ability, as a team, to achieve innovation before the runaway ends leans, in turn, on a strong emphasis on certain key activities. Let’s have a look at them.
Key activities for startups
Along with the key dimensions, there is a set of key activities that startups must consider focusing on in order to experiment, test, learn, and iterate as a standard model for rapid growth. These activities include focus, explore, plan, act, validate, and measure. This cycle shapes an iterative process that startups should carry out to find the right path to achieve product-market fit and, subsequently, growth, impact, and innovation.
The startup dimensions-activities matrix
The following exhibit illustrates what startups should bear in mind for each intersection between the aforementioned key dimensions and activities. This, based on my experience in working and helping startups in their innovation journey, is something that startups’ founders should consider paying particular attention to. Obviously, every startup is different, and these tips are not exhaustive, but it can shed light on the key pieces of advice for each intersection of dimensions and activities. The matrix is oriented to product innovation, but it could be understood for service innovation as well.
Conclusion
As I noted in the title of this post, a startup journey is a race against constraints such as time and uncertainty. For startups, focusing on doing the right things is even more important than doing things right. I have pointed out the key dimensions and activities that early-stage startups must consider to focus on things that really matter. Although this is not rocket science at all, it can provide advice for attaining higher chances to achieve real innovation.
References
Barringer, B. (2016) Entrepreneurship: Successfully Launching New Ventures. 5th edn. Harlow: Pearson.
CB Insights Research. (2019). The Top 20 Reasons Startups Fail. [online] Available at: https://www.cbinsights.com/research/startup-failure-reasons-top/ [Accessed 13 Jan. 2021].
Techli (2012). Why Do Startups Fail? An Analysis Of 3,200 High-Growth Technology Startups — Techli. [online] Available at: <https://techli.com/startup-genome-project/32391/> [Accessed 13 Jan. 2021].
Note of the author:
As Director and Principal Consultant at Leantropy, I believe that organizations can make use of an effective and efficient Innovation Management process to keep a long-term, sustainable competitive advantage. I envision a world where successful organisations are the main enablers of a sustainable and innovation-driven future.
