The Failure and Success of Startups: Part 1

The debate is not about whether 90% or 9% of startups fail. It should rather be about what takes a startup to succeed. It is enough to infer that the failure rates are staggering even in the most developed economies. In a developing economy such as India which is reportedly having the third largest startup ecosystem, the problem is worse. There is clearly no evidence of innovation that will impact life positively.


Please refer to the following illustration. Every major dimension of life on this planet is horribly broken everywhere. Yet we continue to see more and more technology investment in areas that do not contribute to the Quality of Life.


A ranking of U.S. companies by the Drucker Institute, measuring performance on Customer Service, Employee Engagement & Development, Innovation, Social Responsibility and Financial Strength shows the top 10 as Amazon, Apple, Alphabet, Johnson & Johnson, IBM, Microsoft, P&G, 3M, Cisco & Nvidia. Is it any surprise that seven of these are pure technology companies while the remaining three are technologically advanced in their areas of specialization?

We are all aware that we are at the advent of the Fourth Industrial Revolution. Here is a chronology on how we got to this point of arrival:

  • 1760-1840: First Industrial Revolution - Mechanized spinning of textiles, large-scale manufacturing of chemicals, steam power, and efficiencies in iron-making.

  • 1870-1940:Second Industrial Revolution - Radio, aviation, and nuclear fission sparked the Scientific/Technical Revolution.

  • 1985-2015: Third Industrial Revolution - The internet and digital media and devices sparked the Information Revolution.

  • 2016 - Now (Future): Fourth Industrial Revolution - Digital Technologies (Sensors, IOT), Connected Technologies (Wearables), Wireless Networks, Ubiquitous Interfaces.


The important point to infer from the above is about time shrinking progressively dramatically with each revolution. The reason for this is the increasing democratization of systems and with it the growing Customer Aspirations. From the perspective of developing economies such as India, the participation in these revolutions is registered only from third industry revolution due to socio-political factors. Therefore they have the uniqueness of not being burdened by history and retaining the free spirit of entrepreneurship that some of the developed economies are finding terrifyingly hard to overcome.



In an article authored by A.H. Segars, “Seven Technologies Remaking the World,” MIT Sloan Management Review, March 2018 it becomes clear that enterprises need to Transform and Innovate rapidly in order to grow because the context of the world as we know is changing and enterprises, both established and startups are still moored to the relevance of a universe that is fast disappearing.

Where does a startup start?

Having a great idea or building a killer application is not the genesis of a startup in any economy. There are no dearth of good ideas but clearly contextualization is a problem. Like any good construction the place to start is the foundation. Whether a startup or an established enterprise the triad of processes; Intellectual, Value and Customer Capital Management is the foundation. This is the engine of growth and that is what the Customer Universe is interested in.

  • The Value Capital Management Process Creates and Manages Demand through Innovation..

  • The Intellectual Capital Management Process inspires the creation of value through Inquiry.

  • The Customer Capital Management Process initiates the universe of Customer and Consumers into a Unique Engagement & Experience with every single transaction through the process of Education, Ownership and Commitment.


It must become amply clear to anyone that operational engine would be majorly impacted when the growth engine is so established.

While established enterprises have a need to re-lay the foundations of their enterprise to be relevant in the digital economy, the startups have a unique opportunity to get a headstart and built the growth engine first before the operational engine. Look at the following illustration to understand the impact of the preceding statement.


Most established organizations and among them the ones who are trying hard to digitally transform themselves are struggling with a second industrial revolution structure hoping that they can somehow survive the onslaught of the fourth industrial revolution. And many of the startups instead of going the other way try to emulate these dinosaurs. Why?


It must come as no surprise that even some of the apparently most innovative companies in the world would perhaps not have a unified Intellectual Capital Management process across the globe. That would include the likes of Amazon, Google and Apple. Because they still live in a world where a majority of their Leaders and Managers have a worldview of dominating and not collaborating. It takes them a huge amount of public money and effort before they somehow come to the realization of the relevant structure. A startup and lesser organizations on the other hand have neither the resources nor the staying power to overthrow the oligopolies that these enterprises are turning out to be.

Bain & Company in its seminal report authored by James Allen, James Root and Andrew Schwedel in early 2018 had this to say:

"What this could firms look like in 2027: Companies will set up and manage Engine 2 under the corporate umbrella but will likely structure, staff and fund it separately. Resource allocation will be a point of integration across Engine 1 and Engine 2, and will be continuous and zero-based. Top talent will rotate through both engines, learning a balanced set of skills and fulfilling mission-critical roles on both sides of the business."


Summary

Startups should be focused on innovation. They cannot rely on a screwed up process that has been handed down. They need to find what is best for them and the future generation. Design Thinking should be employed to connect the Journey of Life with the Customer Life Cycle. The relevance of an enterprise's Platform, Product, Process and / or Project (services) life cycle must intersect these two life cycles. That is the only way to create an organization of the future NOW.

HREEMM Logo

Hreemm facilitates Innovations that dramatically improves quality of living  in every sphere of life.

Request Early Access to the Innovation platform

© 2020 Medioctor Solutions Pvt. Ltd | All rights reserved.

43, Residency Road, Bengaluru, India