Companies and products don’t die they become irrelevant and fade away

I have heard from many people that the startup initiative in India has been a failure but no one said why. Below is a list I obtained from a social network about the top reasons why startups fail.

 

Interestingly, a startup company had contacted me few months back asking me if I could be their mentor. Their product is on the lines of Askme.com and they were trying to market it in Kerala, my state in India. The key problem was the people of Kerala are not even fully used to the shopping mall culture yet. We still prefer buying from local grocers, medical shops etc. So searching about products on the internet is still a long way away. My question to the company was, do you know if there is a need for your product in the market you are targeting? They had no clue. This is the top reason on the above list. Lack of proper due diligence. What they wanted from me was to understand how to market their product. I told them that you need to go back to your drawing board and figure out something crucial. Simply putting your product out there is of no use. You cannot force people to use your product. So what can you offer them for using your product? You need a better product strategy before you get on to business strategy and that is where marketing strategy comes in. I haven’t heard from them after that.

Even worse is not understanding when the product is ready to be in the market. Mature companies too have new products and services in their pipeline but what makes and keeps them successful is their ability to time their launches precisely. The extreme of this is Apple launching their products whenever they want to because they have a phenomenal market following. But that’s Apple. There is a concept called Minimum Viable Product (MVP) which can help understand when to stop working on the product and launch it. How do we know this? Work on creating those aspects of the product which could create market disruption or get noticed in the market quickly. When this is successful then it becomes easy. People will take over from there. All we need is to take feedback from customers. Customer expectations will tell us which features of the product are more relevant and need to be out there in the market quickly.

There are two phases of every lifespan be it that of the Universe itself and everything within it. Evolving and maturing. Business also follows the same pattern. A friend is learning to be a professional cake maker and my advice to her was simple. If she is going to bake cakes like everyone else is, she is not going to get far. Evolving stage is the experimenting stage where she needs to mix and match and see what unique she can create. So how will she know she has matured? When customers start calling her for her cakes.

My dad has always loved cooking non-vegetarian food. He looks up on a lot of recipes on the internet but then finds his own niche way of cooking. He has been asking me to help him find a market for his food. He cannot compromise on the quality of the products he uses for cooking which essentially means he cannot target the lower and the lower middle strata of the market. If he tries to sell at those levels, he will have to lower his price thereby lowering his profit margin considerably and moreover there will be very less appreciation among those customers for what they are getting. All of this means the key is in the positioning of the products. Positioning will determine the pricing and marketing strategies.

I believe products and companies become irrelevant and fade away rather than fail. Nokia and Kodak are great examples. Nokia phones became irrelevant when their Symbian OS was run over by Android and iOS. With Kodak, the most fundamental mistake happened. They matured and stopped evolving and got run over by technology. Evolving to maturity shows the growth trajectory of the company or the product. Sustaining and staying relevant in the market demands continuous evolution of another kind. This is where the sheer genius of Steve Jobs shines brightly. In the middle of iMacs and Macbooks and iOS and iPods and iPhones and iTunes, he still found the time and space to figure out that there could be demand for a device that could bridge the gap between the Macbook and the iPhone, thus creating the iPad. I have wondered how tuned his mind was into the world of business and how he used to keep his ears to the ground. He seems to have understood the threat of stagnation and becoming irrelevant which should be the reason why he created such a huge product catalogue and a possibly unknown product pipeline on which he was supposedly working till the time of his demise.

There are great companies and greater leaders to look up to. But ultimately success depends on the course we charter and when we are able to muster the strength, wile and guile and navigate ourselves through the choppy waters of the business world.

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Is the startup ecosystem becoming the next bubble?

This has been the decade of startups. From the time not so long ago when technology was ruled by the now legacy companies through the advent of the Cloud ecosystem, technology has had a huge makeover. Business strategies and models have had paradigm shifts and new business ideas do not want to work with legacy business models. The hegemony of  the big technology corporate have waned too quickly. They were never prepared for such drastic changes in such a short span of time. Central to these radical shifts is the concept of startups. Everyone aspires to own a startup now. The hype has grown so huge that there are companies that are ready to hire failed entrepreneurs to tap into their experience. There is a saying that even divine nectar in large quantities can become poison. Sometimes I wonder if the concept of startups is going that way.

I am mentoring a startup initiated by a group of electrical engineering students. Essentially they are trying to unify and streamline an existing chaotic business model. Interesting for a bunch of business students but what are engineering students doing with such an idea? They got bit with the startup bug. Can’t blame them, everyone around them in campus are caught up in the same startup frenzy. I met their head of department one day and had a very interesting conversation with him. He was complaining that many students are not even interested in completing their courses or writing exams because they are chasing their startup dreams, so I asked what type of startups. He said all of them are IT based. Then I wanted to know what his department was getting out of those startups. He got lost. I asked him again, what is the electrical engineering department getting from IT startups which have absolutely no connection to electrical engineering? Nothing. My next question was, where is the next innovation in electrical engineering happening? The three people in the meeting gaped at me. I told them there is a simple solution. All engineering students have to do academic projects in their final year. Make those projects their startup ventures. By industry standards, it takes a minimum of 3 years for a startup to get the first level of funding. Kick start the projects from second year of engineering, set up a team of industry professionals and investors, arrange a bootcamp during the final year, do technical and business reviews of the projects and fund the ones that pass the reviews. With their teaching mindset for the past 2 or more decades, this wasn’t something easy for them to digest. I do not know if they have taken up my idea because it will take a momentous change in the system and in the mindset of all involved people.

What is a startup anyways? Why is there such a hype around it? Every company in it’s infancy is or has been a startup, in the present or in the past. 24 hours not enough in a day, uncertainty at every single breath, the Damocles’ sword of financial breakdown and company’s closure hanging over everyone’s necks, the end of an idea and a dream, all of these have existed from the time business has taken off. People have waded through these miseries and tasted success or failure. 20th century has been the pinnacle of humanity’s greatest technological inventions, never mind the conspiracy theory that the invention of transistors in 1948 was actually reverse engineered technology from the alien spacecraft of Roswell UFO incident in 1947. But we had already discovered vacuum tubes and had made TVs and even computers with them. The magnitude of those inventions can never be matched because no matter how technologically advanced we become, the roots of technology will never change. They were made by the ones who dared to challenge and look beyond all conventional logic. Edison once remarked that he learned a 1000 ways of not making an electric bulb. The Wright brothers had to make countless efforts before they conquered the sky. All these people had were ideas in whom the ones around them believed and stood by them through flawed executions and strategies. Their greatest inventions were born from the mistakes they made. In a post on a social media I read that the value of an idea is in it’s execution. But I am inclined to believe that true value is in the flaws of the idea and in the flaws of execution. I believe that an idea becomes an innovation when we work diligently towards correcting those flaws. Everything in the Universe is flawed and it is in the nature of the Universe to always try to improve itself. That’s why it is tending to infinity in integral calculus.

This is my biggest concern with the world of startups. It’s all about financial valuation; everything is measured in terms of revenue and ROI. The pressure is on full blow from the moment startups seek investment. Seed funding, Series A, B and C funding; catchy terms, huge hype around them and now the startups get measured with respect to these words. Weren’t nascent companies in the past taking investments? Yes. Weren’t they under pressure to not fail? Yes/maybe. So what was different then? I believe those people were able to focus on their ideas and build their core values without the stress of investors holding them by the scruff of their necks. Apple, Microsoft, Facebook, they all started small from garages and dorms and I believe they grew because of their unwavering focus on their idea and vision and not because of perfect execution. The chronicles of mistakes Steve Jobs made in his professional life is legendary. Now big companies are looking to acquire startups and startups are looking to be acquired by big companies. That’s a complete shift of focus from core values of innovation and building a company to making quick money and fame. It is nice to be in the league of successful entrepreneurs who sold their companies to bigger players and even better to tell the world that the next target is to look for bigger and better ideas or look to invest in a startup. On the other extreme was a certain Amar Bose who quietly built Bose Corp, one of the biggest companies in the world without even being there on any of the stock exchanges. No fancy stuff there, they just put 60% of their profits back into their R & D and into their people. Momentous strategy, something every company aspiring to innovate should look up to. But the rules of engagement have changed in financially challenged market conditions. Big companies are willing to acquire startups only if they are making profits or at least they have achieved their break even and if they have decent cash flow statements. I believe all of this is killing the true spirit of ideas, innovation and entrepreneurship. The number of innovations that have truly changed the world before and after the advent of the concept of startups will tell the whole story. How many companies of the magnitude of a Google or an Apple or a GM have come up from the present startup ecosystem?

Nothing in the cosmos lasts forever. What goes up has to come down eventually. This is why I am wondering if the startup ecosystem is another bubble that will burst in the near future. The question that we always seek answer to is where is the next wave of ideas going to come from? This has been the origin of the startup ecosystem because investors want the first and the biggest bite of the innovation pie. One positive aspect of all the startup buzz is that it has managed to extend the innovation and entrepreneurial mindset into the student community all over the world. Uncluttered minds, buzzing energy, ability to absorb failures and look ahead, the mindset to take risks, all these are the essential characteristics for innovation and thinking beyond all boxes. We all know about the college dropouts who have built the biggest companies on the planet. If Africa is going to be the next hub of business then undergraduate classrooms and even schools are going to be next hub of fresh ideas. The fancy terms of the startup environment may not fit that realm. I know someone who along with his team conjured a brilliant idea to convert coconut husk into completely biodegradable plastic like sheets as their engineering project. The idea is lying in cold storage because they never managed to get investments. They are all employed and settled in their lives now and are not in the mindset to let go off their current lives and chase their idea. The kids just need to be put in the right direction at the right time. It is the older generations and the academic world that need a complete transformation and makeover to understand and fit in with the exploding young minds.