Dear Entrepreneur, are you after a quick-fix, mirage, sweat or goldmine?
I met an interesting young man at the airport lounge the other day. A startup entrepreneur, he was flying to the UK to explore a potential partnership with a Healthcare Services Major. He had developed a novel patent-pending healthcare technology and was painstakingly building an ecosystem around it.
He had developed a novel patent-pending healthcare technology and was painstakingly building an ecosystem around it.
As we waited for our flights, he enthusiastically shared his vision with me. It clearly had huge potential, but would undoubtedly take a long time to navigate the necessary regulation, patents, and partnerships to realize it. “Most startup founders your age are men in a hurry,” I asked. “Aren’t you?” He smiled as he replied: “I’m not looking for a quick-fix. I’m digging a goldmine!”.
His comment set me thinking. There are clearly different battlegrounds that entrepreneurs can choose to fight but most (unlike this lad) don’t seem to have the clarity on which one is better aligned to their capability, preparedness and market’s acceptance/readiness.
The 4 zones of play
After much thought on the subject, I realized that a simple 2X2 quadrant with “Entry Barrier” on one axis and “Impact” (or “Return”) on the other can help provide a starting point to figuring this dilemma. To keep it closer to my own expertise I have kept the quadrant focused on defining startups using technology to disrupt various sectors.
This is the low entry barrier and low impact zone. I call it the “me-too” neighborhood. The pace and apparent ease in the early days of the startup revolution may have led to an impression that playing marauder on the back of new technology was going to be a roller coaster ride.
It also gave rise to startups that believed they were in the business of disruption when they were actually just delving in incremental innovation.
The Fitness Watch Fit-Bit, for example, spawned a whole series of “me-too” products each claiming to be disruptive but really only offering one or two incremental features!
This make believes “mirage” zone has a large number of players with no clear unique value proposition. To succeed, startups must discover their real differentiator and unique value to customers.
This has been the major playing field of the most successful startups of the 21st century so far. Newcomers powered by technology wreaking havoc, leading to a succession of incumbents succumbing on their path across industries – media, retail, telecom, travel, transportation, hospitality, the list can go on.
This Quick-Fix Zone, symbolized by the likes of Uber and Airbnb, has seen certain distinct characteristics. I call them quick-fix because of their offerings which provide quick fixes to our daily chores.
It has predominantly been witnessed in consumer sectors so far, with low entry barriers where disruption was caused by the sheer force of new technologies. Yet, it witnessed high impact across a large customer base as it was sharply focused on easing the day to day lives of consumers.
The biggest success factor among the challengers in this quadrant was the surprise element, driven by a lightning fast speed to market, transforming the entire industry landscape and shifting the ground below the feet of legacy leaders.
Moving on, startups are now emerging with their arsenal of new technology in areas of mass impact on society. This includes sectors such as education and transportation. In education, for instance, challenging the leadership of grand old academic institutions that have built their reputation over years of demonstrated excellence is no techno-cakewalk.
The entry barrier in this quadrant is higher. It not only needs a great idea and disruptive technology; it would also need to catalyze change in the environment and counter the fundamental flaws of the system today such as exclusivity, high premium on great content, geographical or cost barriers, standardization of curriculum, and an input based model.
Similarly, and at the risk of triggering a debate, I would place auto-tech – more specifically driverless technology – in the Sweat Zone.
This is because, despite its high entry barrier in the form of heavy investments in technological advancement, prototypes, and testing, it has still not demonstrated the promised safety and surety of results.
It will still take a lot more time and review of the new technology to finally have a large-scale impact and shift right to cross over into the next quadrant, the goldmine zone.
Therefore, to succeed in the Sweat Zone, startups must focus on making a broader, larger impact. Edutech startups, for instance, need to go the extra mile and focus on creating value rather than valuation.
They need to build an inclusive environment, design customized and affordable curricula, and move to an output based model, such as offering personalized learning outcomes through data analytics.
Auto-tech, in turn, must ensure a foolproof way to overcome the weaknesses in the present systems that succumb to human error, hacking; and help bridge the gaps in regulation to build trust among consumers.
And finally, the fourth quadrant is marked by a high entry barrier but a huge impact as well. This would cover regulation and compliance-heavy sectors, such as healthcare and finance. It will necessitate a whole new approach, as startups navigate the regulatory maze – or even force changes in regulation.
To succeed, it will require a cautious approach and a longer incubation period as the stakes get way higher. In Healthtech for instance, people’s lives would be at stake.
In Fin-tech, it would be people’s savings. The going is bound to get tougher here, testing the vision, determination, perseverance, business acumen, market insights as well as the ability to manage legal compliance.
Success would necessitate working within a well-coordinated ecosystem. For example, in healthcare startups must necessarily work in collaboration with doctors, healthcare providers, insurance companies, regulatory agencies and of course patients. And most importantly, they would need to build trust.
But this is the true Goldmine Zone and the results will be worth it, justifying the long road traveled. For, this is where we will see the real bend on the road of human progress, at the crossroads of technology and startups. And my young friend at the airport was in this last quadrant – fueling success with conviction, determination, far-sightedness and a big doze of patience.
Which quadrant is your startup aspiring for?