An innovative idea is the most important seed for a startup business venture. An innovative idea can bring about a significant change in the way a product or service is adopted by the customer, but there are a host of other aspects that come into play to make the idea a working business proposition.
An innovative idea is absolutely necessary to establish a startup. But an innovative idea alone does not guarantee success in the marketplace...!
What turns an idea into a successful business venture?
While an idea by itself may be innovative, the real challenge for the originator of the idea lies in:
1. Stitching the idea into a profitable business model: In this context, a business model essentially refers to (a) how the idea (or a product/service based on that idea) will deliver value to the end user (b) how it can be monetized, and (c) how scalable it is.
2. Evolving a go-to-market (GTM) strategy that takes the business model (essentially the idea) to the market: Having conceived an idea, how will it be taken to the end user? The first question a budding entrepreneur with an innovative idea has to ask is this: what will be the profile of an ideal customer for me? Will it be, for instance, an online user from the general population looking for a specific service, or will it be a corporate entity looking to address a specific business need?
Among other questions, the GTM strategy has to, at the minimum, answer the following questions:
3. Managing Funds/Bringing investments during incubation: Working capital requirements are one of the most important aspects to be factored while establishing a startup. Entrepreneurs at times have a heady conviction behind their product/service, making them unintentionally overlook the fact that employees have to be paid their salaries, and that rentals and utility bills are a monthly occurrence!
The best way to kick-start a venture is through 'boot-strapping'. Self generated funds, or funds sought/borrowed from friends and relatives have been the widely used avenue in raising initial capital to set the venture in motion. If this option is not feasible, or when additional funds are required investments can be brought in through other options too; loans towards working capital or equity infusion from the investor community. Both options have their own merits (or demerits depending on the perspective!) depending on which stage of the business lifecycle the startup is at the time.
The main advantage of a loan is that it keeps management control of the startup with the entrepreneur themselves. This enables the entrepreneur to take operational decisions on organisational strategy, product/service roadmap, etc. based on market conditions, and while doing so, stays in sync with the vision with which he started off.
Equity infusion is a double edged sword. While it gives the entrepreneur access to the potentially vast network of contacts held by the investors, he has to concede certain extent of management control. Equity infusion is ideal when the startup has started to yield revenue (perhaps not profits yet!); such infusion is required to take the startup to the next higher orbit of revenue and profitability.
Whatever the investment route the entrepreneur takes, it has to be aligned with the merit of the idea, the business model, the GTM strategy and the long term plans for the venture.
4. The People Perspective: Having conceived a brilliant idea, a robust business model to go with it, and a GTM strategy that addresses the needs of all possible market segments, how well is it going to be executed? Having right people on the right seat. It is important to bring on board people who have a shared passion and vision about the idea/product/service.
Working in startups is characterized by the absence of role clarity - every role in the company becomes multi-faceted! The CEO could find himself making a pitch for funding during an investor meeting, at the end of which he would need to pick up the telephone to cold call a potential client! These situations will be the norm rather than the exception; hence it is imperative that the people who form the core team do not bring any bureaucratic baggage about hierarchy, role-compartmentalisation and other related aspects.
The People perspective covers not only employees: it also covers external consultants, professional mentors, advisors, partners, vendors/suppliers and others who are equally critical to the success of the startup; they bring the much required view from an external perspective, and along with it, a (brutally!) honest assessment of any shortcomings in execution.
5. Managing growth after establishing the business model: The issues, challenges and priorities will start to change; from the time of business start, and+ when it has reached a certain stage.
Managing growth could also involve the exit strategy for the founders. When does a startup cease to be a startup? At what stage will the founder reduce their stake in the venture? Is it the vision of the founder to make his startup a global organisation? Alternatively, is it the vision of the founder to have his startup acquired by a larger organisation which sees his idea to complement their business (typically associated with serial entrepreneurs)? It is not surprising to see examples of startups working in niche areas, eventually getting acquired by larger enterprises.
The aspects captured above are just the tip of the iceberg. It is wise that these are best approached by having a clear vision, goals, and backed by a robust execution strategy.
Dwight Eisenhower once quipped, “In preparing for battle, I have always found that plans are useless but planning is indispensable.”
Indeed, establishing a startup is no different from a battle. While we may not have all the answers at the very beginning itself, there needs to be certain goals and milestones that needs to be signed-off but be flexible enough to incorporate any changes in plans or execution, during the journey!
Startup Xperts is a Business Growth and Consulting company with an objective to transform CEO’s growth vision into realistic, strategic, actionable plans that delivers results. Startup Xperts supports enterprises through business strategies, goal setting, sales and marketing set up, developing a high performance sales engine, digital marketing, specialized trainings, executive coaching and leadership hiring.