“Entrepreneurship in a lean startup is really a series of MVP’s” … Eric Ries
If one really distills down the tenets to creating a business, it comes down to two basic things
- Understanding & addressing a customer need in a meaningful way
- Monetizing the product / service which addresses the above
That’s it! So, then the question arises, if it is so simple, why do so many start-ups fail? Why do so many innovative products / services fail to take off?
While working as a business coach, I have found that quite often it is because there exists a gap between the understanding of the need in entrepreneurs’ mind and the customers’ mind. This gap is critical and can be a matter of life & death for a start-up. At the same time, addressing this gap in a quick and cost effective manner can lead to significant competitive advantage in the marketplace.
Take the example of the very successful start-up RedBus. When Phani initially faced the problem while booking a bus ticket, his first product was a software for the bus operators, aiming to make an integrated ticketing system that would have made their inventory management more efficient and productive. However, not one operator was ready to use the software, not even for free!
Clearly the understanding of the need was different from both sides! While Phani was trying to increase efficiency and avoid the manual ticket management, the bus operators’ focus was on increasing sales and on first glance this software did not satisfy that need.
So, then the big question for start-ups / entrepreneurs is how to bridge the gap in the assumptions on customer need in a cost effective and quick manner? The concept of Minimal Viable Product (MVP) comes in handy in answering this question.
MVP is essentially is a bare minimum avatar of your final product / service which a customer can experience and therefore provide feedback to the entrepreneur to validate his / her assumptions on the fundamental business hypothesis.
In other words, a good MVP is something that helps answer the following questions
- Is the Customer Need being met? If so, to what extent?
- Will the customers be interested in using the product against other options available?
- Will they pay for it?
So can only the prototype be an MVP?
MVP can take various forms. It could simply be a video / power point presentation which shows how your product works or a working prototype which a customer can use.
Drew Houston, founder of Dropbox, an extremely easy to use file sharing tool, wanted to test his business hypothesis much before his product was ready. He wanted to check whether customers would be willing to use his product if he provides superior customer experience in seamlessly & instantaneously syncing files across platforms. Building a prototype would have taken time and money. So, instead, he developed a video (similar to this) showing a mock demo of how the technology was meant to work. The simulation video became an instant hit and he could sign up beta customers even as his product was getting ready. His video MVP validated one of his key business hypotheses and rest as they say is history.
MVP – a tactic or a strategy?
Thinking, breathing and building MVPs can be a way of life for an entrepreneur. It is not necessarily a one-time affair. As long as a start-up is trying to find their connect with the customer, they can use this process to get the product market fit validated via this Build-Measure-Learn cycle in a quick turnaround & cost effective manner.
Even in the later parts of a product’s lifecycle, MVP, as a process can play a role. Each additional feature or major upgrade can be launched with the same philosophy to validate the real value of new launch from customers’ perspective.
At the end of the day, it is the customer’s need which matters the most, sooner a business can connect with it, the faster they can build a viable business!
Recently I gave a talk on the same topic to entrepreneurs at Start-up Village @ Kochi. You can find the slides for the same here.
I am also doing a webinar on Nov 6th on Building MVPs. Interested may register here.
Recommended Reads: The Lean Start-up by Eric Reis
Same article was also published on yourstory.in.
The following blog post was first published by pluggd.in
Recently I conducted workshops for entrepreneurs on “How to pitch to Investors” in association with TiE and IAN. Many discussions happened but a slide on Risks evoked especially special interest.
First let us see what Risk actually means.
According to Wikipedia Risk is the potential that a chosen action or activity (including the choice of inaction) will lead to a loss (an undesirable outcome). The notion implies that a choice having an influence on the outcome exists (or existed).
An interesting definition, isn’t it? Like it says – risks do not mean that things will go wrong – it means there is a probability of some things going wrong and more importantly, your action plan towards it can make a difference to the outcome.
Ay venture will always be exposed to some Risks – I guess that’s the reason it is called a venture! In this context, let us discuss the different risks a venture faces, especially from an investor’s perspective and what you, as an entrepreneur, can do to mitigate them
1. Market Risk
Every business serves a need. Evolution of technology, lifestyles and changing environment constantly changes & shapes our needs. As a result, the need a business is serving can shrink or disappear completely. Take for example landline phones, at one point customers had to wait for years to get one. Now with the advent of mobile phones, they no longer command a compelling market share. You actually get it free with a broadband connection.
What can one do: At first glance it may seem as if this risk is beyond our control, but we can tackle it by shaping our startup in line with the evolving market. Keep an eye on how the market is shaping up, is it on an expansion trend or a declining one. Be Nimble in pivoting & adapting to the changing market.
2. Customer Adaption Risk
Every customer has the choice of picking a competitors’ offering or simply not using your product / service. In the customer adaption risk the market exists, but one is unable to make their place in it because of competition, partial fulfillment of customer delivery promise or even pricing. Tata Nano for example was positioned right, but is still struggling to get traction with the intended customer base.
What can one do: Work closely with the customers as early in your venture as possible. Develop a good beta plan. Work with early adaptors to find and address the pain points of your product as well as discover pricing. Build clear differentiation from existing products in the market and price it appropriately.
3. Execution Risk
Finally it all comes down to execution! Execution Risk is the risk of whether the team can execute the business plan in all its different dimensions – developing the product / service, managing operations & finances, selling to customers, building a team etc.
What can one do: Understand your key challenges in the execution and continuously plan to make it work. Break down your journey into achievable milestones and then show traction on that path. Hire right!
4. Team Risk
People come together for a cause. They separate because of everything else – chemistry and all the multiple minute details that go on into a relationship. Team Risk from an investors’ perspective is the risk of the right team not coming together or more importantly not staying together!
What can one do: Work / invest (time) on the relationships between core members proactively rather than firefighting later. Define roles & professional boundaries. Respect those. Work out salary & equity distribution upfront.
5. Exit Risk
The only time an investor makes money is when he/she exits from your venture. Not having a reasonably clear exit plan can switch off the investor.
What can one do: For a lifestyle business (typically no exits), look for non-equity financing for your venture. Typically angels exit in 2nd round of VC funding and VCs exit on an M&A or IPO. Clarity on these aspects during discussions with investors helps you in taking care of their needs.
Ultimately no venture will ever be risk free. The key is to understand what can go wrong and then be on top of whatever you can do to take care of that risk. Control the controllables and leave the rest to luck, destiny or higher power, whatever you believe in!
All the best!
Shyam, Rohit and Apara were good friends. They were passionate about doing something on their own. Very soon they figured out an idea which made them take the plunge. In due course, they worked on it and soon their on-line product was ready to take to the market.
Then came the first major hump. All of them favoured slightly different approaches to monetize their product especially where to draw the free vs paid line. Each had their own valid concerns and there was clearly no right or wrong choice. It was a difficult decision, but finally one of them prevailed on the other two and the process moved forward.
With time, the situation became more complex – the initial high of a new venture came down, funds started to run low and customer traction unsteady. These down turns further led to multiple discussions. Again, solutions were not always very obvious with all options having their own set of pros and cons. Critical choices that could change the course of their start-up needed to be made but sadly they could not reach a consensus time & again!
Someone or the other would always feel unheard. Slowly the camaraderie became a little forced and ego tussles started germinating. Ultimately the differences grew so much that a couple of years after the venture started, the founding team broke up!
In my experience of mentoring start-ups, this story is not that unusual – a bunch of class mates / friends come together to start a venture with pretty much every one doing everything. Quite often, at some point, such teams find themselves in a quagmire with relationships souring and a sense of disharmony setting in. Often the risk of teams breaking up gets overshadowed by the other immediate risks a business is facing!
So the critical question is what could have been done differently?
In their pursuit of building their business, Shyam, Rohit and Apara deferred the decision of picking up the critical roles a little too late. They missed asking “Who should be the CEO / CTO / CMO…?” in the initial stages. The premise being that since all of them were good friends, they understood each other and could work out everything together.
In my opinion, the role definitions should emerge early on. All the partners can have influence and work together, but they still need to define a focus area for each one of them and be comfortable with the allocation of roles (for self and others). Assigning focus areas gives everyone in the team a sense of structure and their own home ground. So, if business strategy is in question, the CEO should make the final call and others must then support the decision, CTO decides on an impasse on technical architecture and so on…
It is much easier to decide this in a harmonious fashion right at the beginning than when the heat is really on and misunderstandings have already cropped up. It’ll be a tough discussion no doubt, but a critical one, especially amongst friends with similar background and experience. Since the CEO of an organization will be the first among equals, this role can create more heartburn in the team than the other ones and hence is the most important to decide upfront.
So, do you have a CEO? If not, choose one now!
PS: Interested readers can also read this blog post for more information on how to shape / perform the role of a CEO.
Recently Saarthi conducted a hands-on workshop on “Scaling Businesses”. Conducting it was a great experience and I would like to share a brief summary of the event..
A set of 10 interesting businesses registered for the workshop held at the Adarsh Hamilton in central Bangalore. All of them were from very diverse domains – educational space, crowd sourcing, customer engagement offerings, online recruitment, social networked views aggregation, media space and one in the field of spiritual entrepreneurism as well. This diversity of businesses presented both of us, myself and Vaibhav Tewari with an exciting challenge of presenting a framework for scaling up that could cater to such a varied field. The workshop sought to answer the following main questions – building a scalable business, evaluating readiness for scaling using the Saarthi Dipstick model and what to do to ensure a sustainable path towards scaling.
A quick round of introductions was followed by an interactive session covering different aspects on scaling. The first section covered Building Scalable Businesses. Here a customer centric iterative model of building businesses was compared with the linear model of building it and pros and cons of each debated upon. All the participants could relate to this discussion as at some point of time, every entrepreneur has spent more time (sometimes more than required) building their product / offerings rather than focusing on the customer. To illustrate the model using an example closer to everyone, we picked an exciting start-up called Moontara Innovations. They have done a tremendous job in working with their potential customers very early on with a quick prototype. This early interaction helped them to tailor their value proposition to the needs of the market in a very optimal way instead of focusing on optimizing the product design from cost and form factor perspective. Result: they are in revenue stage already – in less than 9 months from ideation stage!
Evaluating the readiness to scale was the next section of the workshop. For this we used the six Saarthi Dip-sticks as assessment tools to determine the readiness of a venture for scaling. The dip-sticks are designed to evaluate customer adoption, product / service traction, ability of the organization to support a customer base and profitability / cash flows. All the participants applied these dip-sticks to their ventures. The graphical representation of all these parameters provided a ready reckoner for the stage each venture was in. The dipsticks are an extended form of my previous blog post here.
For each dipstick, two volunteers presented how they applied the dip-sticks and the in-sights they could derive from them. While some organizations realized they were not ready for the main-stream market, some realized they were more ready than they had thought, to go full steam ahead on the scaling up path. It also gave them a good look into their own organization strengths as well as the areas that they need to strengthen. The dip-sticks also gave them feedback on which parts of the business need more nurturing than the others.
The following section was focused on what to do when you really want to scale. Three broad topics were covered here – Go To Market Strategy, Organization & Processes and Capital. The first two of these were anchored by Vaibhav. The GTM discussion encouraged participants to categorize their business on the chart depending on whether the product is new/old and the market being addressed is new/old. The strategies useful for different quadrants were also discussed. This exercise helped the participants realize where they currently are wrt the market and the recommended strategies for them going forward.
The presentation on Organization & Processes focused on building your team in a scalable yet with a step-by-step approach. The founders were clearly differentiated from the core team and the employees. The need to transition organization structure according to the growth and maturity of the business was also discussed in detail.
After 4 hours of intense discussions, we broke for lunch. Post lunch, the Capital & Investments options typically available at different stages of the business were taken up. Thereafter, Vaibhav & I sat down with each participant for a quick 1 on 1 to discuss their specific challenges. These individual discussions helped close the loop on the learning through the day and map it closer to their own unique organizational issues.
Before winding up for the day, the participants shared their feedback on the workshop. Here is a snapshot of the overall feedback received. The detailed feedback can be seen here.
We had a great time organizing and executing this workshop. It was heartening to see that every participating business took home at least one strong insight to apply on their businesses.
Encouraged by the experience, we are thinking of taking this workshop to multiple cities as well as do more often in Bangalore. Is it time to scale the scaling businesses workshop – what do you say?
Saarthi Facebook page: https://www.facebook.com/SaarthiConsulting
Scaling Business Workshop Facebook page: https://www.facebook.com/pages/Scaling-Businesses/185673594831236?sk=wall
“Everyone who achieves success in a great venture solves each problem as they came to it. They helped themselves. And they were helped through powers known and unknown to them at the time they set out on their voyage. They keep going regardless of the obstacles they met.”
A frequent question people ask me is, “What does a mentor or a business coach bring to the table?”
The answer to this question is of course a bit situational and for different clients may range from helping define business strategy to marketing / sales to operational issues. However a common thread runs through all of these separate aspects – one level above the tangible deliverables!
I came across this diagram recently at (link) which I would like to use to explain my point. Let us examine it in more detail…
Typically an entrepreneur will go through an emotional curve like the Transition Curve. One starts the new venture (or a new business initiative in an existing venture), full of enthusiasm, positive that all possible scenarios have been taken care of. One is sure of the relevance of the venture as well as its ability to be successful. In other words an entrepreneur starts at position 1 of the curve – Uninformed Optimism – though of course most of us would shrug off the “Uninformed” part as not applicable to us even if someone were to suggest it.
As the new venture, slowly starts on its journey, it can also start running into issues and problems which were either not anticipated before or not anticipated to the degree that they eventually turn out to be. After the high of the start, the doubts start creeping up and slowly the focus shifts more and more to the hurdles that can trip the enterprise. Thus the initial Uninformed Optimism turns into Informed Pessimism.
Over time, if the challenges keep coming headlong, the curve can go further down and one may even start to wonder if one is walking down the right path! Sometimes, an entrepreneur can enter a stage where real questions of survival begin to stare him/her in the face. This becomes a critical point in the journey – with only two options remaining. Either one can give up the venture – fall off the curve (Crash & Burn) or pick oneself up and move forward with some new insights and pursue the venture with Informed Optimism.
This journey from Uninformed Optimism to Informed Optimism, which of course may or may not involve hitting the rock bottom, is critical for any business to survive and then thrive!
To come back to what a mentor / business coach does, he/she works closely with the mentee / coachee to increase awareness and understanding of the current situation. The ultimate goal is to then navigate the Transition Curve towards Informed Optimism with the best of their combined abilities!
While watching Amitabh Bachchan in Kaun Banega Crorepati, my general knowledge has definitely gone up a notch or two. However there are bigger learnings to take away from the show and the megastar hosting it, who is seemingly unaffected by anything. While his contemporaries have faded into their retirements, Mr. Bachchan continues to march ahead like someone who has just started his career!!
There are multiple lessons an entrepreneur can draw from the super success of Mr. Bachchan, especially as host of KBC. Here are some which I have taken away-
Focus on customer connect
The audience and the contestants are equivalent to his customers. If you have noticed, he has some of the best one-liners for every contestant and he connects with almost each one of them in a personal way. An amazing amount of preparation must have gone into each of these interactions. As each contestant leaves, he/she looks very happy and satisfied with the experience. This is customer delight at its peak. All of us as entrepreneurs must strive for this in our businesses as well.
Adversity is a stepping stone
Whether it was the not so successful KBC season 2, or his own career, which has gone through many lows, Mr. Bachchan has continued to demonstrate that one can rise from the lows and overcome adversity, if one perseveres. The many ups and downs while building a business can be surmounted with persistence. Every entrepreneurial journey is a continuum and every low is just a stepping stone.
Reinvention and sustainability
Mr. Bachchan has reinvented himself – across his movies and even across different seasons of KBC – he keeps evolving to suit the latest audience. He has transformed himself to be relevant to the audience across generations. He connects with each generation at their level and in their ways. Very few brands have kept their relevance to such a degree over such long periods of time. Especially in these fast changing times and consumer tastes, this is a big lesson on how a business/brand can sustain itself over a long period.
Nothing defines his presence on the current show more than his alertness – it is remarkable and contributes in establishing the connect with his contestants and audience. TV is not a medium where one can survive only with rehearsals. And therein lies the biggest lesson for entrepreneurs to learn -never let down your guard, always be alert to what your customers want.
Kaun Banega Crorepati is over now, but the lessons it brings to the fore will continue to guide all entrepreneurs.
This article has been contributed by Vaibhav Tewari, an active mentor on the Saarthi Mentor Panel.
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Every business aspires to grow and they will, they only have to find a way of doing it sustainably!
It was a year since Kamal started his online venture. Initially it had been a struggle, but then the business started gaining momentum. For his product, every new customer required some help to get going. It meant additional work for his engineering team, as well as load on the infrastructure to support customers. Kamal was a natural at marketing, sales and connecting with people. And with the compelling product he had built, it was easy for him to get new customers. Now, with his team continuing to work hard to support all new customers coming on-board, he was at the crossroads of an important decision: to keep moving forward at break-neck speed, acquiring more customers or to spend time & resources in strengthening the product.
That is indeed a good dilemma to have! As different businesses get going, a similar predicament occurs for many. They need to make the critical decision of when to scale and how to scale. A classic example of failure on this front is Subhiksha. They scaled too big, too quickly, could not sustain the growth, got into a financial crunch and eventually closed.
In this note, I am attempting to enumerate a set of five-point dipsticks that can help you find if your business is ready to scale and grow. Let us see what they are… We will use the 80-20 rule for most of the dipsticks.
1. Profitability per Sale
Each new customer costs a company time, effort and therefore revenue. In a new business, quite often you may spend more than what you earn from a given sale, especially after factoring in the cost of acquisition of the customer. An easy dip-stick test to check your readiness to scale is – are you making a profit, however small, from majority of your sales.
Apply the 80-20 rule for this question – if you are making a profit from 80% of your sales, then you are looking good on this vector.
2. Support Effort per new Customer
Every new customer will need some support from you to get started. This may be in the form of product customization, explaining the product or helping them with a beta test. Whatever it is, almost every new business needs to spend effort and time to gain customers’ confidence and in that period, the touchpoint from the team is necessarily high.
So the question here is how much effort goes to enable new customers?
Again we will apply the 80-20 rule – if 80% of your total team is working with new customers to enable them instead of building newer versions and products, then you are not yet ready for growth.
3. Business Model Validation
Every new business model has a cycle – from making the initial touch point to sale to fulfillment of need to support. For some businesses the entire cycle takes a long time to complete e.g. in the venture capital industry. Other businesses like online book retailing may take a very short time to complete the cycle.
It is essential that your business model has be tested and validated in entirety before you go all out for scaling.
I would recommend variable dipsticks here: For businesses with a long validation cycle, I would recommend at least 20% of your customers having completed the entire cycle. For businesses, with a short cycle, may be 80% of the customers should have completely gone through it. For medium cycles, the number can be somewhere in the middle.
4. Customer Support Cost
Providing after sales support is a very important aspect of any business – it shows maturity of the business and its positive intent towards its customers. For some businesses, the cost of support can be huge. So, here the dipstick test is to look at your average cost of support – if more than ~20% of your sale price is spent in supporting a customer, then you may want to address that aspect before scaling.
5. Product / Service Digression
Sometimes new customers come in and ask for many changes in the original product. This can lead to a diversification and/or a new business line. The validity of that particular demand should be assessed based on what stage the company is in. Although in the initial days it is very difficult to say no to new business, there needs to be some discipline around the effort it takes or the direction it may take the company in. The diversification should be close to the core business the company focuses on.
Can you support a new business line with your existing resources? If yes, may be you are ready for scale!
Just like a young child needs to first learn to crawl, walk & run before he/she can sprint, same way a business also needs to go through all the stages before it is ready for growth.
The above easy to use dipsticks tell you whether you are in a position to scale in your current scenario. If the answers do not favour scaling up, hold your horses; focus on building a solid business; scale will come as your business matures! This will ensure that scaling the business brings sustainable success and doesn’t trip you midway!
PS: Sincere thanks to Vaibhav Tewari for his valuable inputs for the article.
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“Profit in business comes from repeat customers, customers that boast about your project or service, and that bring friends with them.” — W Edwards Deming
While reviewing the business plan of a venture recently, one thing stood out –the venture was doing a good job in attracting new customers, but was also losing them at a significant rate. Only about 15% customers were coming back to use their services again. After an in depth discussion and deep diving into the matter, some critical issues emerged in the business model and customer engagement model. Thus, an apparently not-so-important issue led to interesting business changing solutions.
Repeat customers are the foundation of a business’ scalability. Constructing a tall building requires a solid foundation – too much churn in the foundation will make it unstable. Similarly to build a strong business and to scale it beyond a certain level, we need to decrease the customer churn at the foundation stages.
Let us first define what a repeat customer is. For a services business, it is easy – a customer who comes back to avail your services again. For a product company, it is sometimes difficult to recognize a repeat customer, especially if you are in the business of making a one-time sale. In such cases, what can be tracked is whether they are coming back for associated/ other products of your company or if there are any referrals from them.
As we all know, the cost of acquiring a new customer is always more than when doing a repeat business. This cost eats directly into the profitability of the business. Additionally repeat customers are a direct gauge of customer satisfaction, which plays a part in customer referrals, and a further increase in customer base. Therefore, a repeat customer is one who makes a new sale easier!
Once we understand the importance of a repeat customer, let us look into the possible options if your business is losing customers. Though there are several factors that can be considered, let us start with the basics:
1. Customer Need / Satisfaction
The first step has to be to go back and check whether the customer got what your product / service promised to deliver. If this value proposition gets broken the customer is no longer interested in coming back. Recently, at my car servicing centre (whose key offering is a “peace of mind” service), some basic things got overlooked twice in a row. As a result they may lose me as their continuing customer.
At all times, we must remember that we exist as a business for only one reason – to satisfy a customer need; and if this basic promise to the customer is broken –we will surely lose customers on a regular basis!
2. Business Model
After looking into the customer need issue, next, one should look into the core business model of any business … in other words … your theory of business. Analyze whether your business model encourages customers to come back and gives them some advantage in re-engaging with you, rather than going elsewhere. Business models especially those in the broking / middle-man kind of business are inherently weak in this aspect.
Crowd sourcing models – which are becoming very popular and finding application in many different businesses – are susceptible to this issue as well. Here, the main value-add is to connect a buyer with a seller, so once a deal is done, potentially nothing prevents the seller and buyer to connect directly at a later stage, eliminating the middle-man and therefore gaining some price advantage.
To overcome this, one must innovate and find solutions (preferably based on value rather than contracts) so that buyers and sellers continue to engage with the business for a clear value add – loyalty points, special pricing, customized pre-work etc.
Another important factor to consider is keeping pace with the competition. One has to constantly look out for other players in the market satisfying the same customer need and find if the customers prefer them and why.
There is a need for constant evaluation and shaping of your USP vs that of your competitors. Not only that, the USP needs to be communicated to the customers at all times to make them see value in engaging with you. Over the years a lot of businesses have fallen into this trap.
One of my favorite examples is the evolution of Indian air travel industry. Indian Airlines / Air India got so complacent about being the only player in the market that they forgot to value the customer in the process. Once private airlines were allowed, it was very easy for them to take away a major market share from IA/AI and paving the way for the decline of the national carriers.
To summarize, monitoring repeat customers is an important requirement for any business. Problems on this front are early indications of flaws developing into the business. The visible issues are like the tip of an iceberg – one needs to dive deep to find out the real issues and fix them at the core level.
If the issue is to do with diluted customer need, go back to the drawing board and re-evaluate. If the business model is weak, work on making it more value based. If the competition is at your neck, re-shape and communicate your USP. Talk to your customers and understand their viewpoint to find why you are losing them. After all, a business is best scaled on the foundations of its loyal customers and you have a big role to play in keeping them loyal!
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Good ideas are common – what’s uncommon are people who’ll work hard enough to bring them about” —Ashleigh Brilliant
In the first part of the note , we had discussed three out of the seven critical questions of the Success Chakravyuha every entrepreneur needs to answer to convert their idea into a viable business.
After discussing the requirement of Customer Need, Ability to Monetize and Defining a USP, let us now examine the ways of cracking the next four steps of this maze.
For most ideas, the business starts to give real returns only when you scale it to an appropriate level. Otherwise the idea remains a boutique offering with a steady return, but minimal growth. There are two aspects which need to be looked into for scalability – is the idea easily scalable and do we have the capability and resources for the same?
Let us take the example of a restaurant. The first question is can it be scaled? With more and more people now eating out, the answer seems to be an easy yes. Next question is how can I scale it? Here there are a few options, (a) increase the cover capacity in the same place, (b) Add an option of home delivery or (c) open more branches. For all these options, we then need to examine the operational implications of scaling up – maybe adding more staff, maintaining quality, planning for an advertising budget etc. Once we know that the idea can be scaled then we can decide what things can be taken care of at the outset itself.
Off late, I have seen proposals for businesses with their USP of homemade food. Here the ability to scale goes against their USP. They have to find answers to that or be satisfied to remain a boutique small business.
One good example of Scalability is redBus.in – they started out as a small scale bus ticketing solution and now they have scaled themselves to a turnover of tens of crores in just a few years.
Thinking small cannot lead to a big business. As mentioned earlier, a business becomes viable only when scaled to a level. For a smooth & regular increase in business the idea has to be geared for scalability right from the start. Starting the process from scratch after a few years of operation, with procedures already defined can cause a lot of confusion.
Typically an entrepreneur has to go through a lot to set up his/her enterprise. To build something that is around, alive and kicking for a few years at least, you need to look into the sustainability aspect of the business. In other words, for how long can my idea/product sustain in the market. Customer need and the way a product satisfies these needs is an ever-changing process. You have to keep pace with this change for your theory of business to remain continually viable.
A good example in this context is the music industry. Over the years, the way people have consumed music has changed – from the LPs to tape recorders, then CDs and now on the web. However, in the same field, the consumption of music on radio continues to remain strong.
With continuous technological advances taking place, customer preferences in today’s world are changing at a much faster pace than ever before. Once we start following and understanding market trends, it is easier to anticipate the time span for which the customer need remains predictable (as it changes with time). We can then accordingly adapt and align our product strategy with the changing markets.
Another important step in conquering our success chakravyuha is determining the feasibility of our idea in the current scheme of things. There are two components of feasibility -
- Are we in sync with the customer need and the available solutions at the time of the proposed launch? It is necessary that the concept / product be realized in the targeted timeframe and still be in sync with the market. For example, let us say my company plans to design a new variation of a touchphone, which is going to take me 2+ yrs to complete. Will there still be a market for it in that timeframe, or will some new, more interesting interfaces flood the market by then?
Another good example here is the work and innovation happening in the alternate energy field today. A lot of companies are currently working in this sector and each one of them has to see when can they get their products out in the market, how is the competitive scenario & what is the customer need at that time.
- Is the business model feasible? Or simply, is the proposed margin between selling a product and the cost of producing it feasible? Whatever product / service we take to market needs to be priced competitively. If our cost price does not allow a positive margin, or only very low profits, the business becomes unfeasible.
Last but definitely not the least is the question of Team. All your painstaking deliberations & efforts for your brilliant idea can potentially go down the drain if a good seed team is missing!
As an entrepreneur, one has to wear many different hats at the same time – sales /HR /engineering /finance /marketing etc. So, every person joining your team offloads a few hats from you, giving you more space to concentrate on your core management role. This increases efficiency in the system, gives you access to more viewpoints and also increases investor confidence.
Putting together a good seed team is always going to be a struggle. As a start up, you will need to sell your idea / product / service to many. In a way, the person who believes in your idea and joins hands with you is your first customer! So, roll up your sleeves and take this challenge of the first set of sales calls for your venture.
As we end this note on the Success Chakravyuha and the seven critical questions associated with it, an important aspect to highlight is that one should not be looking for simplistic Yes or No kind of answers. Instead, finding a compelling answer to each of the seven questions shapes your idea and builds the path to take it to a viable business!
Once you get going, execution becomes the key and one can of course come up with critical factors for that phase also. But that’s a subject for another note!
Keep ideating, and hope this note helps you in piercing this modern chakravyuha successfully!
All the best!
An idea that is developed and put into action is more important than an idea that exists only as an idea. — Buddha
India is bursting today with thoughts of entrepreneurship. As a nation we are moving away from the “find a good job” mindset, to exploring our interests and new avenues as means of making a living. Young professionals are showing the courage to listen to what they really want to do and taking the plunge. I am confident that this wave is going to produce a new India – one which is bubbling with enterprising thoughts and endeavours.
Now that people from all walks of life, every age and every background are thinking and conceiving new businesses, the ideation process is also resulting in a host of “start-up” competitions across the country. I have been associated with a few such competitions recently as a judge and have got the opportunity to meet a lot of exciting, aspiring entrepreneurs. One question which frequently comes up from the entrepreneurs is - how do I decide if an idea is worth taking forward?
Creating a successful venture is almost like piercing a chakravyuha. One needs to closely examine and get through multiple layers of the maze to finally triumph over all odds and emerge successful. This two part note brings forward some thoughts on how you could define your own theory of business using a set of critical, core questions. In the first part we examine the initial three questions we need to successfully navigate through, on our way to success.
What is the Customer Need
The first question, right at the beginning of the journey is – What need does my idea solve for the customer? Unless an idea solves a need or “pain point” for a customer, it cannot be taken to business. The need can be either latent or apparent. An apparent need is something obvious and very easy for the customer to recognize. For example, we need petrol to run our cars – this is an apparent need. Again, all of us feel the well defined need of search engines on the web.
A latent need could be a secondary need or something which the customer may not be directly aware of. In the above example, a company which provides a chemical enhancer for the fuel may be a latent need. Similarly with the availability of a physical newspaper, an online newspaper may not be a very obvious requirement. So, latent needs are either not very apparent or not a part of the essentials. Typically ideas addressing latent need require tools like focused advertising to bring forth awareness.
To sum up, unless the idea addresses a need/pain point for a customer, it cannot be turned into a business. Therefore, this is one of the most important question to be asked upfront.
Ability to Monetize
Once a need has been identified, the next thing to find out is whether anyone is willing to pay for it or not! If yes, then how much. Out of the ideas which cross the first level of fulfilling the need, quite a few may trip on this one. The classical dot com burst was a result of many businesses not asking this question deeply enough and just getting satisfied with getting people to visit their websites.
Going into a business, there has to be a clear, simple and easy way to monetize your service/product. Sometimes monetization can be indirect, for example, quite a few online companies make their money from advertisements. So in this scenario, even though we, as their consumers are using the online offerings for free, they get their revenue from the businesses using the site to advertise.
So, the key here is that once a customer need is figured out, you also need to decide on how to make money from it. More complex the mechanism to monetize, longer it takes for your business to become self-sustainable.
Unique Selling Proposition (USP) or Sustained Competitive Advantage
The third ring of the chakravyuha, after navigating the first two questions is that of uniqueness of your value proposition. Often called the entry barrier, this is an evaluation to see either how easy it is to copy your offering or what is the unique selling proposition for the idea. The answer to this question does not disqualify an idea, but tells us – for how long can we maintain a lead in the market. For example, if you plan to open a restaurant in a locality already having many, you need to define why customers should patronize you. The USP may be using only organic vegetables, a different or new cuisine, different experience or something else.
It is important here to note that USP need not mean a completely new invention nor does it mean something that is always apparently visible to the customer. A USP could also be a better way of doing things for the customer (efficient billing systems) or even a back-end job (a better supply chain system).
In summary, there has to be a Unique Selling Proposition for your idea, which is clear, unambiguous and makes a difference for the customers. Of course this has to be looked at from the customer view point and not your own! Identifying a USP is vital and also has implications on the size of the market that we may be able to tap into.
In this part of the article, we have discussed the first three critical questions every idea has to resolve before it can aspire to become a viable business. We will further examine the next four questions in the subsequent article and thus complete the key to pierce the entrepreneur’s Chakravyuha!
Stay tuned and keep ideating!