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  • Knowing ‘doing gap’ – Execution!

    Venture ideas act as goalposts that we aim to charge towards. The venture journey, however, is not a linear one. It is filled with incomplete information and many more unknowns. While thinking about the product, can you help identify the number of avenues where the offering could be improved and developed? The toughest challenge then often lies in execution.

    For the corporate trained, this challenge is even higher since the organization’s management process already narrows down the attention of individuals to very specific tasks. This allows for narrow spans of attention, improved efficiencies in the execution. This source of efficiency itself could limit us from learning something new and restrict our domains of experience. If we hang around for too long, the threat of becoming deskilled and useless looms large.

    Another bane of being embedded in the lower-middle levels of the corporate hierarchy for too long is that you are more likely to be trained to believe that thinking is, in itself, an execution. You have a small group of people whom you guide and command towards accomplishing specific goals, so you begin monitoring their activities in line with the thoughtful expectations you set up for them. The adherence gives you rewards. However, this is not the case as entrepreneurs; thinking does not substitute execution. 

    Entrepreneurship requires one to be multi-faceted. You must do a little bit of everything and integrate it towards building the venture.  Thinking is only the starting point of execution. You need to work with other people to get the venture idea into realization. Engaging in execution remolds our thinking into something that is grounded. It also ensures a higher rate of success, as against thought through ideas.

    Another barrier to execution is in the inability of entrepreneurs to break their ideas into smaller executable components. These elements should not simply drive the creation of the offering but should at all points ensure that the venture and its value is validated.

    Ask yourself:

    How am I assuming things to happen in the venture building process?

    Have I been stuck too long thinking about it? What is the simplest version of the idea as against the larger idea?

  • Transactions vs relationships

    The foundation of a venture that engages in business activities is the transactions it does on a repeated basis. A transaction is where the exchange of value happens. You provide your end customer with the product they desire and receive monetary compensation in return. Despite being so intuitive in the foundation for setting up a business, as entrepreneurs, we find it hard to get to our first transaction!

    Part of this problem lies in not identifying and framing the problem appropriately. However, the other part of it lies in not being able to communicate the value clearly. A reason for not being able to communicate the value clearly is the dearth of our being embedded in the world of the customer.

    We often think from an offering perspective and try to communicate it in terms of features that the offering provides. This is like telling the other person; this is a car; it has a steering wheel which guides the four wheels. You also have a gear to drive it at a different pace. When we think of this from the customers’ perspective, we realize that these are only your car’s features. But the car by itself solves something that the customer really cares for – being able to travel from point A to point B. Further, it is in a relatively safer environment as compared to a two-wheeler!

    One way to break this issue is to think of the connection with the customer. We should be able to relate to the customer the way the customer sees the problem. An excellent book on this aspect of relating to the problem is “The world’s greatest salesman.” If you do not relate to the situation, if you are not able to see the problem and challenges your customer/user/consumer sees, you are more likely watching from an ivory tower. It’s only the transactions that you are going to observe as a metric.

    The preceding step in realizing these transactions is relating and building relationships. The relationship-based approach has another benefit, given its connectedness to the context. As an entrepreneur, you are getting information that is significantly related to your offering, that you already sold. This opens more avenues for you to identify new offerings to be built. Further, relationships allow the customers to reach back to you and use the trust developed between the humans involved,  acting as a lubricant. Also, the information is filtered and accurate.

    As a takeaway, this means to invest in relationship building, your investment in this would give you more avenues to create your business. Once you scale, you could focus on the key elements and make them into offerings that operate on a transaction. The more the number of transactions of significant value, the higher your valuation would be!

    Ask yourself:

    Can I make relationships the base of venture building?

    Am I focusing only on the transactions and missing out on the rich information relationships would have provided? Do these relationships continue to show me new pastures for the new development of offerings as growth drivers for the future?

  • Many pivots?

    Pivots have joined the vocabulary of entrepreneurship thanks to Steve Blank and Eric Ries. It has become so prevalent that when you ask any entrepreneur who isn’t making much progress, you get a response – “I am making a pivot.” The question that immediately comes to our mind is, why are you pivoting so many times!

    Pivots simply refer to changes in a strategic component of the venture building, guided by a goal. If one is changing the goal so many times, then are you at all making any progress, or are you simply confused? To understand the concept of pivot better, it is important to understand the lean start-up process beginning with the venture idea.

    An entrepreneur beginning with an idea should first acknowledge that there are many underlying assumptions made. You begin with testing these assumptions (which otherwise would weaken the foundation). The testing of assumptions requires an appropriate formulation of the hypothesis. A hypothesis that can be empirically tested through experiments. 

    The empirical testing begins with designing the experiments. Most often, entrepreneurs skip this critical step of experimental design. If you are not designing an experiment, you really cannot make causal inferences by running the experiment. You need to be pretty sure what the variation is before you can run with it and make a claim about the validity of a hypothesis. Testing the hypothesis takes the form of a version of the MVP (more on it later), which is then experimented to gather the outcomes. Based on this experiment’s outcomes, you infer if the assumption was accurate and realistic or just plain fiction. If the assumptions are inaccurate or fictitious, you must re evaluate the component of the idea and make amends. This amendment is what we refer to as pivots. If the assumption withstood the experimental test, you move ahead and persevere on the idea and build your venture.

    So next time you are claiming to be amid a pivot, ask if you have really tested your assumption and thus seek a change in the strategy to build the venture.

    Ask yourself:

    Have I identified the underlying assumption of my venture idea?

    What is a good experiment to test this assumption? It need not necessarily be building your MVP!

    What do the results of the experiment imply? Is the assumption invalid and, therefore, requiring a pivot, or am I simply fooling the world claiming to be in a pivoting mode all the time?

  • Minimum viable product (MVP)

    MVP is one of the most proliferated acronyms from the lean startup approach to the vocabulary of entrepreneurs. While we resist discussing the approaches in detail, the common misunderstood meaning of the word is something that must be addressed and hence this topic. To understand the apt way of developing an MVP, it is important to remember that lean startup suggests that entrepreneurs need to find a problem/solution fit, then make the transition to finding a product/market fit before scaling up.

    In the problem/solution fit phase, entrepreneurs need to identify the existence of the problem that is pretty common, worth solving and having the potential to be paid for, if solved. In the solution aspect, one must consider the broad set of parameters where a solution addresses the problem involved. In the next phase, the solution is developed into a product that is then tested to find an appropriate market that picks up the product quickly. With this background, it would be useful to refer to the image below in understanding what is/is not an MVP. 

    Our interactions with entrepreneurs indicate that most entrepreneurs mean MVP development to be the one represented in Panel 1. Through this, they are generally referring to the development phases of the product – lay the wheels of the car, then connect the transmission system, etc. before developing the car.

    The intended suggested development cycle for MVP is first, to begin with developing a complete product – as shown in panel 2, a skateboard! Doing so will help validate the existence of the problem much earlier. The problem you are trying to solve is transportation! You are not sure if people are ready for a new car when the fundamental problem of transportation is not addressed! Once you have a skateboard accepted, you could continue to improve on the feature and eventually develop a car if it is appropriate.

    For example: If you are thinking of developing an audiobook for tourist spots, and you believe the quality of content is what matters, maybe the best course of action is to simply get quality recordings. See if people appreciate it when you put these recordings out and share them in MP3 players, podcasts etc. Why build the app first?

    Building the MVP right, takes care of the validation of the existence of the problem, reduction in the biases, and quick learning loops.

    Ask yourself:

    What am I building as an MVP? Am I simply fooling myself into developing a whole product in the name of an MVP?

    Disclaimer: The image is used only for demonstration purpose. Copyrights remain with the original creator. No claim of onwership.

  • To share or not to share

    Most entrepreneurs begin from an idea on their startup journey. As addressed before, venture ideas are a dime a dozen and are perhaps the most trivial components of the whole venture building process. The execution often weighs heavily on the mind of the entrepreneur, and if done inappropriately, has catastrophic effects on the venture.

    To enable progress, it is important to begin sharing what you are thinking – the venture idea. We find a lot of entrepreneurs hesitant to do this. In part, this is often the case when you do not realize that execution trumps the creative juices that generate the venture idea in the first place. Sharing simply may help you develop partnerships to build the venture further. So it is a no brainer, that to make progress, it is essential to share your idea.

    While this is part of the story, there is also another aspect that this behaviour highlights. I developed the idea, so it is my idea, and no one else can own this idea. This definitely is not true. Ideas are an outcome of the situation. The commuting example stated earlier highlights this aspect! Batch after batch, we see the same set of options as solutions! This protective behaviour is mostly because of the endowment effect the minute we think it is my idea.

    Another reason why many people fear sharing their idea is the fear of being imitated and copied. Well, this is never going to be the case. First, given similar situations, most people come up with similar solutions, and second, the resource endowments of people are different. No two people have access to the same set of skills and capabilities.

    Despite this, some still believe that a larger company has more resources and is hence likely to copy your product. Well, if your ideas have already gained traction and the market size is large enough to catch the attention of an existing player, this is when the threat looks genuine. But most de novo ventures in the early stages can hardly claim either of these and so it is less likely to be a genuine threat.

    So, if you are asking, should I share the venture idea still – the answer is yes. Go ahead share, and you can get other minds to begin working on your idea. Leverage some of what the other minds are willing to contribute to your venture building efforts and see if you want to make them your partners.

    Ask yourself:

    What are my fears in sharing the idea with others?

    How genuine are these fears given the current situation I am in? Could I benefit from someone else working along with me on my idea?

  • Existence of an ecosystem

    It is essential to acknowledge that businesses are not atomic entities but operate in a specific context – the national, industrial, local, etc. A common situation we find in entrepreneurs is that they begin working on venture ideas in the absence of ecosystems and choose inappropriate ways to solve the challenges they face.

    Take the case of the Indian software industry. Early players relied on body-shopping to capture the promise of the software services industry but were limited by multiple reasons to adopt this model at scale. The data connectivity was a major challenge that had to be solved to ensure that the industry would take off. Some of the larger foreign players were able to get their own data link, however for many entrepreneurs to take up the opportunity that was being created, the government took to setting up software technology parks to ease the access to infrastructure. The software players, too, got together as an association – NASSCOM and formed a strong lobbying body to ensure that the relevant supporting ecosystem was created for young firms to take off. Today it is so easy to set up an IT services firm in India! All this in about 30 years.

    At the micro-level, there are bottlenecks that some entrepreneurs can address by modifying their business models. For example, in the starting days of TaxiForSure, getting drivers on board was a challenge. The founders decided to engage with operators who owned multiple cars to ensure that they were able to address the challenges. In a similar case, TESLA opens its patents to create a common standard that could otherwise limit the adoption of EVs!

    While there are some cases where the ecosystem challenges can be addressed by refining the business model of operation, there are many more that require an ecosystem correction. The benefits of rectifying the ecosystem level could enhance the pie for everyone to benefit from.

    In the Indian context, we also find that the lack of fabrication facilities have stunted the growth of the semiconductor industry in India. Similarly, the projected growth of pharma and biotech companies into drug discovery has been stunted due to the lack of high-end talent.

    The resolution of these ecosystem challenges could be made through joint efforts of the industry (that is all other players like you) and the government, creation of standards, and in some cases, by different ventures working together despite the dearth of support from the government. If your industry is sensing the existence of bottlenecks inhibiting growth, it is more likely you would need to come together for some collective action and thus allow the industry to grow further.

    Ask yourself:

    Are there any industry level challenges that my competitors and I face in executing my business?

    Are these challenges due to the firms’ inability or, are these the bottlenecks in the industry?

    Are we paying attention to it? How do we (as a collective) work towards solving these challenges and thus expanding the pie?

  • The existence of problems does not imply the existence of a business

    Entrepreneurs who listen to a lot of communication on the approaches to be developed to build a business, spend too much time working on identifying a problem. As highlighted in the earlier sections – there are issues of biases that come from the way we frame the potential problem we intend to solve, as well as biases about the solutions that we have to solve these problems.

    The amount of time spent to validate the existence of the problem, when done incorrectly, is a sheer waste of time and resources. Even if you can get your potential customers to say that this is a problem, it does not mean that you can build a business around it. There are a few more parameters you need to consider while building a business.

    Some of the points we observed, which could help in deciding if a problem can be a potential business are – are the majority of the people saying this is a problem, and am I willing to pay for it ASAP to get it solved? Think immediacy, think urgency, think the number of requests! What is the context in which the pain is so heightened for the customer that they would not mind paying the amount to get it solved?

    Now that you have spotted a potential group of customers, what is the quickest way to solve the problem without making drastic changes in the existing flow of operations for the customer? How do you alleviate his/her concerns? How frequently can you access the customer’s site to better understand the usage and improve on the offerings, the stickiness, and ease of use? Last but not least – Can you also think of a potential revenue stream beyond the first foot in the door?

    To build a business and a relatively long-lasting one, you would need to focus beyond the specific problem: on the decision scenarios and scenarios around the problem. Then reflect on these observations to strengthen the offering as well as build a strong case of the initiation and sustenance of a business.

    Ask yourself:

    What is the urgency of the problem experienced by the customer? Is the problem frequent?

    How do they currently address the problem?

    Do the features of your offering deliver the required satisfaction for the customer?

    Based on these observations, could I say that the number of customers is large enough to develop a sustainable business?

  • Novelty does not necessarily reward

    Most entrepreneurs we meet, sell us on the novelty of their idea. The dimension of the novelty may be a new technology being used, or a new aspect in the local geography. What they are generally unclear about, is how does the novelty translate into a benefit for the end-user and the customer.

    People often think novelty is an advantage. In most cases, novelty is a barrier that makes it difficult to sell your offering to the end consumer/customer. Challenges may arise due to the audience not being prepared to take in the innovation. That is, they simply may not be ready to take up the offering. Here is an example: Entrepreneur A loved to develop and design new products in the lighting space. To make it easier to visualize the end product, the entrepreneur developed a simple MVP, to showcase it to the potential customer group of lighting stores. While the customers were amazed by what the tool could do, most of them said, it’s too good for them to use. Their existing systems were not ready for this amount of advancement.

    Novelty has another challenge that the entrepreneur has to overcome. The challenge of being able to create an appropriate anchor in the audience’s mind. If an entrepreneur comes to you and begins telling you about the offering and how it is different from the existing one, you are more likely to ask – how is this fitting into something I already know! So when you are communicating your idea, it is essential to think about it from what your audience knows and how the novel elements could be developed as you speak, allowing the audience to place you in the existing mental schema.

    This gets us to the flip side of novelty – imitation. Is imitation necessarily bad? Well, it is not really bad. As explained earlier, it makes it easier for you to communicate and maybe even easier for you to avoid having to learn from scratch what has already been established as the norm.

    Is it not then a valid question to ask here – Do you not need a unique advantage in your product? The answer is yes. You need it, but the uniqueness only plays a role once you have made it functionally easy to solve existing problems that the audience has—another way to put it, first parity with your comparable products, and then its uniqueness.

    This discussion, thus far, should get you to understand that if you are to build a business, you must learn about the unique value that is deliverable from interactions ground up. It points to a potential paradox that the entrepreneur needs to resolve. If novelty is creating user value, is it novel? How could the novelty create a differentiation that could be leveraged?

    The thin line is – it should be easy for your audience to relate to and then imagine how your offering can create an advantage for them. So don’t shy away from imitation. Novelty does not necessarily translate to an advantage but should allow you to differentiate and gain a premium for you. Know your audience while you are making these judgments about your offering.

    Ask yourself:

    Did I include these features in the offering for novelty sake, or do my interactions on the ground suggest the need for these features?

    What are parity features in my offering, what and how do certain features create an advantage over others? Am I simply overselling the novelty so that I do not lose my audience in between?

  • Business canvases (choose the right tool for analysis)

    Business Canvases have emerged as a useful visual communication tool in the last decade, and the types of canvases are therefore rapidly increasing. These visual tools allow us to quickly summarize and communicate mental images with other business stakeholders… Additionally, the various components (boxes marked) act as anchors to aid the consideration and deliberation about choices that need to be made regarding these components.

    The Business Model Canvas (BMC), developed by Alex Osterwalder, has an intuitive appeal. On the left hand of the value proposition box, one could capture all the choices that need to be made on the solution market aspects and the right of the box, all the choices made regarding the factor market aspects. Each box and the common lines between the boxes are reflective of the design choices one would need to make about the business. If used prudently, one could think through various choices that a business needs to make, evaluate the choices, and make informed decisions that potentially improve the chances of a business surviving.

    Following the BMC, several other canvases have also emerged to the forefront. Some of these are focused on sub-problems of building a business like – the value proposition canvas, the lean canvas, customer forces canvas etc. Some of these canvases focus exclusively on understanding what needs to be built into the product – and are captured in product canvases. We also have the Digital Platform Canvas and the Social Enterprise canvas based on the specific nature of the business.

    Often a common mistake an entrepreneur makes in using the tools is just aimed at filling the canvas and believing that they are now on the course to building a venture. Canvas is just a snapshot of the venture’s image, in which it captures what you think about the business. It does not mean that you have ticked all the necessary elements to become a successful venture, by filling in the various boxes in the canvas. Also, there are no correct or incorrect answers.

    Use a canvas as a diagnostic tool to understand and point out issues with your business. Reflect on the points you have made to identify potential issues or understand the problems you face in a new light. The design of BMC links you to a chain of questions across the different components which could get you to design the business better.

    For example: If you have a product that you plan to sell to multiple groups of customers, you may ask – Are you looking at the customer segments differently from each other? How do you reach out to individuals among these segments? What is the cost of using a specific channel? What does the channel really provide you? Could you piggyback on an alternate channel instead? What is the implication of the cost of customer acquisition? Am I trading off understanding the customers in-depth, with the ease of access? Which of the product features are valued most by a specific segment?

    As you fill in the boxes, you may realize that you already have a complex business model. A start-up could simply fail to deal with such high complexity! You may then use it to sequence your entry into the market. Given that you wish to simplify and keep things under control, what would be the first target customer segment – say a beachhead, would you like to begin with? What would be the additional resources you would gain having entered in with the beachhead segment, beyond just product validation? Does anyone else look up to them as a potential reference group? As explained, by using the BMC above, you could also build on other canvases depending on the problem you intend to address.

    Ask yourself:

    Which is the right canvas for the problem I am facing currently?

    How should I use the visual tool?

    Disclaimer-no claim of ownership. Inserted only for demonstration purpose. All rights with the orginal authors.

  • Fit-misfit

    Another component of the venture idea, which is central in an entrepreneurs’ thinking, is the conceptualized offering. In the zeal to create a venture, the conceptualized offering sometimes may appear trivial or could be a misfit on multiple aspects – say, with the individual aspirations, capabilities, and the existing ecosystem.

    Capability-Idea mismatch: We meet entrepreneurs who come in with strong capability and skills, but the nature of the venture idea that they work on is too trivial and does not do justice to their training and capability. It may be a thoughtful attempt to develop something, so that, even if the idea is trivial, it allows one to try their hand at the first business. This enables one to pick up the nuances of the entrepreneurial process before taking the plunge to develop something more substantial. However, we find that the mismatch between the capability of the individual, their aspirations, and what they are developing, happens repeatedly in the journey.

    An example that comes to mind here, is when a commerce student from a local college wrote to us seeking funding for developing a time-machine! The applicant claimed that he had a theoretical insight that could develop a prototype at the cost of around INR 5 Lakh. We were dumbstruck at the claim. There was no supporting credential to show that the claim was genuine, nor did we have the technical prowess to evaluate if its truth. We suggested the applicant to reach out to a reputed science institute in the city, which would be more apt to evaluate the claim. This is why it is essential to ask oneself – am I doing this to gain confidence, or to derive a kick out of the experience, or to learn from the challenges of the process? Have I made a claim that is in line with my knowledge and capability?

    If one seeks to gather the confidence in driving the entrepreneurial process, it may be more suitable to work as an intern or as part of a start-up team, before deciding to take the plunge. An alignment between the individual skills/capabilities, and the venture idea pursued, helps reduce mental dissonances over a longer horizon in the journey and heightens the motivation.

    Ecosystem-Idea mismatch: The second aspect that we find important to consider when we are thinking of the offering is the alignment with the existing ecosystem. In most cases, entrepreneurs assume the existence of the necessary support for their offerings. Some offerings may be ahead of their time to get to the market. It is, therefore, important to think through the offering, consider the components that you need to create yourself either due to its non-existence, or the existence being relatively weaker in the ecosystem. Ponder over the scenario and ask yourself if the offering remains attractive to you, if these components have to be developed in-house.

    The way to go about involving and integrating these missing components would have to be through partnerships. Partnering with other actors to build the missing components is beneficial here. Otherwise, you need to internalize and spend a substantial amount trying to construct these missing elements in-house.

    The repeated attempts at developing a reliable electric vehicle for almost a century, is a case in point here. The ecosystem has had multiple bottlenecks that continue to be resolved before we have an electric vehicle, which would be a replacement for the crude oil-based vehicles.

    Offering Triviality: The third aspect is the triviality of the offering. It’s not uncommon that you may think of an idea that you can build on and take it ahead. As technology-savvy individuals, we often find people trying out developing different search engines, analytic engines, and assembling these and believing that these would be excellent businesses to build. These are nice hobbies and indicate what your capabilities are, but does not mean anything beyond that. There are so many ideas that people try to implement and not proceed further, so it is alright just to leave it there. If you choose to continue, then see if you can partner and provide these to someone else and continue to improve. Or else, think about a new idea where your capabilities can be used more centrally on the offering.

    Ask yourself:

    Why am I building this offering?

    Do I feel enriched having tried it, even if I do not take the offering to the market?

    Is this just a hobby for me or am I serious about it? How do my skill sets and connections link up here?

    Is the ecosystem I need for this offering available? Do I know what the ‘must-have’ components in the ecosystem are? How do I build them, if there is a need for such components?

    Can I use some ideas to sharpen my skills and demonstrate it to others, who may have serious ideas that I could be part of?