May 21, 2008

DEAD END for startups

Last few days, have been quite busy for me w.r.t Travel & Work and hence, could not blog for a very long time sad. Last weekend, I was at an Unconference named IdeaCamp in Pune [about which I would blog later]; where I met a friend of mine, who had an interesting Web 2.0 idea.He explained me about the concept and everything was fine until when he said "The big guys would definitely have a tough time and would face a big competition from me !!!!". This statement made things look so simple like "You have an idea, you execute it [without any problems] and you have a great market share lol", but things are not always as easy as he mentioned during the conversation.There are so many uncalculated things that come during the phase of execution that may make a GREAT idea AVERAGE or an AVERAGE idea GREAT !!!

This was the best time to write an article on "Things that may break a Startup", which was featured in the DARE magazine.It is one the most practical article's, I have come across and hence, I thought of penning down the same on my blog [which would serve as a checklist for me as well for others who might have missed the article !!!].

NOTE:
The credit of this article goes to DARE magazine and below are some of the most important points from the article.

1. Your IDEA is STOLEN
Virtually, all the entrepreneurs believe that their idea is path breaking and it would take very less time for someone to steal their idea[if it is been discussed in public].Though this might be true[in some cases] but it is one of the biggest misnomers about entrepreneurship.Assume that you keep your idea trade secret and after few months, come out with your product or service.How much time would it take for a competitor to come up with a better product; learning from the mistakes you made or some of the loopholes that were left in your product, which may lead to another better product idea.If your product is hot, how much time would it take for China to mass-produce it? The first mover advantage does not always work the way it has been advertised.
Who came up with the idea of portable music player[PMP] ? And who made the most money out off portable music players ? One of the last entrants in the field : Apple.Who came up with the first cellphone? Motorola.Who is the lord of the cellphone business? Nokia.

It is not always the idea, but the execution that makes the difference.Being a first mover is not always the best.Learning from others who went before you helps.

2. You got it WRONG
You start off with a wonderful idea and after lot of hard work, realize that the things did not work as per the plan.The limitations could be simple, like you are not able to get the components of the exact precision that you wanted or you make a basic blunder in your calculations or assumptions that were revealed in the later stages. There could be market readiness issues or limitations in the delivery mechanisms.What is the way out to this problem - Stringent and frequent reality checks. At the concept stage, do not make sweeping assumptions.Get the basic figures of market size, technology availability and costs right within reasonable limits[+- 15 to 20%].Cross check these numbers thoroughly and recheck them FREQUENTLY. If your business has come about as a result of some market feedback for example from a market survey, recheck to ensure that the sampling and the interpretation is correct.

3. Takes LONGER than PLANNED
This happens due to the following reasons:
  1. The complexities were not very well understood in the beginning.
  2. A bigger problem is when the founders fall in love with the product and fiddle around for ages to make one cool feature or trying to make it prefect.
To manage the first problem, budget for more time than you think it will take.Many successful entrepreneurs say that it would be wise to budget for anywhere from 25 to 50% more time than you expected, depending on the scope and complexity.The second one is more difficult to get rid off.Do not fall in love with your idea[though it is easier said than done], forgetting the passage of time even as we make the most minor changes to it.Taking learning from Gmail, which is there in beta from 2004 onwards.The way to handle this is to break down your project into clear activities and milestones and work out how much slack you can afford to take at each point.Having some [co-founder or even an employee] sound an alarm bell on slippages is also a good idea idea

4. COMPETITOR releases FREE EQUIVALENT
This is a very common problem that is unique to the software industry.But it can happen in various other industries also, where the competitor reduces prices to rock bottom just before you launch.This is the most toughest one to handle and the only solution being to cut your losses immediately and move to Plan-B [if you have one].

5. ONE-MAN shows DON'T WORK
There are very few businesses where a one-man show can pull along and grow for long , which are either in the show business or in sports.If you are not an ace actor or a sportsman, you will need a team that will help you to achieve your goals and grow big.One man shows collapse from sheer exhaustion.
Another version of the one-man show is where the team is kept too small , because the founder does not want to give up control or because of fears of quality being compromised. While this does not lead to the business closing down, it does limit its ability to scale.

6. CO-FOUNDERS fail to GET ALONG
This is one of the most deadliest reasons of all. You have all things in place like your idea, business plan, development team but the only problem is that your top team can't get along.Too many ego clashes, too many instances of my-way-or-the-highway !!! Some differences of opinion are bound to happen and an occasional debate is not a bad thing, as long as you can put all that behind and get back to work.But if these get too frequent, than it is better to part ways than to continue.A clear exit plan is a good thing to have as your agreement.
Worst of them all is when the LEADER himself/herself is responsible for all the troubles,which if not corrected may lead to very serious problems[including closing down] in future.

7. CAN'T AFFORD key skills
You need a specific skill without which your offering is incomplete and that particular skill is not available to you or is too costly to afford.Depending on how critical the skill you are looking for is, and how the demand for that skill in the market is, you need to offer a challenging deal to the candidate. In most of the cases, the right combination of Money and Challenge[in work] would do the trick.

8. MARKETS do NOT accept your PRODUCT
All the things are in place and you are out with your product, but what if the market is not willing to accept your idea. Many startups fail because they have no relevance to the market.Another reason is that they are too overpriced for the market to bear.
It is always advisable to adapt to the market realities and to create a product which is well-inline with the market requirements.Cost effective methodologies for market research like Dipstick Surveys can be effectively used by startups.

9. MARKETS CHANGE
Market and technology changes are a part of the business cycle and like any other business, you need to change your business to be able to survive and prosper.BPO Business took over most of the Medical Transcription businesses.The revolutionary PC completely drove the typewriter out of business.
Those who change with the times survive and prosper, those who don't , become a footnote to history sad

10. MONEY RUNS out
Most of the startups are conservative in estimating the costs and get too aggressive on income figures due to which, money runs out.Making a good business plan is not a one time activity.As the business environment changes and as you get good understanding of the business, change the business plan[at least for yourself].
Another reason could be a slump in the economy which stops the inflow of money.The solution is to have a realistic plan in place and making it more & more mature as your business gains maturity.

11. YOU GIVE UP
What happens when the leader himself/herself looses the way and gives up.If you fall in the category of startups that cannot make it big, there is no need to loose heart. Try again exclaim

I hope that you gained lot of insights from this article, just as I did. Thanks DARE for such a wonderful article, which is an eye opener for all the startups !!!

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12 Comments:

At May 22, 2008, 3:35:00 PM , Blogger Alok said...

Well Said - " There are so many uncalculated things that come during the phase of execution that may make a GREAT idea AVERAGE or an AVERAGE idea GREAT !!!"

Totally agree with you and I wouldn't surprise seeing that you changing things your way because you have the skills of execution and not just an Idea. I have my personal experience that proves your statement ....

And those points marked by you are worth reminding every time... when somebody sees that his idea is going out of sync with the execution plan, I guess holds good for any startup :)

Good day!

 
At May 22, 2008, 3:43:00 PM , Anonymous Himanshu Sheth said...

Hey,
@Alok: I am glad that you liked the article :) With very less (yet good) knowledge that I have in Startup, I have come to the conclusion that "We as Technologist's focus so much on Technology that we miss on other aspects" ... This article was just to keep in mind that "We don't enter or near the DEAD END when we startup :)"

True, this would be true for any startup !!!

Thanks for the encouraging comment.

-Himanshu Sheth

 
At May 23, 2008, 3:26:00 PM , Blogger rajesh said...

very helpful article .. thanks

 
At May 23, 2008, 9:10:00 PM , Anonymous Himanshu Sheth said...

Hey,
@Rajesh: Thanks very much for dropping by and leaving an ENCOURAGING comment.

I am glad you liked the article.

-Himanshu Sheth

 
At May 24, 2008, 9:08:00 PM , Anonymous Jessica said...

Great post

Really an eye opener. writing a comment after a long time but this was a must comment kind of post.

Each sentence of the post is a must must read for all startup owners.

Very truly said.....
"Worst of them all is when the LEADER himself/herself is responsible for all the troubles,which if not corrected may lead to very serious problems[including closing down] in future."


keep enriching us with such eye opener posts.

 
At May 24, 2008, 10:25:00 PM , Blogger vid said...

great article...and i'd like to concur your ideas by pointing out the king of stolen ideas: Microsoft

they blatantly ripped of Apple's Mac fro windows, and distributed Internet Explorer for free with windows to crush Netscape, a hugely innovative startup. And their success today holds testimony to the fact that everything's fair in love, war, and business!!

 
At May 25, 2008, 5:17:00 PM , Anonymous Himanshu Sheth said...

Hey,
@Jesicca:
Have been missing your comments since a long time :) Thanks very much.In fact, this article was more for me and than for my readers :)

This is a checklist which was always be in front of me to check out whether we are not making any mistake or taking our eyes off the target :)

Thanks again for the encouraging words :)

-Himanshu Sheth

 
At May 25, 2008, 5:25:00 PM , Anonymous Himanshu Sheth said...

Hey,
@Vid: IMHO, all we techies always take the lead to criticize Microsoft :) But, they are ones who have responsible for this revolution. And during your entire comment, you missed Xerox(the XPARC) which was the first one to come out with the GUI :)

everything's fair in love, war, and business!!
>>100% agree with the same :)

-Himanshu Sheth

 
At May 25, 2008, 5:40:00 PM , Blogger Rajesh Moorjani said...

@vid:

its not that netscape and apple totally ended up as deadend startups.

marc andreessen is a billionaire and techie-household-name today because of netscape.

regs apple, steve jobs never really had the vision of "one computer per desktop", so in a way im happy someone took the lead on that :)

i dont think apple is doing too badly too :)

imho, even if someone beats you to it (or steals your idea), youll still get a lot of credentials for what you did.

quite a few successful entrepreneurs in the valley have been "failures" with their past startups. they just took the learnings and plodded on.

who said you can only try once :)

 
At May 25, 2008, 10:45:00 PM , Blogger Ranjan said...

You provide a lot of insights on where the startup can go wrong. Thanks.

A Startup is a brave effort in any case and I feel that the success lies in the execution of ideas more than anything else. So I would imagine that a startup reads all of this, analyses his own situation, raises his chin and trudges along.

 
At May 27, 2008, 5:11:00 AM , Anonymous Himanshu Sheth said...

Hey,
@Rajesh: Your comment gave rise to my new article :) Why is it that we always take success from the Silicon Valley?

who said you can only try once :)
>> May sometimes be hard in Indian Context where Failure is considered as a stigma.All in all,Entrepreneurship is all about trying to Succeed.

-Himanshu Sheth

 
At May 27, 2008, 5:14:00 AM , Anonymous Himanshu Sheth said...

Hey,
@Ranjan: Thanks very much for the comment :) And hope to see you again.

We(Our startup) is currently in the execution mode and I wish that we obey all the Rules that I have mentioned in this article !!!

-Himanshu Sheth

 

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