Kuldip Maity

Before we get into the details, let us try to understand how startups get formed. In my experience, broadly, there are two main triggers for startups. 

1) When the founders have a unique idea that they want to develop it as a business and nurture it to success. The founders could have worked in an organization for years and gained confidence that their idea was viable. They can also be as fresh as students driven by the passion of building something and becoming entrepreneurs to fulfill their dreams. In both cases, we can assume that the founders are driven by a desire and passion to make the startup successful.

2) These are situations when an individual has to quit his job because of some compulsion, like downsizing, etc. As the market is not very conducive to new job opportunities, the person initiates a plan for a startup, primarily driven by the need to stay busy or the grand picture that has been painted of the startup ecosystem. There is hardly any planning or long-term research for these individuals before the startup is formed. The startups often voluntarily close down \when the founder gets a lucrative job offer.

There may be other situations that might initiate a startup business, but I thought these two scenarios are worth mentioning. 

As in every business, several key factors influence the success of startups, but one aspect is non-negotiable. That is the passion of the founder/s.

If we look into the stories of successful startups, we will find that each journey has begun with a compelling vision and the unwavering passion of its founders. It is that vision that guides the company’s direction. Driven by the passion of taking the solution to the market, the founders have a deep understanding of the problem they are solving and a clear picture of the value they will bring to their customers.

The founder’s passion drives the dedication of both the team and investors. Unless extremely fortunate to have a smooth sailing ship, the perseverance of the founder helps the entire team to stay motivated during the tough times, pushing themselves to overcome obstacles that might otherwise seem insurmountable.

On the flip side, sometimes the passion might get uncontrollable and push the founders to make decisions that may be detrimental to the business. For example, too much attachment towards a particular plan might restrict course corrections required for the changing market scenario or owing to the new learnings gathered during the journey.

As I plan to discuss other success factors for startups in my next blog, I strongly feel that passion is the biggest of them all. However, while many might have overwhelming passion, the key is to keep it under control and use it only for rational decision-making.

In the last couple of blogs, we have discussed innovation's importance in the startup ecosystem. While most startups introduce innovative products and services, a startup doesn't need to be driven by innovation. Several other factors may drive growth and make a startup successful.

Having discussed the importance of innovation and the prospect of startups flourishing without innovative products or services, I want to emphasize that the key lies in finding the right balance. Startups should evaluate their unique propositions, target market conditions, and business growth strategies to determine the role innovation should play in their business.

For this, every startup business must conduct thorough market research to understand the target audience's needs and preferences and identify gaps they can address. Most of the time, customers are not as much looking for innovation as they prefer reliability, affordability, or convenience.

Another important aspect that needs to be considered before a startup goes down the innovation path is the available resource pool. True innovation may be resource-intensive, requiring niche skills at a high cost. Startups with limited capital may need to focus on more cost-effective strategies before investing in resource-dependent innovations.

By its very definition, innovation often carries a high-risk quotient. Had it been easy and reliable, there is no reason why others have not done it earlier. Hence, before introducing innovation, the startup must evaluate its risk threshold and tolerance. Resources may be required to manage the new vulnerabilities unfolding by injecting an innovative solution. A proper cost-benefit analysis needs to be done before accepting the plan.

Lastly, remember that you are in business for the long haul. Everything does not need to be done overnight. If your startup has a long-term vision, starting with incremental innovation or adaptation is more judicious. More significant innovations can always be introduced at a later stage, as resources and opportunities evolve or you have enough funding support to increase your risk appetite.

Purpose-driven innovation is a valuable tool for any startup business to differentiate itself from competitors, disrupt industries, attract investors, and stay ahead in a rapidly changing world. But, what's crucial is that the startup focuses on its strengths, weaknesses, and the opportunities and threats in its specific business. 

Let the business drive innovation, not vice versa.

Let us discuss a few scenarios here:

There may be cases where a startup business improves existing products or services, making them more efficient, user-friendly, or cost-effective. Their strategic focus may be primarily on excellence in execution rather than innovation in design or development. These incremental efficiency drivers find success by refining what already exists.

There may be limited room for innovative businesses to grow in certain niche markets. Many challenges may restrict them from optimizing their offerings for other markets. Startups can build off these innovations by optimizing the product/service to the specialized needs or demographics without necessarily inventing something new. They can identify gaps in the local market and provide solutions without introducing entirely new concepts. These startups will excel by understanding customer pain points and delivering solutions that meet those needs effectively.

Then we have the factor of the right timing. For any business, timing plays a critical role in its success. Sometimes, a startup might introduce a groundbreaking innovation, but it enters the market at a time that is not apt or is ahead of market readiness. While these startups might have failed, other startups might pick up these solutions at an opportune time and have great success. For example, the recent trend of video-based content creation has boosted video editing apps, many of which were already available for years but did not get their desired popularity. Another recently launched app might have had much better success.

Last, I would like to discuss the factor of cost. Startups providing cost-effective solutions have a critical edge even without introducing groundbreaking innovation. It can be simple access to sourcing raw materials or labor costs that can lead to cost efficiency and drive the startup’s growth.

Even the most innovative idea can falter without strong execution and strategic planning. Startups that can execute well, manage resources effectively, and create a robust business model can succeed without relying solely on innovation.

In this blog, let us explore the significance of innovation in the startup landscape.

First, let us define what innovation is. Wikipedia cites a survey that tried to crystallize a multidisciplinary definition of innovation and came up with the following:

"Innovation is the multi-stage process whereby organizations transform ideas into new/improved products, services or processes, to advance, compete and differentiate themselves successfully in their marketplace."

Innovation is common for startup businesses because of several reasons.

In mature and crowded markets, innovation provides a unique selling proposition. It helps the new business stand out with a product or service distinct from the competitors. 

Several success stories, such as Airbnb, Uber, etc., have disrupted the existing industries or created entirely new ones through innovation. They have been examples of aspiring entrepreneurs who drive their businesses through similar engines of disruption. Hence, they are all hinged on innovative business models and technologies.

We must also acknowledge that the changes we see in our lifestyle follow an exponential curve. To keep it, we see that the business landscape is also constantly evolving. Startups find it necessary to be agile and adaptable to respond to changing market conditions, consumer preferences, and technological advancements. Innovation equips them with the tools to pivot and adjust their strategies when necessary.

We also find that investors are more likely to back startups that demonstrate a commitment to innovation. They see innovation as potential exponential growth and profitability. However, others feel that not all innovative startups have a positive outcome, taking the investors down. We may discuss this in a subsequent blog.

Even with all the above reasons, many have a drastically different opinion. In their view, startups can also flourish without having innovation as their topmost priority. Many startups have identified gaps in the market and provide solutions without introducing entirely new concepts. All they have done is understand the customer pain points and deliver solutions that meet those needs effectively, even if those solutions are traditional. Similarly, concepts from across the world may be localized to suit the Indian consumer mindset and dynamics. There may also be examples where innovative startups have failed because they were ahead of time and could not get the consumer's mindshare. Picking up those ideas again later, when the time is apt, may also be a good strategy for a startup.

In the subsequent blog, let us discuss how aspiring entrepreneurs can have a startup without a disruptive and innovative idea.