If in a previous post we talked about chances of an entrepreneur being successful, in this seventh installment of the series of tips we give to entrepreneurs, we want to focus on how we can increase that probability. As he explains Patrick Hunt, the most important thing an entrepreneur must do to be more likely to succeed is to properly choose the type of project What do you want to launch and the type of innovation that the new company is going to introduce to the market.Type of project: B2B or B2C?An entrepreneur who launches his startup in Europe, and in particular in Spain, has to analyze who your customers are going to be; that is, he must decide if he is going to undertake a B2B or B2C adventure. Spain, experience teaches us that a B2B adventure in the Spanish market presents very important challenges in the strategy of “go-to-market”, since it is a small market, with few large companies, a scarce culture of innovation, and very long sales cycles. When entrepreneurs begin to realize this, they try to go out and sell outside of Spain, and they end up realizing that they have to invest a lot in adapting the software to meet what international customers ask of them, something that requires a great deal of effort in terms of cashflow. In addition, different European markets operate in very different ways. What works in Spain doesn't have to work in the United Kingdom. Therefore, if the entrepreneur has no experience (or with employees who have one) selling software to different countries in Europe, It's better to choose a B2C business, in which reaching other markets is usually easier, since it does not require as much product adaptation, development of strategic agreements with distributors, etc. The start-up investment is lower.Type of innovationClayton Christensen, a professor at Harvard and one of the most renowned experts on innovation issues, promotes a theory that divides innovations into two groups:Sustainability Innovations.They bring to market a product or service that a company can sell to its best customers with higher margins. In other words, sustainability innovations bring a better product to a group of existing customers. Some sustainability innovations are simple improvements that increase from one year to the next. Others, on the other hand, are cutting-edge technologies, such as the transition from analog to digital to optical in telecommunications. They represent a true technological evolution, but their effect is to introduce into the existing market a better product that can be sold for higher margins to the best customers of leading companies. Experience has it that this type of innovation favors market leaders to the detriment of startups, whether they are simple innovations or major technological advances.Disruptive Innovations. Instead, a disruptive innovation brings to the market a product that is not as good as existing products, so it cannot be sold to the most important customers. Still, it's simple and, above all, cheaper. It is able to establish a kind of “beachhead” in an undemanding part of the market, generally made up of a group of customers who previously did not consume the product because it was out of reach in terms of price. From there, the product will be improved to make it attractive to the most demanding customers, who are also willing to pay higher prices. Startups are more effective at disruptive innovations than large competitors because they generate very small gross margins. In addition, since analysts do not analyze new projects in isolation. Therefore, when they evaluate a disruptive project, with small gross margins and unknown potential markets and compare it to projects that are aimed at improving existing products, with known customer bases and higher margins, it is clear who wins. Until now, making these types of decisions was natural and consistent with established processes and values within a large company. Something that, in general, gives free rein to startups, who when they launch this type of innovation remain “under the radar” of large corporations until it's too late for them. Pero
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It is also true that with the discovery and dissemination of this theory, market leaders are taking precautions and there are already a large number of examples in which large companies have been able to bring disruptive innovations to the market.
