by Bryan O’Connell
Among non-business people, there is a common (and somewhat baffling) misconception that ideas drive startup success. The reality is that nothing could be further from the truth. Amazon’s Jeff Bezos most definitely did not come up with the idea of selling books over the Internet. Google was probably the 50th search engine. And when Facebook was conceived in a dormitory room, MySpace and Friendster were already dominating social networking.
What made these companies successful was not the founders’ initial ideas, but rather the millions of micro-decisions that they made on a daily basis; a concept otherwise known as execution. The upside is that for budding entrepreneurs still looking for the right place to start, there are some useful frameworks they can use to help grease the wheels of inspiration. Below are three important ones.
Revisit the dot-com bubble
Many companies failed in the 1999/2000 era not because they were bad ideas (although there were many of those), but because they were genuinely ahead of their time. In 1999, there were only 290 million Internet users globally, most of whom were using slow dial-up connections. Fast-forward 15 years, and that number is closer to 3 billion. This has created a fundamentally different operating environment and many previously unviable ideas are worth revisiting.
A prime example is in the online supermarket space. It seemed intuitive at the end of the last millennium that we would be ordering our groceries online. After all, who really enjoys their weekly trip to the supermarket? Plus, there are obvious supply chain efficiencies to be gained from removing local outlets. Cue Webvan.com, poster child of the dotcom era, which blew through $800m in venture capital and IPO money before shutting its doors a few years after inception.
For years after this disaster, “online grocery” was a dirty word in Silicon Valley. Startups with even a passing resemblance to the ill-fated Webvan sent venture capitalists running for the hills. That was until 2011 and the emergence of Instacart, who leveraged a more capital-efficient model and took advantage of a public that was increasingly comfortable with ecommerce. The company has grown rapidly over the last few years and could very well become the “Tesco of the digital age”. Today’s entrepreneurs could do worse than to take a lesson from history, and try to figure out whether now is the right time to revisit some failed dot-com business models.
Look to the next platform
Every few years a new platform emerges that opens up a range of possibilities. It was the personal computer and the web in the 1980s and 1990s. Then there was Facebook in the early 2000s. After that, Apple’s iPhone in 2007 and the iPad in 2010, ushering in the current era of portable smart devices. Smart entrepreneurs ask themselves what types of business are enabled by these innovations, then go out and build them.
For example, Mark Pincus believed that Facebook would transform the way we play games with our friends, so he founded social gaming company Zynga (maker of Farmville and MafiaWars). Travis Kalanick realised that having a supercomputer with GPS capabilities in our pockets (a smartphone) could enable better local transportation and he was inspired to create ridesharing service, Uber. And Flipboard founder Mike McCue knew intuitively that the iPad would revolutionise how we consume news media, so he set out to build the definitive aggregate news reader for that platform.
To paraphrase ice-hockey legend Wayne Gretsky, entrepreneurs need to skate to where the puck is going to be, not where it has been. Many “killer apps” for the aforementioned platforms have already been built. But there are many more potentially important technologies emerging (Google Glass, Apple Watch, or even Bitcoin). Each, if successful, will enable a slew of extraordinary businesses that are just waiting to be built.
If all else fails, clone
A major advantage for any entrepreneur is that there are many business models that have been proven in local markets but have yet to go global. Therefore, one simpler way to come up with a business idea is to take something that has worked in one country’s local market and bring it to the your country’s local market.
One caveat is that to be a suitable candidate for cloning, the business must have a local element that requires rolling out one geographic market at a time. So Instagram and Linkedin, which don’t require any local infrastructure, are natural global monopolies. However, companies like Groupon and GrubHub, with their armies of local sales reps, were highly vulnerable to cloning while they were growing rapidly in the US (which did in fact happen in both cases).
It’s undoubtedly an uninspiring way to do business, and not what gets most of us up in the morning. But it’s also highly effective. Several multi-billion dollar businesses, such as Germany’s Rocket Internet, have been built entirely on this model.
Bryan O’Connell is the VDC’s first Global Entrepreneur-In-Residence. Originally from Limerick, Ireland, Bryan is an MBA from Harvard Business School, a former VC for BV e.ventures and the founder of FirstLine.