Analyzing the concept of innovative entrepreneurship and the way technology startups emerge can help large companies embark on the era of the 4th Industrial Revolution
When we think of what adds the concepts of entrepreneurship and innovation in practice, memory brings us to Startups, which use technology intensively in their business.
New companies generally do not have all the necessary resources for growth, such as physical space, people and funds, nor the reliability and legitimacy that the knowledge, experience, and brand of large companies conquer over the years — producing and supplying new technologies or quality products to the market.
For startups, it is even more difficult to overcome these responsibilities of novelty and smallness, as, according to the definitions of Steve Blank, Eric Ries and Paul Graham, they are associated with:
• Agility and rapid growth.
• A repeatable, scalable, and profitable business model.
• Development and/or supply of products and/or services in conditions of extreme uncertainty.
• Potential of excellent return on investment.
Where, then, is the magic of how startups overcome such difficulties?
In the 4.0 management model of startups, whose DNA is formed by concepts such as transparency of information, autonomy in decision making, resilience to difficulties, flexibility in management, close relationship with the consumer and with other stakeholders of the ecosystem. These concepts, coupled with the use of new ways of competing, or rather, of “coopeting” in the market, show that startups are already born digital and with a “Culture 4.0”. In line with the 21st century economy, they use new technologies and new business models to enhance the customer experience.
Yes, they are born digital, but what can we highlight in the way of being and acting 4.0 of the startups?
Each entrepreneur has its own style, profile, and behavior, and each startup has different and preferably unique business purposes, vision and model to compete in a world so volatile, uncertain, complex, ambiguous, and accelerated. There are, however, some aspects that are common to successful startups and we can highlight the following:
• Generally, they start from a founder’s mentality, with one or two partners, small, multifunctional team, competent, committed, focused and motivated.
• The purpose, vision and values are shared, considering respect, transparency and excellence in execution.
• In planning, they use methodologies such as design thinking, business modeling and lean startup in resources, processes, …
• In product development, they consider continuous interaction with the customer and use a light, iterative, scientific process through experimentation: build, measure and learn — in the generation of prototypes and minimally viable products, where failure is an option.
• “Pivotal”, that is, a strategic change of some elements of the business model, can occur more than once.
• Seek sustainable growth, but with speed, innovation and continuous transformation.
• Use few metrics, but essential for monitoring and management.
• Gets financial resources through measured investment rounds, based on evidence that milestones have been achieved, presented in progress report.
• Use new technologies in an intense way, such as: cloud computing for use, management and availability of applications, data and reports; provision of access via mobile devices; social media in the strategy of digital marketing and communication with the client; application program interfaces (APIs) for access to infrastructure, integration with diverse systems, use and availability of information; 3D printing for physical prototyping; artificial intelligence and big data for optimization of data usage and better interaction with the customer; internet of things for access to sensors, machines and robots; virtual reality and augmented reality for simulations; etc.
Another point to consider are the macro phases of learning and execution, as well as their characteristics. The process is basically in these stages:
• During learning entrepreneurs seek to turn the idea into a business, which needs to be structured, tested and validated.
• From the business model, they validate the problem, then the solution and finally adjust the product to the market.
• Make use of prototypes and versions of a minimum viable product with the first customers and seek traction — which is demonstrated through revenue growth, profit, customers, pilot customers, non-paying users, and even verified customer problems.
• In the beginning, the startup faces uncertainties — about technology, market, resources, and external environment — that need to be identified, worked and reduced.
• During the process, the business model gets more mature — even with possible strategic adjustments (pivot), the team of partners and first collaborators is consolidating, and the “dating” with investors is happening, thus, the first investment.
• The business will only succeed if the product has value and enchant the customer to the point where it becomes a partner in the disclosure.
• After the adjustment of the product to the market and to acquire traction, begins the execution, with the company structuring and processes preparation to grow.
The ability to experiment, learn and scale embedded in the culture of startups, allows problems to be solved more quickly and efficiently, generating better results.
In common, startups have good ideas with great potential for growth, organizational agility and willingness to risk.
What is and how to learn from startups
Large enterprises are increasingly being pushed to accelerate their innovation processes due to the reduced product lifecycle, increased competition, and increasing technology complexity, specialization, and convergence. Thus, they face the dilemma between continuing the quest for efficiency to exploit their resources to the fullest — which includes pursuing process improvements and incremental innovations — as well as creating products and services with radical and disruptive innovations to stay competitive.
On the one hand, large companies have a recognized brand, resources, scales and routines dedicated to running a proven business model. On the other hand, startups have ideas with great potential for growth, organizational agility and willingness to risk.
Using the concepts of open innovation — which is nothing more than a more distributed, participative and decentralized approach to innovation — large companies can market external and internal ideas, deploying inside or outside their current markets. In that sense, to accelerate their innovation processes and simplify their business models, they can use startups’ methods, techniques, and tools to leverage opportunities, test ideas, prototype experiments, and launch innovative products, even if they bring some uncertainties.
This can be done in two ways: through small internal startup teams, ie multifunctional groups focused on testing assumptions about new potential products using agile methodologies, lean resources and minimum viable products; or interacting with external startups, combining the strengths of each side to create a substantial value and achieve their goals successfully.
The evolution of the startups ecosystem in Brazil
Brazil is a country of many opportunities, counts on the colossal size of its territory and its population, that is, a big market, besides having many problems of infrastructure and other areas, waiting for solutions. To undertake here implies in complexity in the collection of high taxes and fees, bureaucracy from the moment of the opening of the company, little effective partnership with universities, difficulty in finding prepared employees, in addition to low availability in financing and venture capital.
These cultural and historical reasons required the Brazilian entrepreneur to develop a greater capacity for improvisation to overcome his problems. He/she is reputed to be so “creative” and well-connected, but in general, he/she does not excel in the scientific and technological fields, which makes him/her more entrepreneurial than innovative.
Since the launch of the book “Empreendedorismo Inovador” (Editora Évora, 2012), about how to create technology startups in Brazil, it was hoped to see Brazil as an entrepreneurial and innovative nation, counting on governmental incentives, scientific knowledge bases of universities and presence of venture capital. This has gradually become a reality because:
• The government has launched several national support programs for startups, such as Fundo Criatec, Startup Brasil, Inovativa Brasil, Finep Startup, Conexão Startup-Indústria, besides state programs and in some cases local.
• Universities such as USP, UFABC and many others have launched courses, entrepreneurship centers and events focused on startups. And incubators are more active.
• Accelerators in the market are more mature as well as their processes of search, training and launch of startups, as well as the relationship with angel investors and venture capital funds.
• Startup mentors are all around.
• Many large and mid-sized companies have sought to interact with startups in a variety of ways, including awards events, hackathons, coworking spaces, incubators, accelerators, and business partnerships.
• New books and events have emerged on-line training, face-to-face meetings of entrepreneurs (meetups) and many innovative products/services launched with success.
Today we see a Brazil with many examples of winning startups, whose management models can serve as an example for established traditional companies, who seek to innovate in an agile way, using less resources to achieve better results.
About the author:
Nei Grando had two technology companies, has a master’s degree in science from FEA-USP with an MBA from FGV, is the organizer and author of the book “Empreendedorismo Inovador”, is a mentor to startups and serves as a consultant, lecturer and speaker on innovation and business.
This post is a translation from my original magazine article in portuguese at: Revista da ESPM — Ano 24 — Edição 111 — N. 2 — Abril / Maio / Junho 2018, p. 90 a 93. http://bit.ly/Startup-40