The Idea is Only 5% of the Success

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I have been in the entrepreneurship and the start-up game for a long time. Curriculum development, evaluations, books, training, workshops and I started a few companies myself.

THE success factor

When I deliver workshops, I always try to explain, what I think is THE success factors for early success. Networks. Apart from very hard work (read “Perennial selling“), it is about deep domain expertise and networks. They go hand in hand. If you have been a plumber all your life, what is the most obvious business you should start? Plumbing indeed.

Dismayed

I also have been slightly dismayed by the pitch fever, celebration of the exceptions to the rule (we are not all Mark Zuckerberg) and the ignoring of the fundamentals of business (sales). An idea is nothing. Selling an idea is everything. It is about paying customers.

Execution is everything

Contrary to popular belief, it is not about the idea. Your idea is mediocre, nobody cares, you are not going to get the funding or the sales, and you are most likely to fail. It is about your ability to execute.

The Myth of the Idea 

Hence my delight with “The Myth of the Idea and the Upsidedown Startup: How Assumption-based Entrepreneurship has lost ground to Resource-based Entrepreneurship”.

Ideas

The authors view on ideas: Ideas, as the atomised aspect of innovation, gain a sort of sacred status within innovation. Ideas are actually less important than this increasing need for innovation leads us to believe, because it is so much easier and more convenient to conceive ideas than it is to test them.  Our ability to generate new ideas vastly outweighs our ability to put them in practice.

Most of the time, having a great idea or recognising an opportunity before the others “spot the opportunity” was not only insufficient to sustain the creation of a new venture but even potentially harmful to its continuity. Entrepreneurs are still like apples falling upwards.

An exercise

To proof that ideas are the not the magic sauce, he suggests the following exercise:

1. locate great ideas for free through numerous websites of organisations that award innovative entrepreneurial ventures in general in a particular country

2. list the finalists of last year’s contests and identify the industries and the business models they operate with; and

3. do the same for the previous four or five years of these contests and for the maximum amount of countries you can.

The exercise reveals that the challenge is not about locating great ideas for new ventures, but listing and classifying so many of them that step three is almost impossible to complete.

An idea is only 5%

He says that experienced investors and entrepreneurship experts have been suggesting that initial ideas for ventures are expected to explain less than five percent of the success of a startup, on average.

Entrepreneurial Pool of Resources

That is why he is introducing the concept of Entrepreneurial Pool of Resources (EPR). Under his upsidedown framework, new ventures and Minimum Viable Products (MVPs) emerge from the best combination of available and reachable resources in what could classify as the Minimum Viable Resources (MVRs).

Potential entrepreneurs should constantly evaluate the resources they hold and look for partners, investors, employees, customers and others that socially value their resources as useful or even indispensable.

Six degrees

In other words an analysis of your network. The six degrees of separation. That means analysing LinkedIn, Facebook, Twitter and your contact list on your phone. Writing down EVERYONE you know. Both the strong links as well as the weak links.

Analyse how they can help. With customers, domain expertise, industry links, introductions, finance, advice, access to other networks, skills, local knowledge, privileged information, corporate experience, culture, ethnicity, market knowledge, ways of thinking, proximity, etc. You name it. Whatever is relevant.

Deep, long, bridged

That is why we have industrial and political families. They can tap into long, deep, well-developed networks (read resources). That is why entrepreneurs with solid experience in different industries or regions are able to exploit a special kind of resource to start a new venture, by occupying a “hole” between these industries or regions, innovating precisely by mixing concepts and contacts from one industry or region into another.

These entrepreneurs operate by bridging connections that did not exist before their arrival, creating new commercial trails or shortcuts for products and services that were previously non-existent or unreachable.

Reputation management

It also means that reputation management and social capital are important. Trust is the currency in your Entrepreneurial Pool of Resources. Read “Reputation economics

Team

A founding ‘dream team’ should be augmented by potential entrepreneurs that bring extremely valuable resources to the new venture, especially during its first years when resources are often slight and need to be fully leveraged.

The analysis will help you recruit the founding team members that complement each other, leveraging their available and reachable resources.

Mapping the economic resources

Apart from mapping the network, also map the economic resources. The grants, accelerators, awards, support programmes,  Both forms to help you analyse your network and economic resources you can find here.

Business model canvass

If you are familiar with Business Model Canvas (BMC) will notice that both exercises are complementary, as the Entrepreneurial Pool of Resources tends to enrich enormously the “Key Resources” box found in the original BMC.

Tips

Some other tips from the book.

  • Forget about funding, focus on bootstrapping.
  • Focus on prototypes, beta versions, pilot experiments, mockups, dry runs, proofs of concept (POCs) and minimum viable products (MVPs). He is expecting less pitching competitions and more prototype or MVP competitions.
  • Look for angel customer
  • Spin-off from within an existing organisation if you can.
  • Acquire or join existing new ventures. Use your available and reachable resources in a more efficient way, not to start a brand new operation – and all the monumental efforts it demands, but to enrich something that is more established in terms of organisational development. Execution sprouting ideas, not the other way around. Why start from scratch?
  • Watch out for what he calls Pseudo Venture Capitalists. Pseudo venture capitalists are people with little or no experience investing in new ventures who portray themselves as venture capitalists in order to look socially active and with a regular occupation. In reality, they are very wealthy people with nothing or little to do.
  • Focus on B2B. B2C projects are almost as hard as establishing a pop music band.
  • Copy. The easy route is not really “doing something else” but quickly copying what someone else does correctly. So, copying looks to be the more efficient way to start doing something new from a true entrepreneur’s perspective. True pioneering is very rare.  What we mostly see is the recombination of existing ideas, from which some are closer, and others are farther from the proven originals. The closer they are to existing ones, the more likely they are to succeed.
  • Examine concepts like the Indian jugaad, the Brazilian jeitinho, the Chinese zizhu chuangxin, the Kenyan jua kali or the Congolese kobeta libanga. Best translated to North American English as ‘hack’. These concepts illustrate the use of improvisation, flexibility, creativity and intuition to deal with complex or unexpected daily situations without the necessary basic resources to deal with them. Often ignoring rules, procedures or conventional techniques.

Not a scaling handbook

This is not ”Disciplined Entrepreneurship” or “Lean Startup” and the focus is firmly on early stage. Actually, in the author’s view, you can only be considered an entrepreneur for a period no longer than three to seven years. After that entrepreneurs transition into an “ordinary” businessman or business owner.

Climate change

Has some interesting macro views on innovation and entrepreneurship that academics will like (or not). He also expects that entrepreneur will start tackling climate change. The pressure over resources will trigger the ingenuity of entrepreneurs. They will solve the sustainability problems by creating new alternatives and destroying outdated and unsustainable practices. In the 2020s and the 2030s, entrepreneurs will play a very important role in helping around 8 billion people to coordinate themselves and utilise the planet’s resources.

Entrepreneurs as change agents. We need you.

 

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