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What Differentiates a Successful Start-up from a Failed One?

Published by MBA Skool Team in Entrepreneurship Articles category , Published on November 02, 2015Read time:

Today’s generation is full of ideas and are willing to exercise their thoughts with full dedication and are also ready to take the risks associated with starting their own business called as start-up. Today the word start-up has become very common and is growing fast. More and more entrepreneurial minds are being motivated to start their own business where there is an ocean of opportunities and if their idea and approach is right, getting the funds is also not a very big deal today.

Many start-ups are very successful today as their founders have put both heart/soul and mind to their work along with the right people having very good knowledge about the field (for example when Gillette entered India it hired very qualified and experienced people in order to strategize for penetrating into Indian Markets), they have invested in. Many of them have even been able to attract foreign investors like Softbank, Alibaba etc. Everyday we hear of a new start-up but not all of them are able to get the taste of success. But many get success and are growing day by day, how they are able succeed and others are not?

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Any new business whether big or small needs to build a structured organization with a good business model. Initially, focus should be on creating value rather than making profits. Once value is created, profits automatically follow. Delivering value that the customer needs and appreciates is the key. Along with creating a value capturing the value is also equally important, before others do it. Value cannot be created in a day and it requires a lot of effort, to know the pulse of the market and delivering what they want rather than forcing them to buy what they can create, is crucial. Our Prime Minister Mr. Narendra Modi has been emphasizing on Digital India, which is providing a good base for the emerging start-ups, as their models are completely digitized with least human intervention. A separate fund has also been allocated exclusively for supporting the start-ups in the budget this year. They are also facing a great amount of competition from all sides. So, in order to emerge at the top, they need to follow some strategy that none other follows, but with correct assumptions. Focus should also be on studying the complete market precisely before entering into it.

Today the list of start-ups is very long. But few of them really deserve to be mentioned and analyzed upon, like Facebook, Flipkart, Snapdeal, Zomato, BigBasket, Housing.com, Paytm, Mobikwik, Ola, WhatsApp, ZoomCar, Urban Ladder, Pepperfry, Oyo Rooms, Bounty, Saavn, Mast Kalandar etc. Most of the start-ups mentioned above are very successful. All of them have an organizational structure and their owners try to hire people who are more qualified than them and are experts in different departments of the organization. They try to scale up step by step grabbing all the opportunity on the way through farsightedness of their experienced employees. They operate very meticulously and utilize each and every resource very efficiently. They are very well aware that salesperson or drivers (in case of cab services based start-ups) and all other people who directly interact with customers play a very important role and are primary source of first hand information about the market. Through them they come to know about the concerns and need of the people so they can improve on those factors to satisfy their customers and serve them better. To achieve this, they train the personnel according to the type of work they need to perform, and to provide the customers, hassle free services. But the start-ups that are completely web or app based, directly interact with customers without any middleman, and get direct feedback, comments and suggestions, online from their customers and resolve them remotely at a lesser time.

Companies can always look back into the history and learn from the past like learning from Ford’s case or George Eastman’s Kodak case or CNN case. Each of them gives us some lesson and we can learn from them for not repeating the mistakes that they had done or the strategies they followed in order to be successful or brought a major change in their functioning and expanding according to the need of time before their competitors did it, and the companies who learn from the past are generally more successful than others. They can also learn how to make correct assumptions and also to forecast what will be the impact of the assumptions if implemented, whether the assumptions will prove correct or not. They should be wise enough to put a cushion to bear the setbacks if their assumptions bring negative results. The above mentioned factors differentiate between any successful and not so successful start-up or business.

According to Mc. Robert and Hoffman, the reasons for corporate failure can be mainly defined as : 1% sheer bad luck, 15% internal factors triggered by external factors, 52% internally generated problems within management’s control and 32% others. The businesses that follow ethics and run on some values like giving credits to all the responsible people, are generally more successful. If we take the example of Napster, a music company that started very successfully and allowed people to share music without any hassle but forgot to give any credit to the music companies, and that lead to their demise but Apple on the other hand before starting iPod took permission from Music companies, gave them credit and also shared a certain profit percentage with them. Value creation is important but this alone doesn’t ensures success, it needs to be accompanied by certain uniqueness that no one else can follow otherwise it loses its value in mean time when others imitate and capture the value created by them. Value doesn’t always lies only with the product or services that we sell, value can also be created along the promises that we make to our customers along with the delivery of the product. For example : McDonalds doesn’t promises the best Hamburgers rather it has created value by saying “Quick and Affordable meal” or Dominos has created value by promising “Within 30 minutes delivery” rather than promising the Best Pizza in the town, and both of them have successfully been able to deliver their promises. They are very good examples of strategic approach and copying them by their competitors is also not easy.

Every organization follows a business model and when many organizations follow the same business model then competition arises and each of them needs to create a value along with the products/services in order to survive and expand their businesses. If we see 3 global delivery services companies named : FedEx, UPS and DHL; all of them follow the same business model but have managed to create values differently that give them a competitive advantage over each other. FedEx promises morning 9:30 delivery, which others could not and thus, creating a niche proposition. UPS promises 100% guaranteed delivery, it has a different target market like diamond merchants for whom time is not a very big constraint, generally they deliver very valuable items. DHL delivers items of all shapes and sizes, they promise to ship anything. They also ship dogs and puppies.

Any start-up should focus on super value creation to get a differentiated advantage and that can be done by implementing some unique strategy into their business to outsmart any competition. This approach may even make them monopolistic and allows them to capture major market share.

This article has been authored by Richa Sinha from NMIMS, Bangalore

Views expressed in the article are personal. The articles are for educational & academic purpose only, and have been uploaded by the MBA Skool Team.

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