In my last column, I presented 10 key attributes of innovation: 1) intense, 2) novel, 3) narrow or wide, 4) observable, 5) value-added, 6) adaptable, 7) transformational/timely, 8) incremental, 9) operability, and 10) no guarantees (risky). An understanding of these attributes can help us gain insight into the development process for innovative products and services. They can also help us identify innovations and capitalize on emerging trends. According to a recent survey conducted by Siemens and TIME magazine that queried hundreds of business leaders across the United States, 98% of the respondents indicated that innovation was important for their businesses. This survey also showed that technology trends and customer needs are the two most important drivers for innovation.
Startup enterprises, which are typically discussed in this column, are a widely acknowledged path for taking innovations to the marketplace as commercially viable products or services. However, several factors go into creating a successful startup, and even the definition of “success” may vary from one startup to another. For a life-style company, success usually represents the ability to generate steady revenues over a long period of time, which allows the founder or owner to maintain a certain type of life-style. The owner is typically not seeking any outside investments nor has any intention of selling the business.
On the other hand, the founders of a high-growth startup are always thinking about an exit strategy. The founders, along with the initial investors, want to profit from the venture at the right time and for the right price. The exit event may be an outright sale, a merger or an initial public offering.
Whether high growth or life-style startups, I have captured seven common traits of success in the following mnemonic which spells STARTUP:
S: Single-minded focus
T: Technology
A: Assess the Appetite
R: Risk
T: Talk and Tryout (with your potential customers)
U: You and your team
P: Persistence and Passion
By way of example, the 2016 class of innovators and entrepreneurs, along with all former inductees into the Mississippi Innovators Hall of Fame, exhibit these seven characteristics. Innovate Mississippi, in fact, launched this Hall of Fame in 2008 to celebrate and honor outstanding individuals and companies who helped put Mississippi on the map as a leader in innovation and entrepreneurship. They have certainly blazed the trail of achievement for those who will follow in their footsteps.
Single-minded focus: At Innovate Mississippi, we typically meet with about 125 new startups in a given year. Many of these entrepreneurs are excited about the versatility of their technology and believe that it can change the world in more ways than one. Our role frequently, is to help them visualize the shortest path to profitability and focus on the product or service that the customers would want.
When it comes to demonstrating single-minded focus on a product and service, I always think about Joel Bomgar, who founded his namesake company in 2002 with the unique platform he developed for addressing computer problems from a remote location via the Internet. Joel was honored as an “Innovator to Watch” in 2008 as part of the Mississippi Innovators Hall of Fame. Information from the company website indicates that TA Associates made a major investment in Bomgar in 2014, and earlier this year, Thoma Bravo, a leading private equity investment firm, acquired the company. What was once a college campus project, today serves more than 10,000 clients all across the world.
Thalia Mara, a 2016 inductee in the Mississippi Innovators Hall of Fame (posthumously), moved to Mississippi at age 65 after living in places like Paris and New York. Through her single-minded focus, she established Jackson as the host for the USA International Ballet Competition and established the state’s first professional ballet company.
Technology: Every company has a secret sauce or an enabling technology. While we often think of technology as pertaining to computers or the Internet only, it is actually in every sector of the economy including agriculture, aviation, construction, education, energy, forestry, healthcare and transportation.
Some companies focus on making their own secret sauce and others may use someone else’s to enhance their offerings or simply create totally new dishes. Inductees in the Mississippi Innovators Hall of Fame such as Edward Barq, Sr. (Barq’s Root Beer), Dr. Thomas Hardy (first human lung transplant), Hartley Peavey (sound systems and electronics) and Will Primos (hunting products) have been recognized for brewing their “secret sauce” for decades. In this arena, one of the keys to a successful startup is to carve your niche with a specific technology and then protect that intellectual property through patents, copyrights, trademarks or trade secrets.
Assess the Appetite: Once you know your focus and have a technology platform that you will use or will develop, the next step is to assess whether or not there is an appetite for your product or service in the marketplace. Successful startups are good at determining the size of the “addressable market” and not settling on some arbitrary percentage of a given population. Entrepreneurs who keenly observe emerging technology and social trends will understand the needs of their potential clients.
The following is a quote by Jeff Bezos, founder of Amazon, sourced from Fundable.com. “The wakeup call was finding this startling statistic that web usage in the spring of 1994 was growing at 2,300 percent a year. You know, things just don’t grow that fast. It’s highly unusual, and that started me thinking about a business plan which might make sense in the context of that
growth?” At age 30, Bezos quit his Wall Street job, made a list of the ‘top 20′ products that he could potentially sell on the Internet, and decided on books because of “their low cost and universal demand.”
Speaking of appetite literally, Laurel-based Sanderson Farms know people enjoy eating chicken and this company has been at the leading edge of the trend in increased poultry consumption around the entire world. Originally started in 1947 as a small-town farm supply business, the company went public in 1987. With revenues exceeding $2.8 billion in 2015, Sanderson Farms is now the third largest poultry company in the country and employs over 12,000 people. Joe F. Sanderson, Jr, chairman of the board and CEO of Sanderson Farms was presented the Legend Award at the 2016 Mississippi Innovators Hall of Fame gala event.
Risk: The letter “R” is in the middle of the word STARTUP. Appropriately, since risk is at the core of each startup venture. At Innovate Mississippi, we carefully look at clients’ risks in five categories: technology, markets, finance, management, and execution.
Startups that are developing their own secret sauce or technology have a greater risk of failing than those who are building upon an existing platform. They may also have to educate their potential customers on the benefits and usage of the new technology, which could prolong the time for market adoption. The ability to finance a venture through equity investments or debt may be also negatively impacted by a) the complexity and newness of a technology, and b) a lack of clarity in the marketplace appetite.
According to an article published recently by Forbes, venture capitalists hope that every one of their investments will be a “billion-dollar venture,” however, only about 0.003% of their investments turn into “home-runs.”
Next area examples of management and execution risks to consider in a STARTUP:
Talk and Tryout: Once the technology platform is developed and the potential market for your product or services has been identified, it is time to get real-world feedback before getting too deep into the venture. Talking to your potential customers is critical to determining what your product or service should actually look like, feel like and provide. In some cases, potential customers may need to tryout your prototype product before you do a full market launch. A startup will increase its chances of success by making decisions based on this invaluable feedback from potential clients or customers.
“If you build it, they will come,” is a very risky strategy. You should only build it only if you have market research deeming they will come. Look for strategic partners who may help with building the prototype and facilitate access to selected companies or individuals for seeking feedback. Tupelo-based Hawkeye Industries, a 2016 “Innovator to Watch,” has become one of the go-to companies for entrepreneurs who are looking for stamped metal manufacturing capacity and industry connections.
You and Your Team: The most important ingredient behind every successful startup is the individual who not only came up with the original bright idea, but also had the skills to navigate
the business world to bring that idea to reality. This person understood how to make the technology work, the market appetite for the technology, and knew how to manage a myriad of risks involved in entering a given market. He or she also had the foresight to assemble the right team around them depending on the stage of the venture.
For example, in the early days of Howard Industries, Billy and Linda Howard, also inductees in the 2016 Mississippi Innovators Hall of Fame, went out and hired the best transformer engineer they could find to lead the technical efforts for their business they started. Today Howard Industries is the top producer of transformers in the United States and sells their products in 114 countries. Kevin Plank, CEO and founder of Under Armour attributes the success of his company to its strong culture that, “first and foremost is built on people.”
Persistence and Passion: “There is no substitute for persistence. The person who makes persistence his watch-word, discovers that ‘Old Man Failure’ finally becomes tired, and makes his departure. Failure cannot cope with persistence.” This is a quote from Napoleon Hill’s classic book “Think and Grow Rich,” which was originally published in 1937. Dr. S.L. Sethi, another 2016 Hall of Fame inductee, repeated this quote when asked about his secret to success in building his food service and hospitality businesses from humble beginnings. Dr. Sethi fled Punjab and ended up in Mississippi to finish his PhD. He left briefly, but returned in 1968 with his wife and only $50 in his pocket and went on to be the largest Pizza Inn franchisee in the world before starting Bumpers Drive-In and several other businesses which now employ more than 1,000 individuals.
Passion is the other “P” which every entrepreneur needs to be successful. “Make meaning,” is how Guy Kawasaki states it very eloquently. Mr. Kawasaki, a renowned author, speaker, entrepreneur, venture capitalist and technology evangelist, states “Meaning is not about money, power, or prestige. It is not even about creating a fun place to work. The meaning of ‘meaning’ comes down to making the world a better place.” Canton’s TelehealthOne, another 2016 Innovator to Watch, is doing just that by teaming up with Fred’s Pharmacies to put telehealth centers in Fred’s across the state which will increase access to high quality healthcare for many rural Mississippians.
The path to a successful STARTUP can be like a winding mountain trail with sharp drop-offs on both sides. Entrepreneurs who stay focused on that path and don’t get distracted by the beautiful scenery around them will have a much better chance of reaching the summit with the support of their fellow hikers and the right equipment. Try out the Entrepreneur’s Quotient Test at Guy Kawasaki’s website to grade your knowledge of startups. If you want to go further than this short quiz, check out the Venture Capital Tools available through the Innovate Mississippi website. I close with another quote from Kevin Plank about his unique framework which keeps him focused on Under Armour’s growth, “I end every meeting the same way – this is what I heard, this is what I think, and here’s what we’re going to do.”
Dr. Sumesh Arora is Vice President at Innovate Mississippi, a non-profit organization with a mission to drive innovative business growth in Mississippi. His doctoral research was focused on how new ideas spread and its applications to business, economic and policy development. Follow him on Twitter @DrSumeshArora or contact via email at sarora@innovate.ms with questions about developing an innovation strategy for your organization
Reference websites:
http://www.msinnovatorshalloffame.com/
http://time.com/partner/siemens/innovation-starts-here/?sr_source=lift
http://www.forbes.com/sites/dileeprao/2016/09/07/are-startups-stagnating/#2525684b60ec
https://www.bomgar.com/press/coverage/joel-bomgar-founder-and-ceo-of-bomgar#.V99wB_krK00
http://www.fool.com/investing/2016/09/08/kevin-planks-top-7-quotes-on-business-entrepreneur.aspx
http://guykawasaki.com/the-meaning-of-meaning/