Understanding why failure happens in startups.

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Posted On : 11th, May 2017


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Understanding why failure happens in startups.

11th, May 2017    -    Startup community

Failure is defined as “to fall short of success or achievement in something expected, attempted, desired or approved

Unfortunately, in most of the scenarios, failure is directly linked to the inability of the individual or a group of individuals.

When you fail in an exam, it falls on your shoulders that you have not adequately prepared and hence could not live up to the expected outcome of securing pass percentage. Never the blame goes to the teacher or the school you study. Why? Because the school and teacher cannot go wrong. They have done their best to provide you with the required support system to learn and pass. So, you are bearing the responsibility of not passing the exam.


In life, the same principle applies. It is deemed understood that all the support system (Family, friends, Employer, Government, Regulations, Financiers, Colleagues) have all provided you adequate support, but you have not lived up to the expectation and hence you failed.


Now, when you bring the same concept of failure to a start-up world, there are subtle changes to how we see the failure.


When you have an idea, it is very important to understand the Target Market segment, User mind-set, acceptability, usability and the most important is the value addition the user and the business get by utilizing your solution. You become the teacher but when the student fails (in this case the idea), the teacher is made completely responsible.

Langhar, a Delhi-based service for fresh food delivery closed in the recent past. The concept is simple, bring home-makers online, have them publish the day’s menu. Langhar will update their offering page. Users can order food and the food is then freshly delivered by Langhar. Everything went well, except that over a period, the business was getting hit hard. Since it was a marketplace for home-makers to sell what they cook for the day, the seriousness of the cooks started coming down. There were more cancellations coming and over the period, the ratings came down too.

In this situation, who is considered a failure? It is the entrepreneur. What he/she should have done is to keep his team of cooks (in this case home-makers) motivated and should have looked at how the business could be striving. Alternatives should have been planned and since the kitchen is a very important aspect, they should have also build a model to help the cooks in their purchases and maintaining the quality of the food and have alternative plans for filling in the cancellations at the dispatcher’s end.


When the dot-com bubble was building, in 1999, Mr. K Vaitheeswaran saw a tremendous potential in selling goods on the internet and hence IndiaPlaza was born. The site had minimalistic design and was selling imperishable goods. IndiaPlaza had quite a few advantages, funding was easy, first mover advantage and shopping on the internet was quite a new concept. Even though they could stand the burst of the Dotcom bubble, they were riding the rough waters. Even though the idea is path-breaking, few aspects were miscalculated – Number of Internet users was very low, Broadband packages were minimal in existence and people using Credit Cards to shop online were in double digits.

Even though Flipkart came is 8 years later, IndiaPlaza was struggling all the way and they could not pump in the money and could not see the true potential for a market which they initially saw, but never estimated the long-term growth.

 

Failure in a start-up stems from various aspect – Readiness of the market to accept your idea, Identifying the right problem to solve, Having a strong business model.

The readiness of the market – This is very important. If the market is not ready, even though you build the finest product, it would not go anywhere. For instance, In Australia you need not swipe your credit/debit card, you can just show it to the machine and the money gets debited. Apple and Google both have respective money payment mechanisms through their phones but are not launched in India yet. Why? Because market is not yet ready. We are an economy who are slowly moving towards being cashless and the maximum we are doing today is using mobile payment gateways and credit card. It will take another 12 months or more for us to be able to use Apple Pay and Google Pay. These companies have the technology, but not brought them to India because we are not yet ready.


So, understanding your product meaningfulness to the user plays a very crucial role in the success of your enterprise.

The right problem to solve – All the most important inventions in the world are already done and what we are doing now is process innovation (combining various solutions to make them meaningful). If you are building a solar power car for India (I understand Reva exists today), then you are trying to take on a problem which is not an immediate solution for the Indian consumer. Why? Over the decade, as the economy started opening, more and more people are moving to buy their first car and when you are buying your first car, you do not want to have limitations on the distance traveled. We do not have charging points and you need to only come back home to charge the vehicle. Also, since most of us are owning a car for the first time, we wish to have something which can take us long distance. The current offering of Reva focuses on the market segment where people are buying a second or third car. The government also does not have many subsidies for an electric powered vehicle. So, building a battery powered car plant today might not be the best of the ideas to solve. However, the market might be ready in the next 12 months.


What you need to carefully identify is if your target market segment is ready to accept your innovation or not, else, however, path-breaking your idea is, it will go down in vein.


Strong Business Model – One of the most innovative models which has been a hit around the globe is Uber. Simple idea and fantastic execution. Just imagine, you do not buy a single car but you are the largest taxi service in the world. Wow.

There have been various business models for hiring cabs – Yellow cabs, traditional taxi’s, Taxi on call etc. Taxi operators need to buy the vehicle and then rent out to their customers. Uber changed everything. Put the taxi operator on their platform and you make money and Uber makes money. The more you work, the more you get paid, the better the rating, better are your prospects for increasing business.


Today is the day of not inventing new products, but enhance process innovation and focus on the Business Model. This is what will define your success.

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