Old Ways Wont Open New Doors sign: The need for Strategic Innovation on Emerging Trends
Should the Entrepreneurial Development infrastructure, i.e., business schools, incubators, and area developers, shift from product-focus, that helped 1% of unicorn-entrepreneurs (UEs), to strategy-focus, that helped 99%?
Entrepreneurial Development today focuses on finding viable products, promoting them via pitch contests and shark tanks, and funding them with angel capital, and venture capital (VC), i.e., the Product-Angels-VC method, to build a growth venture.
But is this the best strategy for Entrepreneurial Development?
Consider how some of the great entrepreneurs of the last 60+ years, which is the VC age, grew:
· Microsoft: Gates bought the operating system and toppled the mighty IBM from its perch by negotiating a licensing agreement for the IBM PC without IBM having an exclusive or an option to purchase. Gates used personal capital and licensing revenues to secure the deal and to takeoff. He accepted VC after launch because he wanted advisors with skin in the game. VC was not key to his success.
· Walmart: Sam Walton built Walmart and beat Kmart by starting with $25,000 from his in-laws. His initial strategy was to initially focus on the rural market, dominating it, and using these profits to launch an unassailable assault on Kmart’s urban stronghold. There was nothing unique about his idea and VC did not factor into his success – he did not use it.
· Facebook: Mark Zuckerberg beat Rupert Murdoch by imitating MySpace and improving the strategy. Zuckerberg did it with a brilliant strategy, not with a unique idea. He focused on university students and used family and friends’ capital. He used angel capital and venture capital – but only after proving his venture’s unicorn potential.
· Wayfair: Niraj Jain built Wayfair into an online giant without VC until after establishing his venture’s dominance in the online furniture industry. His first round of capital was $36 million when the company was 10 years old and had about $600 million in sales. That is not early-stage VC. That is late-stage capital.
The reality among 85 billion-dollar, unicorn-entrepreneurs is that only 1% got VC based on the technology. Unicorn-Entrepreneurs mainly got VC, if they needed it, after Strategic Innovation, i.e., after developing, proving, and implementing the strategy for a potential unicorn. 76% never got VC.
Strategic Innovation and execution skills have built 99x more unicorns than Product Innovation because:
· Most products can be imitated and improved. Only 11% of first-mover products dominated. 89% of first movers failed or failed to dominate. It takes more than a first-mover or viable product to succeed. It takes a smart strategy and the skills to execute it.
· An emerging trend often changes the rules of the game and strategic innovation takes advantage of the new rules to dominate. Emerging trends based on revolutionary innovations make old products, strategies, assets, and skills obsolete. The first movers may enter based on a product that fits the emerging trend, but smart movers use the evolving influence of an emerging trend to dominate with the right strategy and execution skills.
· VCs finance after Aha and strategic innovation helped 99% of Unicorn-Entrepreneurs get to Aha. Entrepreneurs can benefit by knowing how to bridge the VC gap from Idea to Aha with finance-smart strategies and skills – not ideas. In emerging industries, where nearly every Unicorn-Entrepreneur grew, nearly all bridged the gap by finding the right strategic innovations, not product innovations.
MY TAKE: Entrepreneurial Development can serve more students and entrepreneurs, in Silicon Valley and outside, by teaching strategic innovation and the finance-smart skills of Unicorn-Entrepreneurs to bridge the VC gap – rather than wasting resources on pitch competitions and using ideation incubators.
