‘Life’s too short to build something nobody wants’ claims Ash Maurya. He’s right, yet we keep on building. And who can blame us? Entrepreneurship is very much in vogue, with unbridled support coming from all quarters. Yet few if any of the cheerleaders remind us of the inherent survivor bias in entrepreneurship where the odds of success are extremely slim, and that those held in high entrepreneurial regard are mere outliers. Later on we discover that some of these supposed success stories are anything but, and these same entrepreneurs are naked when the tide goes out. Style over substance. Vanity metrics over real commercials.
The entrepreneurship journey is a difficult one. As US academic and author, Steve Blank reminds us; it is about searching for a repeatable and scalable business model, with an emphasis on searching rather than building. More enlightened entrepreneurs read about the Lean Startup approach, taking many lessons on board to good effect. But many other do not heed these lessons, staying ensconced indoors in ‘build mode’ with little customer contact, and lacking any evidence of demand. Building rather than searching.
These same entrepreneurs are typically looking to build a solution to a particular problem they have identified and which they hope to monetize. But often the particular problem can be a particularly niche one, with minimal impact and little chance of commercial success. Attend most British or Irish tech startup events and you’ll be blown away by the underwhelming scale of ambition. Freemium mobile apps for this and that. ‘Nice to haves’ rather than ‘needs to have’ and apps whose usage tails off dramatically post installation as the early adopter realizes the marketing promise falls well short on delivery. More Google+ than Twitter.
It is time the focus shifted
What if there was a means to significantly increase the likelihood of a customer, to ensure that there was indeed a meaningful problem that needed fixing and to having clarity re a viable route to market? Straight away entrepreneurs would be removing three of the bigger uncertainties that they faced.
Well this simple but powerful model does exist, but it is very much underutilized. In most cases it takes the form of competitions where prizes are offered to participants who solve particular problems. This simple idea is one with an ancient history – an example of which is brilliantly recounted in Dava Sobel’s 1996 bestseller, Longitude, which details the story of John Harrison’s competition win, in discovering a way to measure longitude.
“In 1714, the British government offered a £20,000 prize that led to the invention of the chronometer. In 1837, the French government bought the patent rights to Louis Daguerre’s early photography equipment, and then put the invention in the public domain. More recently, prizes have led to major improvements in human-powered airplanes, energy-efficient refrigerators and suborbital space craft”. Scott Woolley
Shouldn’t more emphasis be put on encouraging entrepreneurs to focus on bigger issues and on offering them the opportunity to commercialise a win? The short answer is ‘yes’.
What are the implications for entrepreneurs?
Firstly, this would likely mean that entrepreneurs should have to focus on areas with a wider social impact. It would also mean that they were unlikely to be working on something as sexy as creating a new Smartphone app. But so what? Maybe these boring alternatives could offer a bigger pay off with a reduced risk. We are very much in gold rush territory again. During that period many of the biggest successes at that time were among the entrepreneurs selling the picks and shovels rather than those prospecting for gold. Perhaps the current crop of entrepreneurs is missing a trick by focusing in the wrong areas. As American VC, Mark Suster claimed recently:
“I have often encouraged entrepreneurs to “think bigger” and take on industries that are not immediately sexy but solve bigger problems. I have noted that we are over-weight as an industry in apps for restaurants, bars & music because many young entrepreneurs launch applications in areas they know.”
We should increase the appeal of these competitions such that the rewards are commensurate with the effort, and seek to refocus some of these young entrepreneurs on some bigger social challenges we face.
The good news is that the tide seems to be turning
Take the Bill Gates foundation for example. They recently ran a competition for participants to build a new toilet in an attempt to alleviate a real global problem where poor sanitation causes death and suffering. Or take the example of the Financial Times collaborating with Sightsavers on an MBA business plan competition designed to come up with creative ways to overcome the stigma attached to wearing glasses in developing countries.
The focus is not just on social entrepreneurship though. The Economist has partnered with InnoCentive on an entrepreneurial challenge seeking ‘short descriptions for business ideas that employ disruptive technologies that could make a big impact on the world.’ Are these not great examples of competitions and incentives nudging entrepreneurs in more ‘socially useful’ directions, but also where their risks are reduced?
There are of course a few problems with this prize led approach.
- Many challenges may be biased towards engineers or in contexts unfamiliar to the entrepreneurs (particularly social entrepreneurship ones).
- The transaction costs associated with searching for challenges may be significant i.e. the process of finding an appealing problem to work on could be timely and difficult.
- There may be insufficient rewards on offer when stacked against free market returns (which can be significant if market distorting patents offering monopoly returns can be secured).
- Like all two sided markets both sides need to be nurtured to ensure network effects kick in.
- The sex appeal may be lacking in working on some less glamorous initiatives.
However, in my view most of these limitations are surmountable. There are a number of companies such as InnoCentive and Changemakers already looking to address these deficiencies by supporting companies and by attempting to reduce the search costs. Similarly more and more companies are embracing open innovation approaches where the boundaries between firms and the wider environment are more permeable, and innovation is not limited solely to employees of the firm. And with the Internet, we have a platform with which to really drive awareness.
What we need are more companies to use these platforms, to share some of the problems they have and to set up competitions to solve them. And if these participant companies can offer significantly appealing rewards for real challenges, entrepreneurs will flock in. In many respects this last point is crucial. In terms of compensation; prizes should extend beyond a cash prize, to access to VC’s so the entrepreneurs get look to raise finance to bring their idea to market, to non-exclusive access to the participant company as the first customer, and fair competition terms i.e. no claims on any IP or associated licenses. While agreeing the commercial may be tricky, an arm’s length agreement should be achievable.
In summary, the dominant entrepreneurial model has many inherent issues not least the sheer volume of failures. It seems that other models should be considered by greater numbers of entrepreneurs. One where challenges are real, routes to market are clear and accessible, and one where the customer is easily identifiable. Maybe it’s high time to start building things that people want.
This article originally appeared in The Kernel