A new machine

Solving a completely new problem or an innovative approach to a existing problem.

In the earlier write-up I spoke about a strong belief in the idea. While a strong belief in the idea is a necessary condition for a successful entrepreneurial journey, it isn’t sufficient.

Now assume that you have ticked off the box of strong belief. And somehow your idea turns out to be writing a search algorithm. You are trying to compete with Google! Are you being rash or is there really some hidden value that you are bringing to fore?!

The approach

Every successful entrepreneurial idea (or for that matter any successful business idea) either solves an hitherto unaddressed problem or a need, or solves an existing problem in a novel or much more efficient way.

The innovative approach could be in terms of the…

…the business idea itself for e.g. SpaceX will soon offer space tourism. Who would have thought of taking a flight in the spaceship actually watching the Sun set over half of the earth or an earth-rise!

…the product or a service for e.g. Kindle e-reader by Amazon. A novel way of reading and carrying a book, actually a library of books, in a backpack. Netflix offers movies on demand. No need for DVD or DVD players, or for that matter a TV (you can stream them even on mobile screen!)

…the technology behind it, say payment gateways. A unique way of making cashless payments without the requirement of Credit cards. Scan the UPI code and you are done!

…the supply chain and distribution- food delivery companies. A unique solution to the shortage of delivery staff at the restaurants. And remember the demand peaks both at the restaurant and for home delivery at near similar times.

…or even the marketing and brand building approach- latest Facebook commercials are an interesting way to expand the proposition beyond just a social media platform to doing “more together” in terms of support or increasing the business.

Please note that the above classifications are neither exhaustive nor water-tight. Moreover, there is a possible overlap for e.g. streaming movies needs a strong technology backbone.

Needless, to say as long as the idea lies somewhere along the spectrum of solving a completely new business idea to solving an existing idea in an innovative way, the classification and semantics are immaterial.

An innovative supply chain

When we started the venture, we tried offering customers the convenience in the process of buying groceries. There was no novel concept in buying groceries. In fact, it was a chore that households had got used to doing as a practice. But the idea, ordering them online on a website with a hypermarket range of products combined with a convenience of home delivery, was different.

From a supply chain point of view, we tried a novel concept of tying up with a major Cash & Carry firm. We took up an office that was literally a stone’s throw away from the Cash & Carry distribution center (DC). We started in a 700 sq. ft. office with literally a few desks, laptops and a printer. In the initial period whenever somebody used to visit the office and ask for the warehouse, I used to take them to the window and point towards the DC!

So when the customers would order- we would go to the DC, pick-up the ordered items, invoice them and deliver them to the customer. To avoid any issues of stock-outs we used to sync the inventory on the website to that of the DC.

No huge investments in setting up the warehouse and the inventory.

No demand forecasting of which brand and which pack of breakfast cereals to stock in how many numbers.

And ease of getting in to new categories of fresh fruits & vegetables and fresh meat & fish. We delivered fresh turkey bird as well, to expats, during one of the Thanksgiving.

It impacted the margins but given that it was a bootstrapped venture, it was prudent for us to use that money for customer acquisition, technology and hiring. Moreover, I knew jack-shit about fresh vegetables (I could get confused between 2 similar bunches of green leafy vegetables) and there is no way I could have figured out the quality of fish!

You watch a movie while we buy groceries for you!

We even tried an innovative effort at highlighting the brand proposition to potential customers. We tied up with one of the leading movie ticketing companies in India and offered movie vouchers for orders above a specific amount. The promotion: You watch a movie while we buy groceries for you!

In another promotion, we tied up with an upcoming amusement park on the outskirts of Bangalore and again gave a free ticket (and multiples) for orders above certain amount.

The idea was to make customers aware that there is a better usage of time rather than going to a hypermarket as part of family outing, and picking up the same brand of toothpaste month on month on month on month…!

It’s not enough, it’s not enough

These novel ways of fulfilling the supply chain and highlighting the brand proposition, started giving us good results in acquiring customers and scaling up the model.

However, when it to came to monetisation, they seemed inadequate. I would be using the word monetise to interchangeably mean running a profitable business or raising funds or a strategic acquisition!

One of them was Scale. A large scale that would be a sort of “nuisance” to the existing players or disrupt the market.

For larger retail chains running brick and mortar stores, the scale of our venture would have added probably one mid size hypermarket to their top-line. Moreover, expanding it would have required a longer term investment commitment and an immediate impact on the bottom-line for the retail chain.

The online space had many small players and a large online player (way ahead of others by a huge margin). The largest online player had deep pockets to run front-page ads in leading newspapers. In the eventuality of our venture shutting down, most of the customers would have invariably flocked to the incumbent. Unfortunately, there was no other larger player who could have posed a threat or challenge to the biggest one, by acquiring our set of customers. There was no FOMO. It was a virtual monopoly!

We were actually in a vicious conundrum where without scale there was no monetisation and without monetisation there was no scale!

A Different customer base say a niche segment buying organic food or exotic products- cheddar cheese, pita bread, broccoli or avocado! Or a strong customer base in a geographically different location.

A superior supply chain backed by a superior technology that would have given personalised recommendations based on earlier orders; synced inventory across multiple sourcing points and would have allowed order fulfillment without stock-outs; given accurate timelines and delivery schedules.

Honestly, we would have been at par with other players, in one or two of the parameters. The disruptive advantage was missing!

Effectively, you need an innovative product (service or a solution), that rapidly builds, at least, one significant differentiator or a moat for your start-up to increase chances of monetisation!

Innovator’s dilemma

A wonderful read in this context is the book The Innovator’s Dilemma by Clayton Christensen. One of the key observations in the book is as follows:

Incumbents are slow or for that matter reluctant to embrace disruptive technologies as it might impact their existing or core business models.

And this is the inertia that gives start-ups with disruptive models time to scale and actually disrupt the market.

By extension, incumbents are in a vantage position for incremental additions or innovations. If the incumbent (or a new entrant) has the mindset and deep pockets to replicate the product or a service in a short period of time, or acquire another start-up in a similar field, or buy market share by spending money; the time advantage for a start-up diminishes.

Effectively, you need a innovative product (service or a solution), that rapidly builds, at least, one significant differentiator or a moat for your start-up to increase chances of monetisation!

Easier said that done?!

But then who told you entrepreneurship was easy

Views are personal

Other articles in this series:

I believe I can fly...

The first recruit & a deal

The last order