How Startups Can Overtake Corporates in the Innovation Race
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Three years ago, the world’s largest automotive company, Toyota, publicly doubted the real potential of electric cars. “We do not believe there is a market to accept it,” said Toyota Chairman Takeshi Uchiyamada.
In April, 276,000 people signed up to buy the Model 3, Tesla Motors’ latest all-electric vehicle. This figure matches the annual sales of some of the most popular car models in the U.S., such as the Honda Accord or Nissan Altima. And they did it in just two days.
Tesla’s success has proven the industry giants wrong. The business is the first successful American automobile company in over a century, started by just a small group of engineers and a handmade car. Their story shows how, by going against the grain, new entrants can challenge established leaders. Startups have a secret weapon -- they are inherently innovative, they are agile and adaptive. This gives them an advantage over the more rigid structures prevalent in larger corporations.
Pioneering a new idea in the presence of industry giants can be a daunting prospect. But by questioning the accepted standard successful startups such as Airbnb and Groupon, have redefined whole industries. This article explains just how entrepreneurs can effectively ‘reinvent the wheel’, taking tips from the successes and failures of new businesses, and my own experiences, creating a smart bike in a crowded market.
1. Define your own big mission.
Startup leaders have the benefit of being able to assess a problem from a fresh perspective, to create their own unique solution, and bigger mission.
The global bicycle market is a $53.9 billion industry focused on mass market produce, and dominated by household names such as Giant and TREK. At SpeedX we compete with these veterans by focusing on transforming cycling from a functional activity into something that is enjoyable, through the use of smart technology. We are taking on a huge industry, but doing this with our own distinct vision.
Startup founders have the ability to pioneer new solutions that others perhaps may overlook or disregard. uBeam founder Meredith Perry has come under fire from skeptics who question her radical vision to create the world’s first wireless energy solution and disrupt a multi-billion dollar CE industry.
Perry aims to enable the first truly wireless device, by creating a charging system that uses ultrasound waves to transmit energy. This means wireless power and also wireless secure data -- all groundbreaking technology, but met with little confidence from experts. However, the CEO believes being able to address the problem of transporting power as someone who is not an expert in this field means she has actually has an advantage. “You have the potential to outthink the top thinkers,” she says. uBeam has already received $25 million in funding, and the new charging system will be unveiled later this year.
Entrepreneurs need to define their greater mission. Following this end goal will give you direction, an identifiable market, and will help you to identify the necessary steps to take to make this happen.
2. Startups are agile, use this to your advantage.
A startup is small enough to act with freedom, they are agile and can be more responsive. A larger business already has an established product, and connected target audience. They have a system of departments and hierarchies built around this, product road maps, and shareholder interests to contend with. All of this limits new innovations to R&D teams, and shifting business focus is much harder, whereas startups can jump full throttle into new projects.
A recent survey of 250 executives reported that 40 percent believe that startups are disrupting their industries. Inc reported these findings, explaining that respondents cited “a greater willingness to take risks and more flexibility” as strengths that help startups to innovate.
A great example of this is the billion-dollar pivot executed by The Point, better known today as Groupon. The Point started off an online fundraising platform, the venture struggled and was on the brink of failure. They tested the concept of a “Tipping Point,” communicating target amounts required for a plan to be actioned. The Point died through lack of focus, but using this new concept Groupon was born and it transformed the online discount market.
3. Make your product better than the original.
In 2015 Rdio, the first on-demand music streaming service in the U.S. went bankrupt. Launched by the founders of Skype in 2010, the music service charged listeners $5 a month to access the streaming cataloguer. Rdio failed to market and distribute this to a large enough user base and was beaten out by Spotify, who arrived later to the scene, but with an improved model. Spotify’s free service attracted a larger audience who became familiar with the platform, later encouraged to upgrade to the premium service with additional features. The company understood that the online world had grown accustomed to free music, and they created a better tool to fit this appetite.
Startups might be recognized for innovation, but this only works if your product is significantly better than the industry standard. This means you need to understand the market and the demand, know what the current offering is, and then create something that adds more value. At my startup we did this through taking part in cycle tours, working with focus groups, and interviewing cyclists.
Getting feedback directly, using online testers and even crowdsourcing solutions means businesses can constantly improve their beta products. It is important to stay connected with your audience, and to make sure your concept fits their needs and habits.
4. Lean on accelerators and business pros.
When Tesla founders Martin Eberhard and Ian Wright pitched electric cars to Elon Musk, in his SpaceX office, they found a common passion. By bringing a visionary on board they were able to turn their concept into a reality.
While we can’t all woo Elon, there are other ways that entrepreneurs can find valuable mentorship and support.There are hundreds of accelerators and incubators that will provide training, networking opportunities, and even office space and capital to help you get your idea off the ground.
Entrepreneur contributor Punit Arora reported that businesses that work with incubators have been found to have survival rates of over 80 percent, compared to a startup average of 20 percent. There are a huge number of options, from industry leaders such as Y Combinator to more niche programs that may suit your business better.
As a founder, you need to take the time to find an accelerator that caters to your business needs, has mentors and previous graduates who have worked in your field, and has a program that introduces you to suitable investors.
But it’s not all about the money, Rdio was able to raise $117.5 million from investors, it was the first player on the U.S. music streaming scene, but it still failed. uBeam may well have a very unique yet defined mission, but it still comes up against constant criticism that wireless power is not much more than a dream.
The road to success can be tough for new businesses. However, more and more we are seeing the strongest ideas emerge from the startup scene. Agile startups are today recognized as valid contenders against the giants of industry. What’s more, larger businesses are increasingly waking up to the power of startup innovation, and harnessing this for their own developments. Google has created its own in-house startup incubator, Area 120, helping employees to launch their own startup initiatives. This is reflective of a new trend of startups helping larger businesses to create new products outside of the rigid structures that may have previously inhibited this.
In recent years, startups have turned homes into hotels, drivers into a paid couriers, and electricity into a viable fuel for new automobiles. Successful new enterprises can challenge the accepted norms with new concepts and in doing so, transform entire industries.