Improving Start-up Survival Rate: "Design Thinking" to The Rescue
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Startup ecosystems around the world continue to grow and thrive, with countries like China and Germany starting to flex their muscles. In their latest report, Startupblink ranked the Chinese startup ecosystem at 12, while India was ranked at number 37. Overall, it is heartening to observe a growing list of tech Startups in India that are trying to address some of society's vital needs in areas like agriculture, water, education, and health. While the overall investor interest has dropped in the last few years, the enthusiasm of 'changing the world' through Startups has not waned.
Yet, we continue to witness high startups mortality rates - of over 90% in the first year of operations. Numerous studies and anecdotal data suggests that the top few reasons for such failures are: misalignment between co-founders; over-focus on product and lack of customer empathy. Our work with hundreds of Startups shows that most of these risks can be prevented, or mitigated if the founders follow a structured launch methodology based on principles of customer-centricity and financial prudence as described in "Design Thinking". We are surprised to see that most Startups do not leverage the power of this tool that has gained tremendous traction worldwide. Perhaps, it would be unfair to brand Design Thinking merely as a tool because if used correctly, it builds the mindset for building robust and innovative organizations.
We present a Design Thinking framework which has been customized to serve the needs of early-stage Startups (although its essence can be used for established enterprises to innovate continuously as well). The framework contains 5 phases and 10 practices, and is shared as a case-study of a Startup that is setting-up internationally accredited Pre-School centres in India:
Set The Context
Map the current socio-economic and educational trends in India
Identify Stakeholders in the ecosystem who may support, or oppose the venture; list companies with competing offerings
Understand the regulatory framework that applies to the education domain in India/world
List co-founders' desired roles and aspirations
Deeply Understand The Customers
Identify customer segments that are of primary/secondary interest
Empathize with the identified customer segments (the Startup founders have personally visited over 100 homes with young children and 50 offices with new parents, and interviewed over 100 parents using existing early childhood centres). This was the most important facet of truly appreciating the context of their customers, and not merely viewing them as revenue sources.
Understand the life needs of the customers related to sending their children to a Pre-School, e.g. social interaction, safety concerns, priority admission to primary schools, early learning, no family support for a working couple. The founders were surprised to discover a growing segment of single, working mothers as possible customers.
Based on insights developed through customer empathy sessions brainstorm various solutions to address customer needs
Discover various service offerings that can address the identified needs, including accredited and non-accredited pre-schools
Explore features are the relevant, distinctive and affordable; with the power to scale
Explore viable business models for the venture. These discussions have led to founders to offer a regular as well as a "premium" category of pre-schools. Also, the founders decided to own and operate their fleet of "safe buses" instead of relying on partners/contractors
Launch The Solution
Map validated customer needs to the service features
Show the customers a renovated house as a rough prototype of the facilities that they would be offering to gauge their interest and traction, and to improve the founders' understanding of their needs
Prepare various parts of the organization (e.g. teaching, security, operations) to support the venture launch
Pilot the customer acquisition & customer service process, and the pre-school facilities, with representative samples of the customers (Pre-schools were pilot tested in 2 geographies)
Refine offerings, launch and measure the impact
Monitor solution usage and its impact on children/parents; conduct further customer empathy visits to see first-hand how the solution is improving their lives
Based on customer feedback and empathy, continuously refine the offerings
There are many moving parts in a Startup, and they all must come together to offer a delightful experience to the customers, and a fruitful experience for the founders. Design Thinking, while not being a panacea, can serve as the glue that brings the most critical elements together - enabling the founders to launch, scale and grow successfully.