Tuesday, January 19, 2010

Business models and Entrepreneurs

 

Wonder 1:

What is the difference between startup entrepreneurs and non-entrepreneurs? Is it that one of them has a great notion about business strategy while the other doesn’t? No. In fact, both of them don’t have a friggin clue about business models. The difference is one of them takes the forward step with a mix of guts, greed, passion and appetite for risk. The other doesn’t.

Wonder 2:

Why do all those strategy and business professors, with apparently lots of business ideas, don’t make a dime making something, while Steve Jobs or Larry Page who don’t write about strategy still make billions? The difference is the profs are waiting for a perfect business idea that satisfies all their models, while an entrepreneur lifts up his finger and just does it. The people who talk about strategy more often than not have little clue of actually building a business. They can talk & analyze post-facto, but cannot predict the success/failure before it actually happens.

Wonder 3:

Why do planned communist economies fail even when the planners are very good, while capitalist economies thrive in apparent randomness. Is not competition wasting a lot of money in advertising and stuff? How can a capitalist economy beat a socialist economy well-designed by famous economists with planning done to perfection?

The fundamental assumption about all these three things is that a business can somehow be planned, predicted and built with perfection. The assumers think some dude thinks up the perfect idea, draws up the perfect business plan, goes on to implement and make big bucks. But, the reality is any but the most trivial of businesses cannot be predicted, and great idea goes through 100s of revisions and iterations, just like how a great musician plays a tune a million times in anonymity before achieving fame. The ones who are flexible to this iteration, can cope up with change and can adapt to randomness becomes the successful entrepreneur.

Microsoft started in 1974 building BASIC compilers with little plans of building Operating Systems and such. They kept on doing good work and waited 7 years before the major idea of DOS hit and then another decade when Windows hit. Apple started in 1976 assembling microcomputers, but were inflexible to change that almost destroyed their company. But, then a change took place a decade ago, and now they make all their money with iPod, iPhone, app store and an OS written from UNIX a decade ago. Did they have an idea about any of these in 70s? Google started in late 90s and their initial business model was like putting banner ads. They had to wait for 5 years before AdSense idea hit that gave them the real revenue and rest is history. Ford started in 1902 making motor vehicles like 100 other companies, but it was after 7 years when they really made Model T they changed the business world. And Nokia – the lumber company – had to wait 120 years before the mobile telephony took the small Scandinavian company to world stage.

As a company evolves, the ideas, assumptions, models and even the sector could change. So much for detailed planning. So, instead of waiting for the perfect idea and business model to knock our door, we have to take the step ahead and learn to work with imperfection. As we keep pounding hard to add value, keep innovating and keep our minds and ears open to new concepts, perfection and new paths will come. A society that gives enough leeway to work with imperfection and nimble to change wins. If we keep bonded to the myth that great entrepreneurs start with the perfect idea, we waste all the opportunities to work with the imperfect ideas that could morph into perfect ones.

3 comments:

Sreevatsan said...

Wonder 4: This blog post on Entrepreneurship, practical views on impractical myths!

Ram said...

In entrepreneurship it is always, Ready-Fire-Aim. It is always fire and then aim. As an entrepreneur myself, I could not agree more. I ended up selling my services to a segment, which I was not even aware when my business model was designed.

You can read this article on "What makes entrepreneurs entrepreneurial?"
http://www.effectuation.org/ftp/effectua.pdf

A good one..

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