Every company used to aspire to grow and get a label of a ‘corporate’. Corporate innovation was the standard each startup wanted to reach. But today, corporates learn as much from startups, as startups from corporates. Especially when it comes to venture failure.
The rising corporate-startup collaborations is testament to the potential benefits and value one can derive from the other. In the past, startups used to have a basic support role for corporate innovation, and now large companies need end-to-end startup assistance.
This assistance requirement is not just for projects but also for real-life lessons, especially lessons on venture setbacks. Corporate innovation in India is looking at startups as valuable partners to reinvent business models and for growth.
Today’s corporates are on a fast-track to innovation aiming to achieve agility and remain relevant. Hence, they believe there are valuable hidden lessons to be learnt from even those startups that fail.
Copying is a No in Today’s Corporate Innovation Ecosystem
It’s not easy being a greenhorn in the startup ecosystem. While first-time entrepreneurs may be inspired by the success stories of Unicorns, they should refrain from cloning the market leaders in their category.
Several startups blindly attempt to replicate the business model of larger players and burn their fingers—and bridges—too fast. For instance, take e-commerce startup DoneByNone that was launched as an online women’s fashion brand. Although the company was backed by early stage investors, the co-founders had to shut shop as they couldn’t keep pace with the stiff competition posed by e-commerce giants, such as Amazon, Flipkart and Snapdeal.
DoneByNone started off great with corporate innovation but failed due to a plethora of factors that usually plague novice e-commerce players: poor distribution and inventory management, low margins, flawed pricing strategy and the lack of customer focus.
Key takeaway: It pays to exercise due diligence before starting a new venture or diversifying the business.
Analysing Customer Behaviour Leads to Corporate Innovation
Milk and grocery delivery startup Doodhwala abruptly discontinued its delivery operations in 2019, handing over the reins to Freshtohome, a rival delivery platform. Among the reasons cited for Doodhwala’s failure was its lack of customer focus.
Customer dissatisfaction with the app stemmed from its delayed delivery cycles and non-responsiveness to refund complaints. The startup failed to interact better with its customers and keep the conversation going even when the chips were down. Further, the startup faced stiff competition from established players like BigBasket.
It is very important for startups to get a feel of the market. This is where startup incubators like T-Hub play a role in giving a real understanding of the market and customers.
Key takeaway: That the customer is indeed the king.
Corporate Growth Requires Funds
Many startups in the innovation ecosystem commit the blunder of pushing for a high growth rate despite being challenged with cash burnout. Yumist, a startup that was launched to serve home-cooked meals using Zomato and Swiggy’s delivery channels had to shut shop due to the lack of funding that further resulted in operational issues.
The startup was on the growth track to provision for funding problems that could prove to be a major setback for the business.
Key takeaway: Build a strong cash culture to sustain the business.
Pivot Just Enough To Survive the Startup Ecosystem
History has shown that organisations that failed to pivot to adapt to crisis situations have met with disastrous consequences. Failure to pivot has been cited as one of the most common reasons for the death knell of some startups.
Take for instance Y Combinator backed HealthTech startup DocTalk that folded as it failed to pivot strategically at the right time. The company’s original model promoted communication between doctors and patients through a mobile-led platform. Subsequently, it attempted to transition into an electronic medical record (EMR) solution, a strategy that didn’t yield expected results.
Key takeaway: While it’s important to pivot when the situation demands, it’s even more crucial to strategically pivot.
As can be seen from the above examples, new startups often fold up due to a plethora of challenges that they encounter in the startup ecosystem. However, it would behove corporates to learn from the failure of fledgling entities to avoid committing mistakes, resulting in miscalculated business decisions.
Like Jack Welch, former CEO & Chairman of General Electric said, “An organisation’s ability to learn, and translate that learning into action rapidly, is the ultimate competitive advantage.”
