THE VIEW FROM TAFT
Is there a “science for start-ups?”
licensing its proprietary technology to product developers and manufacturers such as Sony and Bose.
The Disruption Strategy involves the decision to compete with the incumbents and work for the quick commercialization of the product or technology (“storm a hill”). Netflix disrupted the movie rental industry (and cable television eventually) and expanded rapidly in the United States. One can argue that Uber used the same strategy worldwide except that other players were quicker to establish similar services in other parts of the world (e.g., Didi Chuxing in China and Grab in Southeast Asia). Both companies are known for their high rates of cash burn as they aggressively sought customers. Netflix’s model became harder to replicate when Netflix built significant barriers by emphasizing high quality content.
Ventures that follow the Value Chain Strategy work with the industry by building unique capabilities to become preferred partners. Foxconn developed competencies to bring new products to the market at scale and on time, thereby becoming the preferred outsourced manufacturer of companies such as Apple.
The Architectural Strategy seeks to “design an entirely new value chain and then control the key bottlenecks in it.” They compete with existing players while bringing their innovation to market through a deliberate, planned process. Google and Facebook are the poster children for this quadrant. Both companies were adamant about not charging users, and instead devised innovative ways of earning money through the “eyeballs” generated by their sites.
The article is sure to provoke a lot of discussion regarding strategy and entrepreneurship. Some of the companies cited as examples can also be viewed from other quadrants. Google, for example, can also be thought of as using a Disruption Strategy because its decision to provide the product for free also led to rapid adoption.
Entrepreneurs tinkering with the “next big thing” would do well to consider the points raised by the authors. But they should be aware that other keen observers argue that there is no “science for start-ups.” Research by Anthony K Tjan and Julian Lange suggests that plans make no statistical difference in a start- up’s success. Disciples of this philosophy advocate the no-plan plan. They say that you should just launch your product, learn from your customers quickly, modify, and scale as quickly as you can.
Would I have used the Entrepreneurial Strategy Compass if I had known about it seven years ago? It does not apply to the franchise business I started given that franchise concepts are already tested in the marketplace. I will continue to look for tools that are better suited for such ventures. I may even develop my own set of tools! However, I will definitely think of this compass if ever I do discover the next big product or service.