Entrepreneur...can you control a momentary lapse of reason!
An entrepreneur’s life is full of challenges. Treading along unchartered territories and figuring out an innovative way to solve the next problem. Taking decision with limited data points all the time, depending a lot on your judgement and hoping that things will work out well...
And then there are times when you could have a momentary lapse of reason, step on a landmine and screw up big time. Here are some “classic” landmines in the path of an entrepreneur:
Going to press too early.A lot of founders believe that the litmus test for the success of their venture is to get coverage in a leading financial daily. No doubt that seeing your name in morning paper gives a huge ego kick; however, your customers actually give a damn to your ego and care much more about the product you have to offer. As a result, many times the press coverage attracts potential customers (the early adopters) to explore what you have to offer only to find a semi-baked product leaving a bad user experience. That’s it. You have lost the early adopters for now and possibly created some negative buzz on the social media. The things can go terribly wrong if you are making announcements about raising seed round, when the product is typically in prototype stage. More than customers, you catch the attention of your competitors who are now aware of your presence and will possibly track you closely going forward. This is clearly a momentary lapse of reason situation.
Incentives will make customer change habit.Lately zillions of business models have mushroomed where the founders/investors tend to believe that if you incentivise the customer long enough, you will be able to bring a habit change. Recall the age old proverb that Old Habits Die Hard, and there is no better way to experience it than running your own stint. People change habits in exchange for some real convenience or significant benefit and not for any short term candy offer! Always keep in mind that customer is smarter than you and will always maximize benefits for himself. If there is an incentive they will use to it for immediate gain and as soon as you remove it they will shift their loyalty to the player who brings them best value for their time and money. This whole situation is best illustrated by what’s going on in the Indian e-commerce industry. Online portals competing to outdo each other on discounts being offered and irresponsibly burning investor’s cash only to fall like a pack of dominoes once the customer shifted loyalty and funding dried up. This is a permanent lapse of reason situation. What surprises me is that so many investors were a party to it.
I need branding...branding and more branding.I have met many entrepreneurs who failed to see the shortcomings in their product or go to market approach and will make believe that they will be successful if they had more money to spend on branding. Brands are not made by incessant spending on media. We have seen likes of Kingfisher, Housing and many others do it and fail miserably. Brands are made from the inherent value proposition of your product and a strong execution to offer a consistent customer experience on a sustained basis. I am a believer that it is a blessing in disguise if you don’t raise obscene amount of capital in the initial rounds as then you learn to use your money judiciously. Funding constraints is the best way to learn cash flow management and it teaches you to measure the RoI from every penny spent. A smart entrepreneur knows that media spend is the easiest way to burn cash. So he fine tunes his go to market approach with shorter trials till he knows the most cost effective way to reach his TG and accordingly spend on the right media properties. A not-so-smart entrepreneur calls an agency to make a pitch, gets very impressed, and has a fatal lapse of reason and signs on a cheque to empty company coffers.
If our competitor is doing it, we should also do it.Pick-up any vertical and you will be able to find 20-30 start-ups playing in that market and competing with each other. A few of them were innovators who defined a new way to solve the problem. Rest are me-too who jumped in with subtle variations in their offering. But all are essentially targeting the same customer base. As markets mature, no more than 4-5 ventures will survive and divide the market among them. And these are start-ups who innovated at every step. Now if you are in a copy-cat mindset, i.e. if my competition is doing it I should follow suite, you are basically writing the failure script for your venture. Your competition miscalculated and placed a full page advt in a leading daily, burning a whole lot of cash with little RoI and you followed him in the ditch. Instead of following, you should be highly critical of your competitor’s action, scrutinizing them to the last detail before even considering it for execution at your end. And if you do find merits in their action, you need to find smarter ways to achieve better results at half the cost so as to outsmart them and maximize your chances of success against them.
Entrepreneurship is a combination of 100 meters sprint and 10Km marathon. The leanest and fastest will take an early lead but the balanced and consistent will rule the markets in the long run. If your thinking is Obscured by Clouds and you can’t control A momentary lapse of reason...trust me that entrepreneurship is not your cup of tea.