Old Ways Won’t Open New Doors sign: The Need for Strategic Innovation in Emerging Trends
Should Entrepreneurship Development infrastructure, i.e. business schools, incubators, and space developers, move from product-focused, which helps 1% of unicorn entrepreneurs (UEs), to strategy-driven, which helps 99%?
Today, Entrepreneurship Development focuses on finding viable products, promoting them through field competitions and shark tanks, and financing them with angel capital and venture capital (VC), the Product-Angels-VC method, to create a growth venture.
But is this the best strategy for Entrepreneurial Development?
Consider how some of the great entrepreneurs of the last 60+ years, the VC era, have grown:
· Microsoft: Gates bought the operating system and knocked powerful IBM off its perch by negotiating an IBM-exclusive or no-purchase license agreement for the IBM PC. Gates used personal equity and license proceeds to secure the deal and take off. He accepted the VC after launch because he wanted consultants with skins in the game. VC was not the key to its success.
· Walmart: Sam Walton founded Walmart and beat Kmart by taking $25,000 from his mother-in-law. His initial strategy was to initially focus on the rural market, dominate it, and use those profits to launch an invincible attack on Kmart’s urban stronghold. There was nothing unique in his idea, and it did not affect the success of VC – he did not use it.
· Facebook: Mark Zuckerberg beat Rupert Murdoch by imitating MySpace and improving the strategy. Zuckerberg did this not with a unique idea, but with a brilliant strategy. It focused on college students and used the capital of family and friends. He used angel capital and venture capital—but only after his venture proved its unicorn potential.
Wayfair: Niraj Jain turned Wayfair into a VCless online giant until his venture established its dominance in the online furniture industry. When the company was 10 years old, its initial round of capital was $36 million and sales were approximately $600 million. This is not early stage VC. This is late capital.
The truth among the $85 billion unicorns is that only 1% have VC based on technology. Unicorn Entrepreneurs have predominantly received VC after Strategic Innovation, i.e. after developing, proving and implementing a potential unicorn strategy, if they need it. 76% have never received a VC.
Strategic Innovation and execution skills produced 99 times more unicorns than Product Innovation because:
· Most products can be imitated and improved. Only 11% of first mover products dominated. 89% of first movers failed or failed to dominate. It takes more than just a first mover or viable product to be successful. It takes a smart strategy and skills to execute it.
· An emerging trend often changes the rules of the game, and strategic innovation leverages new rules to dominate.. Emerging trends based on revolutionary innovations are making legacy products, strategies, assets and skills obsolete. First movers may enter based on a product that fits the emerging trend, but smart movers use the evolving influence of an emerging trend to dominate with the right strategy and execution skills.
· VCs funding and strategic innovation after Aha helped 99% of Unicorn Entrepreneurs reach Aha. Entrepreneurs can benefit by knowing how to close the VC gap from Idea to Aha with finance-wise strategies and skills, not ideas. In emerging industries where nearly every Unicorn Entrepreneur grew up, nearly all filled the gap by finding the right strategic innovations, not product innovations.
MY FORECAST: Entrepreneurship Development can serve more students and entrepreneurs in and outside Silicon Valley by teaching Unicorn-Entrepreneurs strategic innovation and finance-smart skills to bridge the VC gap, instead of wasting resources and using idea incubators in field competitions.
