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Entrepreneurs are “reformers not revolutionaries”

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1. Solve the last ten per cent of the innovation problem

Successful entrepreneurs solve the last ten per cent rather than the first 90 per cent of the innovation problem. They’re rarely the first to introduce an innovation to the market and their contribution is usually marginal compared to the totality of the final innovation. But, by solving the last remaining part of the consumer problem, they have a dramatic commercial impact. For example, in innovation terms Apple is mainly responsible for developing the mouse/click and icon driven computer operating system. However, the snag for consumers was that this system was only available on Macintosh computers while most computers were based on DOS (Disk Operating System). Microsoft solved the last ten per cent of this problem by adapting Apple’s innovation so that it could work on DOS. As a result, Microsoft – not Apple – went on to become the dominant supplier of icon/click driven computer software operating systems.

While Apple co-founder Steve Jobs used to dismiss Microsoft’s innovative contribution as marginal, it wasn’t long before he went on to adopt Bill Gates’ winning “last ten per cent” strategy. When Apple launched iTunes it was able to learn from entrepreneurial companies such as Rio Player that had already launched a digital portable music player with content available from a website (RioPort).

Apple solved the last ten per cent of the player problem by providing a more slick operating and cool looking handheld device (iPod). Likewise, it was able to convince record companies to support its music content website iTunes, simply because 90 per cent of that battle had already been won by earlier web content innovators. Companies such as MP3.com had already – at considerable cost – overcome the legal, regulatory, technological and marketing costs associated with the emergence of an online music market.

2. Reform rather than revolutionise

Most successful entrepreneurs are reformers not revolutionaries. Instead of light bulb flashes and shrieks of Eureka, most successful entrepreneurial ventures make modest innovation contributions. If you take a look at the dominant firms in entrepreneurial markets such as the Virgin Group, Innocent, Ryanair and Facebook, you will typically find that successful entrepreneurial ventures did not introduce massive innovation steps, they just built on an existing platforms provided by other firms. Healthy natural smoothies were around for decades before Innocent encapsulated these qualities in a quirky branded retail product that captured the consumers’ imagination, for example. Likewise, blog software and self-managed personalised websites were not brought to market by Facebook but it was Mark Zuckerberg who customised these technologies to meet the social networking desires of a primarily student market. The key to success in all of these ventures is not consistent with the archetypal revolutionary entrepreneurs who break the rules of business. Instead, here are entrepreneurs who reform rather than revolutionise.

3. Agility – being able to change strategy and tactics

Many promising entrepreneurs waste their time trying to keep their “unique idea” secret when what they should be doing is putting it into action. The reality is that many other ventures will be doing just that with the same idea. Successful innovation develops and improves as part of an iterative process that requires putting the idea into practice. Did you know that the original name for Cobra Beer was Panther? The name change resulted from a negative customer reaction to the pilot launch of Panther in Indian restaurants. Later as the business developed, Cobra Beer discovered that one of their supposed unique selling points – the fact the beer was made in India – was not important to customers. This customer insight led the company to decide to brew closer to their European customer base. Entrepreneurs also learn from other ventures. Customised greeting card business Moonpig.com decided to use TV advertising only after observing how this advertising medium had been successful in raising sales of a smaller rival venture. It is agile and allows entrepreneurs to change their mind and strategy. Successful innovation is not typically a Eureka event, it is a process.4. De-risk before taking risk Successful entrepreneurs rarely throw all of their financial resources at the first mention of the business idea. Instead, they will use just enough finance to achieve the nearest performance milestone and then adapt the business idea based on that experience. If performance is poor then the entrepreneur still has resources to try something different, perhaps even another new venture, spreading risk across a portfolio of ventures. This allows entrepreneurs to hedge their strategy, only committing to a strategy after getting market feedback while at the same time holding back finances for a plan B. Approaches such as these are the reasons why companies like Organic Apoteke, who initially targeted the UK market, were able to change their approach when US retailers Wholefoods and Macy’s showed an interest in selling their skin care products in America. The same approach was used by the Virgin Group to spread risk and build a portfolio of businesses across diverse markets.

For further information, contact the author at andrew.burke@cranfield.ac.uk

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