Problem - Vivek Srinivasan

Problems are a part and parcel of life. They pop up at strange times and strange place. They are usually very uncomfortable to deal with, and take up a lot of mind space. How quickly you are able to dispose off a problem, depends on… the problem.

As a startup, you will have problems. Guaranteed.

In business and in life, it is important to be resourceful to be able to solve problems. The dictionary defines resourceful as “having the ability to find quick and clever ways to overcome difficulties”. I think it is knowing and having the resources to overcome challenges.

Money is but, one resource, that most people have. It is most certainly not the only resource that you have. Often people who are described as resourceful find solutions which do not involve money.

YOU choose the type of resource that will solve your problem. You can either choose to throw money or you can choose to throw people at a problem.

A lot of the problems can be solved using the power the perseverance and conviction. Is it easy? No, it is not. Is it possible? it certainly is.

I always choose to throw people at problems.

If you are using money to solve a problem, eventually at some point of time, you will run out of money or the incremental value of that money is going to disappear. (Law of Diminishing marginal utility)

To the contrary if you were to treat perseverance and conviction as currencies, their marginal utility increases as you expend more of it.

Most problems in life involve people. Invariably solving a problem comes down to convincing the person at the other end, that the solution that you are offering is the best one. A resourceful person generally ends up coming up with great barters and convincing offers that all parties involved can agree to. At the end of the day there is a person at the other end of the problem and it is possible to negotiate a solution with that person.

Whether the problem is securing time to make payments, or of negotiating a price, or getting something done the way you would prefer it done; there is a person that is causing this problem. Dealing with this problem implies dealing with the person who is the source of the problem. To convince, cajole and persuade the other person is all is needed to make certain the problem is solved. This requires an innate understanding of human nature, patience and calmness.

Quite often the problem is that something is not selling the way you expect it to. Marketing is about getting people to behave the way YOU want them to. Throwing money is not the best way to get people to behave the way you want them to. Convincing them that your way is the best way IS. More often that not, this involves a great deal of human effort on a very personal level. It seems to be very convenient to put a billboard out or run a radio ad; but how many times have you been convinced to buy something because you saw a hoarding or heard a radio message.

A startup requires people who can think on their feet and figure out the way to convince problems away. These people are the ones who make success possible for startups. Every time you look at a startup, instead of the founders, check out the team. These are the people who are putting out many small fires all the time, in order to make it possible for the CEO to put out few large fires.

Recruiting RESOURCEFUL people is a pre-requisite to building a successful startup.

So who are you recruiting?

All too often I come across young entrepreneurs, who are just starting a business through which they intend to hawk their skills. Starting a business does not necessarily make it a startup. It makes you an entrepreneur certainly, but not a startup.

Anybody, who engages in any kind of business is an entrepreneur but only a few among them can be deemed startups. I can’t go around saying, I have a startup just because I setup a Dhaba on NH7!

Unless… the business meets certain conditions; I shall list them below.

Attack a problem that has not already been solved

When you attack a problem that has not already been solved, you are creating a market for yourself. The kind of solution that you offer cannot be bought off the shelf and hence it makes the offering compelling.

I know web development and hence I started a web development company. Well, sure you did! But the problem with that is, you are not solving anything new, you are invariably going to compete with the many thousands of web development agencies that are out there already. You lack experience and most certainly the manpower that some of the more established peers have. From that point forward, it is an uphill climb. Besides, since this is a well-worn path, many entrepreneurs have tested and tried all kinds of permutations and combinations of selling the product or service. I do not deem such a business a startup.

Unless… you have found a way of doing the business differently.

Building a business model which breaks convention

Take a company like Uber; it is able to get into a business that is as old as the motor vehicle and able to find scale like no other business has been able to, till date. Many companies have tried running a taxi business. Invariably the biggest problem with running the business successfully has been that the incentive of the owners and the drivers has been misaligned. This has meant that there is no global taxi business; until, Uber.

Uber used a mix of technology coupled with a business model, which is unlike any that existed till then. Most importantly, the company does not own any inventory of vehicles unlike every other cab business prior to it. They own the platform through which they are able to generate demand and they manage to match that with individual taxi owners who are able to deliver a standard product quality.

Uber is just one of the examples of how an old world business has found a new avatar through an innovative business model.

Examples of such companies include Airbnb, HotelsTonight, Google, Spotify, Pandora

The success of each of these businesses hinges on the fact that they did things differently. They changed the way the business was done in the past. Before Google, all search engines used to push the sponsored listing up on the search results without informing the users; precisely why the ‘Don’t be evil’ motto was coined. Spotify and Pandora changed how music was consumed and thereby changed how users pay for them as well. Airbnb changed the ad-hoc renting market forever; not only for home-owners who wished to rent out their houses/rooms as holiday accommodation but also for travellers who seek for cheaper stay options. Each of them have been able to change the way business used to be done, which brought them leadership role in the market and helped them get recognised.

Ability to grow across geographies and scale, providing exponential returns

Most of the businesses established prior to the onset of computers usually consisted of certain assets, which cost a lot to replicate across countries, which in turn slowed down the growth of the business. In the case of most startups, one of the defining features is that they are easy to replicate in different geographies and hence lead to rapid expansion across not only domestic but also international geographies. [Caveat: Certain problems are country specific and therefore cannot be scaled in a similar manner internationally]

In all of the cases mentioned above the companies were able to quickly spread the same model across boundaries and ensure rapid growth of their businesses. The increase in scale means exponential returns for any investment that has been made in such businesses.

Despite being restricted by copyrights, companies like Spotify and Pandora have been able to expand to tens of countries resulting in very high turnovers for them.

Scale is by far the greatest defining attribute of a startup. Companies that can cater to a relatively large market can scale continuously and therefore generate greater value for the investors in the long run by unlocking value in untapped markets. Squeezing more money out of the same set of customers often proves challenging and also results in companies acting in a manner which is seem to be contrary to the interests of the consumer.

These three attributes are by far, the most important for the business to be classified as a startup.