The UAE is home to 27 per cent of the region’s start-ups according to the recent State of Digital Investments in Mena report. LinkedIn reported earlier this year that the number of “entrepreneurs” in the UAE has nearly doubled in the past year. This steep rise in entrepreneurial activity certainly expresses faith in the UAE’s good business conditions, world-class infrastructure and strong efforts at diversification. However, the actual success of these businesses depends on multiple other factors.
Start-ups by nature are often built around disruptive innovations that solve problems. Paul Graham, co-founder of seed capital firm Y Combinator, says the very best start-up ideas tend to have three things in common: they’re something the founders themselves want, that they can build, and that few others realise are worth doing. “By far the most common mistake startups make is to solve problems no one has,” he writes on his blog.
The functional opportunity is captured in the words “few others realise are worth doing”. But therein also lies the challenge to a start-up’s ability to succeed in terms of longevity, profitability, growth and economic impact: of being able to lead the audience to adopt the solution proposed! That calls for defining not just the solution but also the problem, which is often invisible until someone shines a light on it! In marketing parlance this is called category building.
The first step to build sustainable, profitable businesses that are set up for growth requires the entrepreneur to clearly define the top three to five audiences he is solving the problem for. He must then articulate in simple terms how the product, service or solution does so in an easy, relatable manner. Audience identification and targeted benefits tatements grounded in strong market data and consumer usage insights are more likely to work than those based on just gut feel.
Solution statements meant for everyone in general get through to no one in particular. While a scatter gun approach may be good for initial brand awareness in an established industry category, new category building requires rigorous “knife sharpening” to define audiences, positioning and benefit statements. Without this even a great idea that solves a "problem that exists" as Paul Graham puts it, may sink without a plop!
As early in the game that a new entrepreneur can ask themselves these questions, the better their chances at successful category building: a) which are the top three to five audiences or “community” profiles whose problem I am solving?, b) how would I define their specific problem?, c) how will I articulate the solution simply?, d) how can I make this known to them as early in the journey as possible to make them participant in the solution?
Entrepreneurs often get so caught up in the brilliance of their own ideas that the strategically critical task of getting it across to those to whom it matters most – the consumers paying for the idea — is left to the very end. Worse still are those building businesses to solely woo venture capitalists (VCs), private equity or even angel investors in the hope of making a quick buck. Getting investors excited is a good measure of business-worthiness, but the true strength of an idea lies in is growth, profitability and long-term sustainability.
Many recent industry reports say that venture-capital funded enterprises have been seen to fail more than others. That’s no surprise to VCs themselves either! Broad industry estimates released by venture capitalists themselves peg investments that fail to fetch returns or even break even at 65 per cent, while just a measly 4-6 per cent of companies they invest in actually make money or get spectacular returns.
Simply speaking, keeping in sight the real audience and not the investor truly creates the spine on which great businesses are built. Ford was a start-up once, so was Google. Times may change, so may what constitutes disruptive innovation. What never changes is business fundamentals that make strong economic sense!
—Madhuri Sen, an industry veteran of over two decades' experience, is founder and key consultant at Ace Brand Strategist, a brand communications and marketing consultancy focused on start-ups with high socio-economic impact.
