Scott Anthony, Managing Director of Innosight talks about some of the important lessons learnt using examples of businesses that Innosight has ventured into.
This post is part of the live coverage of Echelon 2012, Asia’s leading tech startup event happening on June 11 – 12. If you spot typos, slight inaccuracies or need more clarification, do leave a comment in the post and we’ll address it in the next edit.
At the keynote, “Lessons from the trenches of disruptive innovation,”Scott shares the four lessons that he has learned along the way while at Innosight
White spaces: sometimes they exist for a reason
In starting a business, it is alway important to find a market that exist. Scott stresses that as an entrepreneur, always ask the following questions before starting a business:
1. Why doesn’t the business exist?
2. Is this the market space that you are out to target?
Scott gave the example of a business in a white space that Innosight started out in india called “Razor rave”, which was inspired by the success of cheap and reliable Singaporean barber shop, “QB house”.
The problem that they saw was that the problem of having ‘too much hair in India’. To get a shave or a haircut for men, one can either go to a six star hotel or an open roadside barber shop. He saw the opportunity of recreating a similar haircut experience as QB house in India and decided to open a chain of barber kiosks in India.
However, they soon encountered the problem of whether anybody is going to invest in a business that lies in a white space. After spending $70,000 out of their own pockets, there wasn’t anyone who was going to invest in them again. On the other hand, a company like iTwin has decided to enter into a crowded space that offered many similar solutions like dropbox, sugarsync and box. But because there are a lot of things happening in the space, a lot more people will be giving money to fund it.
Scott gave a piece of advice for entrepreneurs looking into entering a white space: “If no one has started this business, make sure you have a very rich friend because no one is going to fund you.”
Love
Giving the example of one of Innosight’s businesses, “Guaranteach”, an online teaching site similar to that of Khan academy, Scott explains how the lack of love despite all the useful features and videos put up can affect the success of a company. The number one reason why startups fails is because of the lack of connection with the consumer.
Unit cost: know them, cover them
After generating love, the next important step is to know how to convert them into cost. Scott further explains this with his example of the laundry kiosk service, “Chamak” that the company has came up with. b figure out sustainable business model. Even though there were customers who were willing to pay for it, they never figured out how to cover up their monthly incremental cost. He stresses that companies should make sure that at the very least, they should understand what their unit cost are. Businesses that never figure out how to cover their unit cost usually fail.
Funding
For his last pointer, Scott talks about how startups usually underestimate things. However long a startup thinks it takes to get funding, he will always underestimate it. Every entrepreneur always has great plans on how their business can grow but we all know that these will never happen.
Quoting Guy Kawasaki,”As a rule of thumb, when I see a projection, I add one year to the delivery time and multiply revenues by 0.1″
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