Building a successful startup
There are two distinct categories of entrepreneur: Traditional entrepreneurs are people who start their own company based on existing business such as restaurant, retail, tailor, selling foods in market etc. These businesses are typically limited within a region with limited growth. The technology entrepreneurs are people who create their own company based on their innovative knowledge and their products can disrupt the market resulting in significant growth beyond the local region. The traditional entrepreneurs depend on the local market to succeed and often hire a limit numbers of employee. In contrast, the technology entrepreneurs change the market, open new industries, and grow bigger with unlimited number of employee.
From an economic view, countries that want to succeed in globalized economy need to promote technology entrepreneurs. The growth of these startups can create more jobs and prosperity to the economy. The benefits of entrepreneurship are well understood but despite the popularity and efforts, many startups still fail. Twenty years ago, when I was in China, the government already tried to promote the development of an “Entrepreneur regions” or China’s Silicon Valley in Shanghai and Beijing. When I was in S. Korea, people also mentioned about the development of a “Startup zones” in Seoul but today there are still nothing significant. A professor in Shanghai explained: “Of the thousands of startups that created throughout the year, most of them failed. They all have received government’s support with tax incentives and free renting office space but few succeed. The two most common reasons for failures are “Do not meet market need” and founders “Ran out of money.” Similar stories were also told by my friends in S. Korea and Japan.
Both of these issues can be solved with additional entrepreneurship trainings because engineers cannot develop startup successfully without proper guidance. The best way to avoid failures is by learning from other entrepreneurs, from their successes and failures, and adopting these lessons to increase their chances of success. Many entrepreneurs often share experiences either in technology conferences or on line. Engineers should seek out this information to find specific answers related to their startup. Despite the availability of this information, many people still go on to make similar mistakes while starting their company. In my entrepreneurship course, I often invite successful entrepreneurs to come and share their lessons where students can openly asking questions regarding their problems. When I talk to these entrepreneurs, I learn from their mistakes and I adopt them into my course materials. I want my students to learn from the practical aspect, not theoretical as I believe entrepreneurship should be practical. There are many books written about entrepreneurship, each reflect the author’s view on how to do it successfully. Some are good but most have certain values that only work at certain time and place but not universal enough to be applied everywhere. What work in the U.S may not work in China because the environment and culture are different? Having successful local entrepreneurs come to share experience is a much better solution.
When building startups, entrepreneurs should follow a specific process based of lessons learned. By understanding how and why a startup should be built according to a specific order, entrepreneurs can solve most of these problems according to the process. For example a technology solution without customers is useless. Instead of focus on developing technology first, entrepreneurs should focus on identify and develop customers to make sure whatever they do will meet the needs. After having product, entrepreneurs should focus on specific type of customer and do it better than competitors to make sure that they can succeed. They must ask themselves what type of value or benefit that they offer to customers such as reduce costs, increase profits, or increase customer satisfaction. They should be able to explain clearly how the value is generated and why it differs from anything else on the market. An effective value proposition should lead to a relationship between the startup and the customer and influence customer’s purchasing decisions.
Having a clear value proposition is one of the first challenges any entrepreneur must solve. In my class, students do not develop solution until they identify opportunities and understand customers’ problems to make sure whatever they create will meet market needs. They must validate their solution with customers to make sure that whatever they do is what customers are willing to buy before they even start their startup. Without identify what value you can bring, what customer you will have, what market you will serve but everything is just a guess than it is a formula for disaster.
Sources
- Blogs of Prof. John Vu, Carnegie Mellon University
