Camels, tigers and unicorns: how to map startup journeys and success factors for innovationMadanmohan Rao
What are the different types of startups, markets and technology deployment strategies? This book shares deep research insights into the process of innovation and commercial success.
There are many anecdotes, biographies and case studies of highly innovative companies, but few data-based insights on the majority of innovation initiatives. Filling this gap, the book Camels, Tigers and Unicorns: Rethinking Science and Technology-enabled Innovation draws on innovation data gathered over the period 1995-2015 from 300 science and technology-enabled firms.
The authors of this insightful book define innovation as ‘the creation of new value.’ Uday Phadke graduated from Trinity College and University of Sussex, and was CEO of Cartezia. Shailendra Vyakarnam is Director of the Bettany Centre for Entrepreneurship at Cranfield University.
They define 12 vectors for commercialisation of innovation: overall commercial overview (triple chasm, portfolio), proposition framing (competitive positioning, regulation), customer types, go-to-market, commercialisation strategy (priorities, pivots), business models, IP, manufacturing, product definition, development, organisational dynamics, and funding.
The authors have developed a Workbench of around 50 tools based on these internal and external vectors, which can be used by startups, accelerators, investors, policymakers and researchers. See the sample chapters and videos at the book’s website, and the online description of the Workbench tools.
The 22 chapters are spread across 300 pages, and the material is thoroughly referenced. See also my reviews of the related books The Startup Checklist, The Wide Lens, The Manual for Indian Startups, The Lean Startup Way, Disciplined Entrepreneurship, and The Innovator’s DNA.
Mapping the startup journey
There are three chasms startups must cross: from concept to prototype (Chasm I), from prototype to functional offering with a commercially sustainable business model (Chasm II), and significant scaling up from early customers to large market (Chasm III).
There are different approaches to crossing Chasm I (proposition framing, design thinking, tech development), Chasm II (product iteration, business model, funding), and Chasm III (marketing, sales, distribution). Most startups fail while trying to cross Chasm II, the most complex part of the journey.
Camels are internally resourced firms, tigers are funded by angels and VCs, and unicorns take huge high-risk investments based on the hope that a sustainable business model will emerge. Camels are known for patient and planned progress, whereas tigers are agile and operate in fast-moving sectors.
Unicorns, though receiving lots of media attention, assume that lots of capital can help build a large user base and gain momentum. Unicorns may actually end up ‘buying’ customers, and defy normal business logic, according to the authors.
The frameworks in the book apply across a range of tech firms: engineering, medical and agriculture. Market penetration tends to be faster in media, entertainment and finance than in electronics and hardware.
Startups need to clearly specify which type of customer to address: consumer, enterprise, government, or professional communities. Each has different types of demographics, psychographics (values, attitudes) and behaviours (purchase, usage).
Target organisations themselves are of different sizes: micro (less than five employees), small (10-50), medium (50-250), large (250-500) and very large (more than 500). For these targets, startups need to figure out whether to offer a product, service, platform, base technology or application technology in different kinds of sectoral activities.
Each offering itself needs to be assessed for its speed of adoption and need for complimentary or supportive technologies. Go-to-market strategies should be broken down into positioning, price, place, promotions and partnerships. Clearly defined metrics should be in place, such as customer acquisition cost (CAC), committed monthly recurring revenue (CMRR), lifetime value (LTV) and churn.
“Business models can have a very big impact on the valuation of a firm,” the authors explain. Licencing or subscription models for software can be more valued than product sales; multiple distribution models in the media sector are more valued than single distribution models.
“The critical issues which are hard to quantify are the motivation, self-awareness, social skills and relationship management capabilities of entrepreneurs which often hold the key to success,” the authors observe. Growth challenges lie in alignment, power politics, reward structures, and ownership.
As the startup grows, leadership will need to become more directive and delegative, teams change from flat to hierarchical and virtual, processes become more formal, and structure becomes more organised around functions and product lines. New strategies and talent will be needed as the company expands from local to international markets.
The broader ecosystem
The broader ecosystem of innovation includes the macro-environment (public-private balance) and meso-environment (customers, channels, IP regime, regulation, finance). Mentorship networks, incubators, accelerators, makerspaces, and government innovation agencies play a big role here (see the YourStory interview series Startup Hatch).
Incubators help startups cross Chasm I (prototype development), accelerators help cross Chasm III (scale the customer base). The authors suggest a third category of player, the Reactor, to help startups cross Chasm II (eg. via business model development, customer profiling).
Some of the activities are ‘bursty’ in nature (eg. hackathons, bootcamps) but others require long gestation periods. Some forums are largely peer-driven (eg. makerspaces), others involve support from industry experts.
For large companies, the innovation challenge is whether to build, buy or partner for creating new products and services. “Innovation is not an extra that can be added to an existing business culture and mode,” the authors caution. Creating an entrepreneurial culture requires changes in process, culture and remuneration (see my book reviews of Unrelenting Innovation, The Innovation Formula and Eight Steps to Innovation).
Large firms also need to figure out how new offerings may fit into or disrupt existing portfolios. Approaches like intrapreneurship, innovation sandboxes, and outright acquisition can be deployed (see my framework of 15 innovation tips: how large corporations can successfully engage with startups).
In sum, the book opens the door to more research and evidence-based frameworks on the process and impact of innovation in the global economy. “We believe that the sagacious commercialisation of science and technology-enabled innovation holds the key to balanced and sustainable growth across the world,” the authors sum up.