How to build sustainable businesses in emerging, mature markets
In my days at Harvard, I came across an interesting concept that permeated the startup ecosystem. The foie-gras effect. It observes that startups are injected with excessive amounts of venture capital to scale massive growth at all costs. Other phenomena have illustrated this. With mega-funds at stake, startups collapse as they try to scale growth prematurely.
Instead of evaluating market opportunities, user research, product development, and healthy cash flows, it’s the big-ticket valuations that absorb all energy and focus. Across emerging markets and mature markets, technological advances are being adopted and innovated rapidly. Companies that fail to scale sustainable growth will have a shorter lifespan.
Therefore, the question should be how startups can avoid the crash and burn crisis and create a successful playbook for growth based on diverse market needs.
Follow an asset-light business model
Agility and nimbleness are prerequisites for an organisation to thrive. Asset-heavy business models often come with the pitfalls of large capital expenses, production bottlenecks, etc, that can be more judiciously avoided in a globally changing, volatile environment. Whereas, an asset-light business path is a viable avenue to fast-track innovation.
As a result, companies can reduce dependence on capital and maximise productivity through partnerships.
Take the case of ride-hailing or online marketplace model for home rentals. They do not have to be reliant on intensive capital expenditure and can quickly adapt to fast-changing environments.
Even for the manufacturing sector, OEMs are investing in alliances with vendors or contract manufacturers to boost production, rather than time-consuming greenfield expansion.
Optimise product portfolio
A winning formula begins with the product. By continually testing, iterating, and developing products, businesses can stay abreast of the latest innovations.
An emerging business can optimise its product portfolio with a two-pronged approach. Either it can follow an incremental route, by adding new features, hardware or software, at regular frequencies to bring more value to customers. This modus operandi can help startups in mature markets which are already saturated.
A high-growth economy like India, however, presents a great opportunity to test disruptive products and become a market leader.
Startups can look at bringing in completely new, avant-garde technologies or develop new competencies for a larger pie of the market. The 5G smartphones industry is a prime example of this.
According to Canalys, 5G smartphone shipments are expected to race ahead and reach 1.4 billion units globally, in 2021.
Synergise global mindsets with localised teams
Companies often expand into new geographies by building local teams from scratch. Local talent can resonate more effectively with local market concerns and drive targeted and crafted strategies that address the heart of the matter.
However, we live in a world where boundaries are constantly blurring with rapid digital transformation. Founders, with global mindsets, have a more diverse and holistic lens on new trends on the horizon and can attune their business priorities accordingly.
Cultivating a global mindset infuses more innovation, diversity, and empathy in a brand’s culture and persona. In a post-COVID landscape, consumers seek to form a humane connection with their desired brands, rather than strictly transactional ones. Thus, it helps build brand resonance and resilience in the long term.
Edited by Affirunisa Kankudti
(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)