These days, it has become fashionable in the entrepreneurial circle to dismiss ideas as mere talk and focus on the execution. Hustles, Pivots & A/B testing are the rage as aspiring entrepreneurs are now told to throw stuff on the wall and see what sticks.
We don’t necessarily think that’s true.
Don’t get us wrong. We are believers in the power and importance of Hustling. After all, that’s why we published this infographic!
However, to completely discount the value of ideas is absolutely wrong.
Let us examine the so-called ‘unicorn club’.
It’s usually a bad idea to gain an understanding of an industry by studying its most successful members. However, in the “all or nothing” startup industry, where everybody begins with their eyes firmly fixed to the very summit, it’s a useful analysis to make.
Paraphrasing from Cowboy Venture’s excellent analysis of the US’s unicorn club – “83% of companies (Startups valued at a $1 Billion+ dollars in the US) are working on their original product vision; only 17% significantly changed product focus in a big pivot.”
There you have it. An overwhelming number of the most successful startups in the world became successful because of their original idea. The unicorn list now includes 84 companies, so it’s not an insignificant sample size.
Even most of the pivots also have stories that differ from the ‘traditional pivot’ (if there is such a thing). Stewart Butterfield’s two wildly successful startups, Flickr and Slack, the latter of which is a member of the unicorn club, both actually arose out of side projects intended to help the main mission of the company, i.e, creating MMO Games. Slack, for instance, was an iteration of the tool Butterfield’s team was using for internal communication. It was only when the project for the MMO was shelved, that Stewart looked back at what they had, and realised the promise of a communication tool for workplaces.
This, as you may realise, is different from the traditional pivot story. Some would in fact, not call this a pivot at all.
The Lean Methodology
If we closely explore Eric Ries’s Lean Methodology- the book/method responsible for all the obsession with Pivots, we’ll find that it’s a long way from saying that ideas count for nothing.
Quoting a passage from the book
“Innovation accounting works in three steps: (1) Use a minimum viable product to establish real data on where the company is right now. (2) Startups must attempt to tune the engine from the baseline toward the ideal. This may take many attempts. After the startup has made all the micro changes and product optimizations it can to move its baseline toward the ideal, the company reaches a decision point. That is the third step: (3) Pivot or persevere.”
The pivot comes only in after a long and difficult process in which you expend a lot of time, effort and money. As Tren Griffin explains in this excellent blog post.
“If you are doing a big pivot, you have made a mistake. Mistakes are costly. That one might be able to sustain a big pivot and still win is a feature of The Lean Startup process, but it is not a goal.”
Eric Ries’s whole method is actually based on testing two of the most important assumptions the entrepreneur makes- ‘The Value Hypothesis’ and ‘The Growth Hypothesis’.
The value hypothesis tests whether a product or service really delivers value to customers once they are using it. The value hypothesis itself should be an attempt to solve a genuine problem that the entrepreneur has identified and backed up by painstaking research, which is what ‘Ideas’ mean in the entrepreneurial world. The alternative is testing every idea you can think off and endlessly pivoting, all the while hoping that you somehow hit upon a good product.
Peter Thiel, YC and Brian Chesky
Considered by many as one of the leading minds in technology, Peter Thiel, has famously disagreed with the Lean Methodology. Instead, he urges us to “Not be a copycat”, and work towards “Creating a Monopoly”. He also says focusing on your competitors can make you lose sight of what’s truly important.
But perhaps nobody knows more about creating successful startups than Silicon Valley’s legendary YCombinator. In this brilliant series of lectures authored and delivered by the who’s who of the industry at Stanford, Sam Altman, the current president, explicitly talks about the importance of working on great ideas, and how most of YC startups work on their original product vision. He then makes the point that most of the pivots are actually something that the founders themselves wanted.
He extends this further and talks about how companies should be difficult to replicate, and how the greatest success are mission-oriented companies. In a later lecture, Brian Chesky, the founder of AirBnB expands upon mission driven companies, and how they help hiring, culture, branding, and motivation.
The ‘Desi’ Pivots
We made a list of 17 companies that we believed can serve as shining examples for the rest of the entrepreneurial industry in the country- based on valuation, market share, and product success. Only a small number of these companies have billion dollar valuations, and some of them are actually over a decade old, belonging to what many consider to be a previous era of entrepreneurship, and hence would have been excluded had we used the methodology of Cowboy Ventures. Many startups could rightly argue for their name to be included, but we felt this was a useful number for a ballpark estimation.
Even if we take the most liberal understanding of Pivot, we find that only 6 of the 17 most successful startups have ‘pivotted.’ Even amongst these six, only Snapdeal and InMobi are companies that have completely changed their product vision. Micromax always wanted to be a product company, Zoho’s current success is built on a side division that eventually subsumed the rest of the company after the telecom crash, while Ola and Infoedge just noticed other extraordinary opportunities within their domain.
While the sample size is too small to truly draw a meaningful conclusion, the number of Indian companies pivoting does seem to be a little higher than those abroad. That might actually be one of the reasons why, despite its massive size, the Indian startup industry lags behind many smaller markets like Tel Aviv and Singapore.
By themselves, ideas are nothing, but without a great idea, you’ve missed an important marker on your entrepreneurial journey.
But the great thing about this industry is that bad starts can always be overcome and converted to stupendous success like Slack and InMobi.
And what of the eternal question- To pivot or not to pivot?
This has no definite answer, yet it ends up being defining the startup. As Reid Hoffman said in his lecture ( a part of the afore-mentioned YCombinator series), great founders need to be both persistent and flexible, and knowing when to be what is perhaps the single most important quality of a founder.
Stewart Butterfield knew when the game was up for his MMO, despite the fact that it had achieved a small cult following. On the other hand, the founders of Justdial were actually told that they would be funded if they pivoted to a BPO, but they choose to ignore the advice and continued plodding along on a dark and lonely road.