Released as a project hypothesis, the Startup Genome is a study that was conducted in order to create a framework by which to benchmark technology start-ups in Silicon Valley and across the world. The report is a mash-up of various hypotheses put forward by thought leaders in the field of entrepreneurship and strategy. One of the key pillars of the report is the Marmer stages of entrepreneurial growth. What I found interesting though is the similarity between the overall theme of the paper and the already well-known stages of new technology adoption. Here is a comparison of the two.
Stage One: Discovery/Validation maps onto Innovators
According to the Startup Genome, this stage of the entrepreneurial journey consists of few to no customers, an ambiguous value preposition and almost no sort of structure. Its corresponding stage has the same characteristics. The stage has only few early innovators adopting the new technology and a generally low penetration and traction ratio.
Stage Two: Efficiency maps onto Early Adopters
Same story here: as the business gains traction and builds trust and an easily communicable value preposition, the number of customers/ users increases. The corresponding stage in the other graph shows that after the innovators, the early adopters come in and growth begins to take off. In both instances, success or failure is pegged on this group of people. It is important to note that in both instances, it is at this stage that the product or service either gains traction or begins to decline. Rapid iteration is critical to this stage.
Stage 3: Scaling maps onto Early Majority
This is the stage at which the company really takes off. This stage is characterized by seeking venture capital and the priority is given to growth over product development. The corresponding new technology adoption stage is likewise characterized by viral growth and a greater emphasis on conversions. Something interesting to note here is that in both instances, the business usually gets a UI overhaul; for the startup it means rebranding, new offices, etc.; for the technology it’s a cleaner UI and UX.
Stage 4: Profit Maximization maps onto Late Majority
Now that the business has successfully reached and passed the scale stage, it is now time to maximize the profits. In both instances, this stage is characterized by an emphasis on monetization. This means deriving more value from the already acquired customer/ user base. If a Freemium model was being used, this is the stage when premium products are released. If it’s indirect monetization, revenue models are bolstered (Facebook ads).
Stage 5: Renewal maps onto Laggards
This is perhaps the most important and interesting stage as most businesses miss it and end up being overtaken by new entrants, as Porter’s five forces model indicates. In both instances, the owners must find a way of reinventing themselves in order to stay on top. It’s ironic that the lifecycle of technology is around 10 years and so is that of a typical startup before they both start to decline or are replaced by a new entrant (Hi5 and MySpace).
Links:
http://tutor2u.net/business/strategy/porter_five_forces.htm
http://maxmarmer.com/2010/01/5-steps-of-entrepreneurial-growth/
http://apps.business.ualberta.ca/mlounsbury/techcom/readings/darwin%20and%20demon.pdf
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