I am a practical guy, so I recognize that expecting the real world to be fair is a dream that every entrepreneur needs to put aside as they reach the age of majority. As a business advisor, I see entrepreneur passion often so focused on an innovation that is certain to change the world, yet ignores the potential impact of one of the many business inhibitors that kill too many startups.
As an example, I am intrigued with the innovation and technology associated with flying drones of all configurations. I especially like the newest personal flying car, introduced at the most recent Consumer Electronic Show (CES) in Las Vegas. Yet, I anticipate a long hard road for startups in this space due to the practical reality of innovation inhibitors, including several of the following:
1. Dependency on new infrastructures and support. It is easy to see the value of electric power versus fossil-fuel engines, but we are a long way from the network of drone service stations and mechanics that exist today for conventional transportation. Necessary infrastructure is an inhibitor to many startup innovations and can take generations to fix.
2. Demand for safety and usage regulations. New technology solutions often raise the specter of new government regulations. Even the most obvious rules can take years to get debated and passed nationally or internationally. Witness the struggle of the Segway human transporter, introduced back in 2001.Technology can change faster than laws.
3. People are slow to change and embrace technology. For most people, an “easier to use” innovation means change and new learning effort that can easily offset the value of the change. Investors have a rule of thumb that simple cost reductions of less than 20 percent are not enough to convince most users to change to a new solution.
4. Investor risk tolerance limits. Every investor has a risk bias against specific innovation types based on investment experience. They like risk, up to a point, after which your startup will always be told that more traction is needed. Trusted business advisors can tell you the real issue, and recommend alternative investors or risk reduction techniques.
5. Closed community of owners or experts. Some business domains and technologies are so dominated by a small group of “owners” that outside innovations are discouraged or actively attacked by incumbents. Attempting innovation in these domains without first penetrating the fortress is extremely risky. Do your homework first to improve the odds.
6. Low startup founder resilience and persistence. The best innovators never give up and are not discouraged by setbacks. Thomas Edison failed more than 10,000 times before finding the right light bulb design. Challenged by contemporaries, Edison responded: “I have not failed. I have just found 10,000 ways that won’t work.”
7. Qualified and motivated team members are hard to find. It takes more than a single entrepreneur with an innovative idea to build a business. Every startup needs a team with the right skills and experience to complement those of the founder. The right people are hard to assemble due to low near-term returns, high risk and lack of training options.
8. Limited availability of financial resources. I put this constraint at the end, but it is an important one. There is never enough funding to deal with the development and rollout costs required for big innovations. Every entrepreneur knows that he or she could do more — and take more risk — with more help. The best are able to do more with less.
I am not suggesting that you let any of these inhibitors keep you as an entrepreneur from tackling the innovation of your dreams, but simply realize that fore-warned is fore-armed. Understanding the constraints up front gives you a tremendous advantage in overcoming them, and it can save you from serious pain and frustration. The entrepreneur lifestyle has always been a fun and satisfying experience. Let’s keep it that way.
Image credit: CC by Brad_Montgomery