Yesterday I was reading an interesting article on fivehirtyeight.com about the fact that even though we’re spinning up more startups than ever, the success rate of these ventures is declining.
It was an interesting piece but I got to thinking that it missed a couple of things I’ve observed over the years. Given that it set up Amazon as this sort of poster-child of startup success, it seemed reasonable to think about just what caused Amazon to be so successful…and what might these incubated, mass-produced startups be missing?
I’ve done a lot of thinking about what made Amazon so successful and have come down to two basic reasons:
One: the time was right…all the pieces were in place for a business that sold stuff through the Internet to take off…enough people had online access, email accounts, and a general acceptance of the technology, etc. The fact that we sold books was almost irrelevant…
This sort of situation shows up a lot in scientific and social revolutions – all of the pieces are there, kind of waiting for someone to put them together and make the big leap. The fact that Newton or Einstein or Heisenberg is the one who does the big-leaping is as much about that individual’s genius as it is about the times they were fortunate enough to be born in.
It is a bit like putting together a jigsaw puzzle with friends where you don’t have a picture of the finished puzzle (what jackass lost the box?). Sooner or later, someone is going to shout out “Oh, I know what it is!” The pieces (literally) had come together enough so that person could see the finished puzzle. Their genius was being first. Had they not been there, sooner or later someone else would have.
Ditto Amazon…Jeff was the Newton who put together the available pieces in the right way to create the first mammothly successful Internet business. He might have been first but the “invention” of Amazon was inevitable. Had he not been there, it might have been a few more months or even a few more years, it might have been an utterly different product or service, but it would have happened.
Which brings me to Amazon-reason-for-success-number-two:
In Amazon, Jeff put together all of the pieces necessary for success. Believe me, there were other “players” out there at the time, but none of them had the combination of resources that it took for Amazon to succeed:
* Sufficient technical skill to execute
* Sufficient business savvy to execute in THAT arena
* Sufficient financial backing to enable us to grow ahead of what we could pay for (as much as I loath carrying personal debt, I’ve recently had the revelation that rapid business growth is impossible without it)
* A solid product well suited to online sales
* Leadership willing to ruthlessly grow and dominate
Other companies may have had good ideas and good technical people but lacked the VC to build the brand…still others may have been well financed but lacked technical know-how, etc.
A lot of the “established” brands that tried to build a quick online presence in the 90s failed (I remember just how worried we sometimes we’re about Borders or Barnes and Noble getting into the fray…and where are they now?). Why? They had plenty of money, they had products that were well suited, they were at the time successful businesses. But they didn’t “get” it technically and weren’t willing to commit to their online presence…it was more just an adjunct to a world they thought (or hoped) was still going to remain brick-and-mortar focused.
So I read this article on 538 and I think about Amazon about what might be missing from the standpoint of creating the next MEGA startup. Now I’m not talking about a startup that creates casual games for touch screen devices or that launches a device to help people find their keys or someone to have sex with on a Friday night or maybe even a pseud-taxi.
I’m talking about startups that grow, within the span of a couple of decades, to dominate multiple market segments, to be household names. This kind of growth requires that you TRANSFORM the world. You can’t just have a better mousetrap, you have to utterly change the concept of how mice are caught.
Amazon did that – first with books and then with just about every other thing that can reasonably be put in a truck and while they were at it leveraged that position to a few side-businesses like renting server capacity and making TV shows.
So if you want to create the next mega-startup, you need to think about what that startup should be doing. Just throwing startups at the wall to see what sticks isn’t necessarily going to work. Sure, as Henry Ford said “in order to double your success rate, you need to double your failure rate” but if you rampantly, thoughtlessly, encourage the creation of startups, you lower the barrier to entry. Every yahoo who is trying to make a buck is going to find a way to hop on board your seed money train, your hip converted warehouse space, your advisory board’s well intentioned meddling.
This touches on another screed I’ve been meaning about today’s tech world (but I promise I won’t go off the deep end here): the tech sector is attracting a completely different type of person than it did decades ago. It used to be people in “tech” we’re there because they liked computers, they liked programming, they didn’t like people, or something similar. As this sector has become more and more of a good place to get a job that pays some serious cash, it has started appealing instead to those people who look at possible starting salaries and pick the job with the highest one that seems palatable and then go get a degree in that field. Witness the rise of the “brogrammer.” As startups are more and more “facilitated” with incubators and consultancies and more and more readily available seed money, is it possible that we’re inadvertently attracting the wrong kind of people to lead them? Not the kind of people who see their success as coming from tenaciously building an innovative new product or organization but instead those who are there to make a quick buck?
So now, in today’s startup world, are we really innovating as much? Or is the number of people who are really, really putting things together ahead of everyone else actually going to remain the same…and instead there’s just going to be a lot of “noise” from the also-rains who are just blindly sticking puzzle pieces together to see if they fit?
Because without someplace to go that is truly revolutionary, we’re going to continue to create startups that are perhaps successful, but unlikely to be extraordinary. In 1996 the pieces were in place for someone to revolutionize the way we bought stuff by selling it online…Amazon was the “lucky startup” that got there, successfully, first.
But what’s the new area that is primed for a revolution, where the ingredients are all sitting there ready for someone, some Newton or Bezos, to put them together ahead of everyone else.
I don’t know what it is. I’m not that person. I know it isn’t going to just be another app, it isn’t going to just be another thingy you can get online.
Alternative energy? Maybe.
Oh hey look, Tesla!