The epidemic with its associated lockdown and restrictions have turned the world upside down and business leaders are preparing themselves for an extended period of tough conditions. Under these circumstances how do startups survive? many of them are unprepared.
This is especially true of IT and tech companies. Traditionally the industry bets on raising the next unicorn, through rapid growth. However, this rapid growth against all costs works only in a booming market.
Outside of these industries, where the startups have less capital availability, which is more susceptible to macroeconomic shocks, it becomes imperative to behave like camels instead of unicorns. Camels can survive the deserts for long periods without sustenance and adapt to extreme climates.
They offer valuable lessons to businesses in all sectors how to survive, sustain and grow in adverse conditions. They do this by adopting the following three strategies.
Balance instead of burn
These companies have no interest in burning up scarce resources or prioritize speed over efficiency. They are ambitious but take a balanced approach to growth, which has the following elements.
- Right pricing fro the start They do not offer free or subsidised products to accelerate adoption. Instead, they charge customers for the value of the product. They understand that pricing is not an impediment to growth and it is a feature of the product that reflects its quality.
- Cost management They cut costs through the lifetime of the product to align with the long term growth of the company. They take calculated decisions and estimate for investments if we grow significantly and won't suffer it is incorrect.
- Change trajectory Mangagng costs through the lifetime of the company prepares it to face tough conditions for a long period. They may prefer to grow in controlled spurts, accelerate and invest when required by an opportunity at hand. They maintain the option to adapt their growth strategy and returns for a sustainable business.
They are built for a long haul
The business leaders in the company understand that they are in this for a long haul. They are prepared for the breakthrough. Initially, survival is the primary criteria. This allows time to build, find the right product and develop the operation. The race is about who will survive the most and not who will be the first to market.
Breadth and depth for excellence
These companies often face unique constraints that become strengths during times of adversity. They may startup in small markets by necessity which may not be sufficient for growth and is forced to spread across many markets. By this, they may learn valuable lessons on what works and what doesn't and apply it in fine-tuning their business model.
Again, they may not have a support system of associated products and services and may be forced to develop these support structures. Thus it may be necessary to provide a full ecosystem in the interest of making a success of the business model.
Of course, they should not take this too far as it would divert attention fro the core purpose as well as require unsustainable investments. Instead, they should invest only in activities that are self-reinforcing and self-balancing.
By prioritising balanced growth and building for longterm these companies can survive market shocks, and grow in good as well as bad times. They turn adversity into an advantage.
Startups, It’s Time to Think Like Camels — Not Unicorns
by Alex Lazarow HBR 2020/10
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