If you are the first with the most, you are close to betting the farm, taking a big bet and, if it turns out right, you will make a big profit.
Start-ups and grown-ups all follow a similar life pattern when it comes to entrepreneurship. In his writings, management teacher Peter Drucker, has covered these comprehensively. There are four broad entrepreneurial strategies that can be followed, and these are described with the typical American panache as:
i. Being first with the most
ii. Hitting where there is nothing
iii. Occupy a niche
iv. Disrupt the product and the industry
If you are the first with the most, you are close to betting the farm, taking a big bet and, if it turns out right, you will make a big profit. You just hope that you don’t get it wrong. For example, in the 1920s, Roche Pharmaceuticals bet on dominating the emerging vitamin market by paying huge amounts for vitamin patents. Even after the patents expired, Roche still had half of the vitamin market. When the telecom industry opened up in India, Bharti bet on GSM technology and spectrum acquisition. The bet worked in its favour, and the company became dominant in the Indian telecom market. New challenges have emerged latterly for the company, but that is another story. The second approach is about hitting where there is nothing. For example, although IBM made the early ‘scientific’ computer, it made its name and profits by betting on commercial applications on another brand of computer called the Electronic Numerical Integrator and Computer (ENIAC). Hindustan Unilever adapted the detergent powder technology to a detergent bar for the first time in the world. The bar market has been dominated by the company for decades since then. In the third generic approach, the entrepreneur consciously seeks out a niche that the firm then dominates. For example, there are relatively small auto-electronics companies located near Fukushima, Japan, and they are original equipment manufacturers (OEMs) who supply specialty electronic components.
Excerpt Wisdom for Start-ups from Grown-ups
The businesses are small, maybe with sales of $250 million per annum, but the OEMs are completely dependent on them. This came to light when an earthquake hit Fukushima in 2011. Marico India prefers to be a key player in the small but specialized medicated shampoo market, rather than being in the mainstream shampoo market. As an example of the fourth generic approach of fundamentally changing the product-market offering, consider how online grocery shopping is gradually eliminating the weekly grocery shop visits for consumer products. When India’s Titan Industries entered the jewellery market, the company deployed the carat meter to create a serious and well-founded doubt in the jewellery consumer’s mind about the purity of the gold they had until then been supplied by the traditional jeweller.
—Excerpted from "Wisdom for Start-ups from Grown-ups", authored by R Gopalakrishnan and R Narayanan, with permission from Penguin Random House India. Price INR 399. The title released on February 22, 2021.
(Edited by : Ajay Vaishnav)