Investing on THE idea and creating the future.

by Working Woman

As already discussed in the first blog, the 90’s was the era when the world experienced the surge of the startup company.  Startups, such as dot com retailers Amazon (1994), eBay (1995), the search giant, Google (1998), embraced and led the networked economy.  Even though the burst of the financial bubble in the early 2001 shook things up, and negatively impacted entrepreneurship, by 2003, against all Cassandras who never believed in a new economy, there was a new wave of tech companies.  2004 saw the birth of the most popular startups so far, Facebook and as the old hierarchical business model was being replaced by networks, startups continued to function within that network system.  Untouched by the global financial crisis of 2008, continued into 2012, which was one of the most incredible years for startups, as a great number of new startups emerged and existing ones bloomed.

The important pattern emerging, as we already discussed in the first blog, is a new type of entrepreneurship.  This new type is all about THE idea.

idea

Investors invest on the expectation of what this idea will bring anew to the market, not on something already created and tried.  As Castells (2009) states “the internet entrepreneurs sell the future, because they believe they can make it” (p. 57) and they are able to convince the financial market that they can.   As such, technology is viewed as the vehicle through which these people will go about changing the world.   This also helps explain why the first startups were closely tied to technological-based innovation.  I believe that the most important shift we see is in terms of the mindset of the people.  This is what I keep from Castell’s description of the new entrepreneurial culture:  The notion of creating the future and through that gaining financial well-being and success.

I mentioned in the previous paragraph that because the initial startups were technology-based, the idea of a startup has closely been linked to producing technological innovation.  There’s been a shift however, from this notion, as more and more diverse startups emerge.    To make it clear what it is exactly that we are referring to as we go on talking about startups in our blogs, we present the definition of a startup.

According to Wikipedia, a startup company or startup is an entrepreneurial venture or a new business in the form of a company, a partnership or temporary organization designed to search for a repeatable and scalable business model.   These companies, generally newly created, are innovative in a process of development, validation and research for target markets.  Steve Blank (2006), a technology entrepreneur and professor at UC Berkeley, in his book  the four steps to entrepreneurship has gone a step further making it more specific, indicating that startups fall into 4 different categories:

  1. Bringing a new product into an existing market
  2. Bringing a new product into a new market
  3. Bringing a new product into an existing market and trying to resegment that market as a  low-cost entrant
  4. Bringing a new product into a new market and trying to resegment that market as a niche entrant

So as Facebook and Tesla Motors for example, are considered startups because they produced disruptive innovation and changed an entire market, and are technology-related startups, Wikipedia used the networked model of business, availability of Web 2.0 and crowdsourcing, to bring a new product into an existing market creating a niche for that market, while not being a technology producing startup .  Similarly, many startup news organizations seek to use the internet as a platform to create new providers of news.

The startup company differs from any other “traditional” company in that it is characterized by these 4 essential features:

openess

Openess:  Instead of product development, in startups we have the notion of customer development.  Startups have an initial idea which they test by asking potential users and through that feedback they either proceed or refine the idea and test it again.  So potential customers and partners have access (thus openness) to the startup’s product or service from the beginning.

Teamwork

Peering: By being open startups collaborate with customers and partners and this collaboration or peering is reinforced and is seen also within people working in the startup.  The ideas of employees are valued and encouraged and se see something resembling more of a partnership than employer-employee relationship

 

sharing.jpgSharing: Openess, transparency of information, processes, intellectual capital are all characteristics of a startup venture.  Not to mention the sharing of knowledge and know-how with other startups, encouraging and building startup mentality and development.

acting globallyActing Globally: Though it might be working “physically” on a local level, the internet and the web in particular allows collaboration with other companies or entrepreneurs located in another continent.  Its funding may be a result of global cooperation (ie crowdfunding platforms), or have access to their customers located in other countries, are a few of the examples.

The new entrepreneurial culture of THE idea and the “creation of the future” is the one that leads the new business ecosystem.  Startups are seen as the entities that will emerge and create the “next big thing to create uncontested marketspace and disrupt entire industries” (Weiblen and Chesbrough, 2015, p. 67).  Entrepreneurship is now taught in business schools around the world and more and more MBA students list founding or working for a startup in their career plans, as opposed to working in a bank or investment sector, as was done in the past.

References

Blank. S. (2013).  Why the lean start-up changes everything.  Retrieved from https://hbr.org/2013/05/why-the-lean-start-up-changes-everything

Castells, M. (2009).   The internet galaxy.  Reflections on the internet, business, and society.  New York, NY:  Oxford University Press

Diamantaki, K. (2016).  MA in digital communication and Social media.  Digital media and CMC.  Lesson 1 [PowerPoint presentation]

Feld, B. (2013).  Creating Start-up communities.  Ritrieved from http://www.tradeforum.org/article/creating-start-up-communities/

Naldi, L. & Picard, R. G. (2012).  Let’s start an online news site:  Opportunities, resources, strategy, and formational myopia in startups.  Journal of Media Business Studies, Vol. 9(4), 69-97.

O’ Reilly, T. (2007).  What is web 2.0:  Design patterns and business models for the next generation of software.  Communications & Strategies, no. 65.  Retrieved from http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1008839

Παραδοσιακή Επιχειρηματική Κουλτούρα Vs Κουλτούρα Startup [Traditional business culture vs startup culture]. (n.d.).  Retrieved 29 April, 2016 from  http://www.slideshare.net/

Startup. (n.d.).  In Wikipedia.  Retrieved April 2, 2016, from https://en.wikipedia.org/wiki/Startup_company

Start-ups: Μια επαναστατική εταιρική κουλτούρα (2016).   Retrieved from http://www.cnn.gr/money/epixeiriseis/story/26141/start-ups-mia-epanastatiki-etairiki-koyltoyra

Weiblen, T. & Chesbrough, H. W. (2015). Engaging with startups to enhance corporate innovation.  California Management Review, Vol. 57(2), 66-90

 

 

 

 

 

A mindset revolution!  A historical account of the startup movement.

By Working Woman

revmindset

“The web is more a social creation, than a technical one.  I designed it for a social effect-to help people work together-and not as a technical toy.  The ultimate goal of the web is to support and improve our weblike existence in the world.”

Tim Berners Lee (Slide 65).

One man’s vision echoes strong years after his creation.  Not only did the World Wide Web lay the cornerstone of great new inventions but it also kept its initial objective, of being a social creation, helping people work together.  The choice of words is not random, and they are the basis upon which this series of blog posts is structured.  The four of us (Abir, Ino, Marilly & Teri) aim to look at how the invention of the internet and the world wide web together with social change have helped shape the new business ecosystem.  We will focus on startups, how they came about, what’s different about them in the business world and why we believe that through startups we can summarize all that’s great about digital media and computer mediated communication.

The phenomenon termed as startups, is one which emerged in the information age and a product of the new e-business environment.  Why is that?  Well, with the surge of the internet there were revolutionary changes taking place regarding the way businesses now handle production, management and economic calculation.  To understand how the internet helped shape the new business ecosystem, it is useful to describe how it all began.

By 1993, the internet, a medium which for the first time allowed many- to-many communication, on a global scale at a chosen time had become a global network with 250 web servers.   Computer communication networks users reached 16 million in 1995, within just the first year of world wide web’s widespread use and has since, kept rising reaching 3,17 billion in 2015.   The 1990’s was an era that saw businesses, as network enterprises.  It was the era of “chosen time, high-capacity, high-speed, interactive communication, via data transmission” which was “met by computer communication networks, including the internet” (Castells, 2009, p. 68).  It was that realization of the new possibilities this networked model opened companies up to that a large number of businesses start using the internet and the web for conducting business, the termed dot.com companies.

Companies, seized the opportunity the internet offered them, to be organized networks available to suppliers and customers, receiving real time feedback on their products/services, reaching pricing agreements, proceeding with manufacturing and then being able to ship a product directly to the customers.  Orders are now being handled automatically and companies are able to offer technical support via the web, to their customers.  A large amount of production (i.e manufacturing) becomes outsourced to a network of suppliers, not geographically bound.  Employees become connected via company intranets communicating instantly with many others on the same building, or even globally.  And those are just a few examples of the changes we see.  The real time customer feedback on products, now allows the communication of production errors/flaws and their immediate correction, ending up with a “highly flexible customization” as was termed by ABBs CEO back in 2001.  Everything from production to processes is organized around the internet.   The new network model gives rise to an open culture, one encouraging innovation, cooperation and reduction in bureaucracy.

Initially, the first startups were associated with the innovative technology necessary to provide internet access, or using the internet to provide services necessary for the new business economy.  The trend is booming and here is the real market disruption.  Technology led productivity growth is observed and any innovative idea that sounds promising draws capital and investment as its valuation is depended on the anticipated higher value, instead of investment made on established cash flow.  The new economy is now characterized by a very volatile stock market, where high risk innovation is financed in return for high growth.

As Castells indicates, the downside comes in the late 2000, early 2001, when what grew to become a financial “bubble,” burst.  As there were huge investments made based on the anticipated returns of technological innovation, leading to unrealistic valuation of such companies in the stock market, when this unprecedented expected growth did not materialize, the negative outlook of investors led to more conservative approaches and devaluation of such technologies, thus a downturn of the stock market.  The new economy is an economy which is sensitive as it is based on high-risk innovation and market expectations, not on realized profits.  As such, it is the perfect environment for startup companies, which are producing disruptive innovation, to flourish.

Still, even at this sensitive stock market, the startup movement hints a positive outlook for the future.    To make my point I will go back to the beginning, more specifically to Tim Berner’s Lee vision and state that the web and the internet has indeed given us access to information, products and entrepreneurial ventures never before imagined.  And it HAS improved our web like existence, by helping shape our lives, including our professional ones, for the better.  Many Greek startups have enabled young entrepreneurs to turn their ideas into new products brought in the market, have led to creation of new markets altogether, supporting local entrepreneurship and local economy.  In an economy characterized by a long time recession and immense emigration of young talented minds to other affluent countries, Greece can use more startups and such entrepreneurial culture to aid its economic growth.  As Naldi and Picard state, reduced bureaucracy and new forms of financing, lower the cost of starting a startup venture, making it possible for employees or unemployed to start their own venture.

 

 References

 

Castells, M. (2009).   The internet galaxy.  Reflections on the internet, business, and society.  New York, NY:  Oxford University Press

Diamantaki, K. (2016).  MA in digital communication and Social media.  Digital media and CMC.  Lesson 1 [PowerPoint presentation]

Evolution of a startup company. (n.d).  Retrieved from http://www.igrinn.eu/en/services/green-start-up-guide/startups-are-strange-animals/evolution-of-a-startup-company

Naldi, L. & Picard, R. G. (2012).  Let’s start an online news site:  Opportunities, resources, strategy, and formational myopia in startups.  Journal of Media Business Studies, Vol. 9(4), 69-97.

Number of internet users worldwide from 2000 to 2015 (in millions).  (n.d). Retrieved from http://www.statista.com/statistics/273018/number-of-internet-users-worldwide/