As highlighted in our previous analysis of “Startup – Hiring and Firing”, the requirement of manpower increases exponentially during growth phase when the target is to make startup presence visible in the market and reduces considerably when startup enters into its maturity or stability phase when the target shifts towards operational excellence and profit generation. The reason why growing startups like TinyOwl and Housing are in news since last few month is not because of their success meters but the rapid changes in their organizational structures. If the rapid growth and expansion dependent on funding are to be considered reaching its limits, the maturity phase of these startups is getting started and the requirement of manpower is getting down.
TinyOwl Firing Saga has developed a lot of lessons for startups. FS has comprehended few of those critical issues that are helpful for entrepreneurs.
[A] Copy the Concept with Brain
Steve Jobs once said for Microsoft “Microsoft has had two goals in the last 10 years. One was to copy the Mac, and the other was to copy Lotus’ success in the spreadsheet – basically, the applications business. Over the course of 10 years, Microsoft accomplished both of those goals. And now they are completely lost.”
Microsoft has always remained in light because of its image of copying Apple, in spite of all these controversies, Microsoft has always been able to manage its market share because of its strategies to penetrate into the market volume of other players.
Same happened with TinyOwl, the concept was not new, and so the success parameters were limited to the operational excellence, market acceptance and geographical area selection.
Here are few lesson for small startups regarding the startup idea selection and evaluation –
- Exact Copy – If your startup concept is an exact replica of existing platform, product or service, check whether the targeted market is ready to accommodate one more platform . If the other players are limited to particular features, products or geographical locations, you can easily build your loyal customer base without their interference. If the other players are dominating or having sufficient resources to penetrate into your customer base, the chances of your success are limited unless you prove yourself better than those big giants.
- Copy with Some Additional Features– If your startup concept is an extension to the existing concept i.e. you are having some additional feature to add to existing platform, product or service, the success probability is limited to the fact that how well your target customer accepts the extra features in that product.
- New Concept–if your startup concept is completely new, the best strategy for idea evaluation is by making a “Startup – Prototype” and getting feedback of targeted market volume on that. The benefit of creating a prototype and then developing a full scale product/service is that it reduces the risk associated with new concept acceptance and provides guidelines for large scale execution.
[B] Remain Clear on Startup Vision
“Action without vision is only passing time, vision without action is merely day dreaming, but vision with action can change the world.” –Joel A. Barker
Every idea has a short and long term vision. Whether you are preparing for a competitive exam or studying some of the famous books, there is always a goal in your mind, either to crack the exam or getting wise. Most of the entrepreneurs have to major long term objectives in mind for their startup concepts –
- Getting bigger and bigger day by day and become leader in some domain
- Becoming expert in some vertical and getting acquired by some big player
Same is applicable for TinyOwl, whatever may be the short term and long term vision of their founders, but FS Labs is pretty sure that their short and long term market capturing strategies were not in line with their future goals.
If your target is to become the leader of some domain, the focus factors should be operational excellence, market penetration and capture, timely funding and a sustainable expansion. If your target is to become a support to some of the existing players, the focus should be on market capture, loyal customer base and uniqueness of the feature (in terms of it development and customer trust).
[C] Know the Competitors Very Well
“Take the initiative to ask your customers what they think than to wait for your competitors to do it.”John Wechsler Co-founder, Formspring.
Market competition is the biggest challenge for any of the startup. Whatever may be your domain of startup, other players are always there to stop you in penetrating their market volume or creating a new customer base.
TinyOwl’s is not a completely new concept; this market of INR 89K Crore has almost 120 startups in competition out of which 60 started in 2014 only. Leading player of the market has been Foodpanda, Zomato & Swiggy.
Foodpanda already has strategic partnership & investment in Swiggy. It is looking to strengthen its presence everywhere to fight a global battle with Zomato. Most of the investors are already aligning themselves and are less interested in investing into a venture which ultimately going to get acquired in name of sector consolidation. Facing too stiff competition, TinyOwl has not been able to raise enough funds to run its operation after unplanned expansion.
TinyOwl has also burnt huge cash in promotions and advertisements. But on this front also, Foodpanda and Zomato are always in better position due to unlimited fund availability with them. As per FS Labs, for better understanding of startup market competitions, we can categorize the competitors in three verticals –
- Level 1 – Same Domain Startups with Limited Funds and Reach
- Level 2 – Same Domain Startups with Huge Funds and Moderate Reach
- Level 3 – Big Players getting Diverse
FS advises startups to overcome the level 1 competition by achieving operational excellence, enhanced consumer relationship management, level 2 competition by market penetration strategies and level 3 competitions by evaluating the market trends of acquisitions and growing your business in that direction only.
[D] Move ahead with Proper Plan
“A Goal without a plan is just a wish”
For converting an idea into a business model, a very essential element is the planning of your future today. Without a defined frame work for your objectives, all that happens is you start beating around bush. Though they have started a bit late, TinyOwl firing saga is an excellent example of having plans for their future, the alignment of resources as per the need and the changes in model to enhance profit margins.
Any activity has five phases during its lifecycle: Initiation, Planning, Execution, Monitoring & Control and Closure. The knowledge areas involved during these phases are Scope, Schedule, Cost, Quality, Communication, Manpower, Procurement, Risk and Integration. So founders must plan every activity beforehand aligned with the available resources.
Now that TinyOwl has learnt its lesson, let us see if they could plan some magic to turn around the situation.
[E] Expand the Business Model as per Market Need
“Growth for the sake of growth is the ideology of the cancer cell.”- Edward Abbey, American Author and Environmental Advocate
Most startups start from a city and do exceedingly well before targeting an expansion into other cities. Basic of expansion is clear. Either your single city operation generates enough funds to serve your operations during expansion to other base or you have enough funding to start operations altogether in a new city.
TinyOwl secured timely funding but methodology which they followed was not up to the mark. When they secured $50 million funding they announced about targeting expansion in 50 cities. Where they actually spent the money was on promotions and marketing. Customer volume definitely surged because of the promotional offers, but it was not a loyal customer base. Expecting that large number of investors will be attracted toward investing in TinyOwl, its founders gambled to open new bases in other cities as well.
In fact TinyOwl has offloaded its delivery service as well and that required searching a new delivery player in each city where it planned expansion. It requires investment other than the operating cost of TinyOwl only as funding of delivery players is also a responsibility of TinyOwl.
As per FS Labs, Market expansion should be carefully planned and should happen only if founders are able to see light at the end of tunnel. This could be in form of – securing positive operating margins and support of investors.
Wish you luck for your startup. Stay connected with FS for more updates.