Why You Should Track The Newly Created Startups in Your Industry?

 In GreyB's Thought Process, Popular Strategies

A wise person once said – Be wary of the startups launching in your industry. What sounds like an interesting idea with a small team working on it today can give all the giants a run for their money in the future.

The statement couldn’t get truer. We are living in an era where upstarts or new startups have captured the majority of markets earlier owned by giants or created their own markets which have affected more than a couple domains at a time.

Think Airbnb which has hugely impacted the hospitality industry and have forced hotel chains to reduce their costs to be chosen as a viable option for customers. Or Uber and Lyft, the transportation network companies which owns the majority market share of the billion dollar worth ride-hailing industry, and sent the taxi and car rental industry tumbling down.

These are just a couple of examples. If you look around, there are hundreds of startups springing up trying to solve some problem in a particular domain, attempting to become the next Uber or Netflix. Chances are they might even succeed since one of the major barriers in their growth – availability of funding – is no more existent.

With the remarkable rise of Venture capital firms and Angel investors enthusiastic to invest money in startups, in hopes to ride the wave of projected profits, the only thing keeping these startups away from becoming a profitable one is creating the perfect solution which would receive wide acceptance.

The perfectly crafted solutions for an itching problem faced by the domain coupled with exceptional business models, could in no time give these startups an edge over the Giants in the industry. And that is why it is extremely important for companies to keep an eye on the newly created startups in their industry.

Because no matter how much of your balance sheet is allocated to research and development, no matter how much you aim for disruptive innovation, there always exists a more strategic key to innovate or to own that innovation. And chances are, these newly launched startups could bring to the table a better version of that technology with a better business model.

However, it is always possible for industry giants to overtake these startups given the abundant resources available for R&D and better marketing and sales channels. With cleverly crafted strategies, it could only be a matter of time before companies come up with innovations that could overtake the startups. But that comes in later.

Any of the planning and plotting and strategizing could only help once you’re aware of these developments in the industry. How could you be aware of these developments?

By tracking the newly launched startups in your domain. Because there are chances that they could disrupt your entire industry and it would be too little, too late when you take action if you’re not tracking their activities.

Why you should track the startups in your industry?

Let me give you an instance.

In the early 2000s, CD’s and tapes were still dominant. Music companies made handsome profits selling music in this form and downloading MP3 files from the internet was not very common yet. With the advent of smartphones and their increasing popularity, came apps to replace some gadget of everyday use. Among hundred of those apps, was launched an app that tried targeting music lovers and achieved huge success.

Launched in October 2008, Spotify had its own unique business model. Having tied with up major labels, Spotify, instead of providing paid songs that can be kept for a lifetime, gave away millions of songs for free and kept a subscription fee of $10 if anyone wanted to open their playlist for an ad-free access.

Spotify achieved instant success which only went onto grew multifold. From 12.8 Million euros in 2009  to an annual revenue of 2.9 Billion euros seven years later, the projected growth and success of the model was quite apparent.

If only other companies in the domain had tracked that, they could have got on this wave comparatively earlier, and not just would have made huge profits, but also could have been a strong competition to the music streaming giant.

Checking what new startups are up to keeps you updated. It brings in to notice what’s trending in the market and what your consumers need next. Small firms owning disruptive solutions to a problem troubling your end clients might be breathing out there. Are you keeping a check?

Given that there are a  lot of startups springing up at a time, which could make it difficult to track all of them. However, there are two particular categories of startups that you need to pay special attention to, the former having the potential to severely impact your organization and its market share.

Let’s have a look at both these categories.

Startups founded/cofounded by one of your ex-employees

Anthony Levandowski, the co-founder and technical lead on the well-known project Waymo, founded Otto (a startup working on driverless trucks) in 2016. Levandowski later sold the startup to Uber for $680 million and became head of the Uber’s self-driving car research team. The company enjoyed a lot of media attention, being the first self-driving truck to complete a commercial delivery – of a  trailer full of Budweiser.

It was nine months later when the company faced a lawsuit filed by Waymo –  the self-driving project that Google started – alleging Levandowski of stealing and using Waymo’s secretive LIDAR development tech. According to the complaint, Levandowski downloaded more than 14,000 confidential files before filing a resignation in Waymo. The company accused Levandowski of using Waymo’s trade secrets to start Otto, selling it and heading Uber’s self-driving project later.

A former employee knows the system inside out and can easily cause a breach of laws protecting confidential information. Keeping a check on startups entering your niche updates you regarding any such felony. Yes, Uber later fired Levandowski and halted the manufacturing of its self-driving trucks.

But is fighting for your own property worth the pain?

Startups found by an Industry Leader Could Skyrocket 

An influencer in the industry knows the system thoroughly. S/he has surpassed the challenges that others might have trouble noticing. If s/he has an idea, chances are it must be solving a huge industry-specific problem, with the team assembled at a startup. And with proper analysis, you can easily get your hands on the aforementioned problem and the valuable solution. 

If found unworthy, you might learn what new has entered the niche, else this investment will become worth all your efforts. Figuring out that an influencer has opened a new firm in your industry must raise a red flag. Chances triple if these influencers are present at a leadership position in a huge enterprise in your market. Such startups have great potential to introduce a big disruptor in the market. Think Pinterest. Think LinkedIn. Think Otto.

Conclusion

It’s always great to be ahead of the competition. It is even better when you have a track of companies which might be a strong competition or an industry disruptor in the future. While competitive analysis keeps you in sync with the latest developments by competitors and top companies working in your domain, keeping track of startups in your domain could give you an idea of developments that could blow up(in a  good way) in the future.

Once you’re aware of these developments, you can always formulate a strategy to beat them to market and earn a lion’s share.  If the former doesn’t sound like a great option, you could also invest in these companies and ride the wave of projected profits, along with owning a piece of that company or make it absolutely difficult for them to work on that piece of innovation by accruing patents that are likely infringed by their innovation. The choice is yours.

Which one would you go with?

Authored by: Neha Tanwer, Research Analyst, Market Research and Shikhar Sahni, AVP, Operations.

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