Over 95 percent of startups fade away within the first five years, and even more within the subsequent five years. As a survivor of these critical milestones, we can emphasize the vital importance of consistently reassessing and adjusting your business models.
Certain business models inherently outperform others, but stakeholders often neglect to ask the right questions, either due to perceived complexity or the effort involved. For those seeking a concise overview of what distinguishes one model from another, here are six key questions that Dubai Next should consider leveraging to enhance the survival rates of startup cohorts.
- Does the initiative establish a platform for interactions? In a landscape where the value of products and services is increasingly integrated into data-driven digital networks, having a platform strategy becomes crucial. Standalone offerings, while not inherently flawed, lack the exponential growth potential seen in many platform business models. For instance, Michael Bloomberg’s success with the Bloomberg Terminal was not just about technology; it was about fostering social interactions, making the technology irresistibly appealing to users.
- Does it make a significant impact? Many entrepreneurial ventures fail because the improvements they offer to customers’ lives are marginal. Groundbreaking offerings should make a noticeable difference in what customers can do or the problems they can solve. Wise, for example, revolutionized foreign exchange trading by offering significantly lower prices than traditional banking alternatives, leading to massive customer adoption.
- How interchangeable is our user interface? Some user interfaces are easily interchangeable, while others create user loyalty. For instance, Excel’s platform may not be the most efficient, but users are hesitant to switch due to the learning investment. Products like Google Sheets replicate functionality, minimizing the learning cost for new users.
- Once and done, or ongoing problem? Capitalism often favors treating chronic problems over offering complete solutions. True cures tend to come at a steep price, as providers seek to profit from a one-time opportunity. For example, drugs curing formerly incurable diseases can be prohibitively expensive.
- Transactional or relationship-oriented? The nature of economic transactions varies, with commodity purchases requiring less relationship establishment. Higher-risk purchases or those requiring customization emphasize the significance of the buyer-seller relationship. Emotional and economic benefits associated with the purchase often lead to a greater willingness to pay and stickier relationships.
- Lone ranger or co-created? While the idea of a lone innovator like Steve Jobs is popular, collaborative approaches involving communities of participants, including users, developers, makers, and designers, tend to be more powerful today. Being part of such a community makes it challenging to leave, particularly for those who contributed to key aspects of the creation process.
