Incremental Innovation / Exploitation Strategies

This is my perspective on the way some of the so-called successful startups are doing business in India. These views are completely based on my observations and agreed upon by a few fellow entrepreneurs.

Innovation is the process of translating an idea or invention into a good or service that creates value or for which customers will pay. Everything revolves around this word in any successful business model. Very interesting question pops up when you start thinking how innovative those considered-successful businesses are:

Can you call a well-funded company innovative?

I call a company innovative when my life is positively impacted by their products/value and when I see constant momentum in their evolution. Most of the investments happen on promising user growth. Early stage entrepreneurs struggle a lot with initial funding because there aren’t many people who can invest in the company by just analysing the idea. Investors need to look at traction to decide whether to invest or not. Most certain promise that’ll be put forth while the investing is the future scale at which company can operate. During all this, most of the times product innovation is taken for granted. Scaling the company without enough momentum in product innovation will definitely be a disaster. A lot of well-funded indian startups are shutting down, but is it just because of lack of product innovation or lack of a good revenue model?

The real question we should be asking is what is at the core that is driving the company? X: Is it creating a product that will enable us to loot by exploiting the willingness to pay of poor customers or Y: Is it creating a product that customers feel happy to pay for? I would like to share some incidents that can justify that those companies clearly have X in mind:

Incident 1 (Housing.com):

housing.com/rent was one of very impressive products I have used. For past one year I have moved across three cities and have benefited a lot from finding houses for rent on housing.com. And all of the sudden the company announces that it is shutting down renting portal. Most of my friends need it. I have seen my friends who work in housing post in facebook about how bad they miss that product. There is no lack of product innovation here. I’d love to have that product back or in fact pay for that on need basis. They have shut it down because it is not generating enough revenues.

Incident 2 (Paytm):

One of my colleagues, saw a trimmer originally worth Rs.1500, for Rs.32 on paytm. We saw roughly 15,000 user had ordered that product already in 30mins (data displayed by paytm). Without any delay he ordered it, only to receive a message one hour later saying that was a technical glitch and they are refunding the money. The catch here is that the money was refunded to his paytm wallet. We have shared this story with many people and apparently they are all familiar with this type of activity in paytm.

Incident 3 (Ola):

I really don’t want to get into surge pricing :(. These days I have to try at least 4/5 times to get a cab driver who agrees for the trip. They simply deny duty because they don’t want to travel to my destination. Why can’t Ola give a simple destination preference to drivers and filter for me. Product innovation is definitely a question here but I have to say I’m impressed by the way they are exploiting my willingness to pay for need.

In all these cases I was willing to pay for my need and they are exploiting. They are damn good at that. All these companies would be having a completely different tone in their products if Y is in their core. And the product I love using was shut down. I think shutting-down is inevitable for them unless next big round of funding hits them and they can keep acquiring users by cheesy offers. Innovation has been forgotten. I’m sure they call it business innovation, but read this article again and you would understand the difference.

Update:

A better & deeper explanation of my thoughts in this article!