Want to Build a Business But You’re Out of Ideas? Hype Cycles Can Help
by Akarsh Dhaiya
In business — as with many other things — timing is everything.
Whether it’s hiring a new executive, raising funds from external investors, or pivoting your business model, executing at the right time can bring your business closer to success. However, finding out the right time to do anything is never easy, and it takes long company-wide discussions and pieces of advice coming from everyone before deciding whether something big is worth doing at a certain time. Yet in some cases, that advice might come from merely observing.
Take Peter-Paul de Leeuw, the Co-founder and CEO of AmberScript and my latest guest at The European VC Journal. His startup offers an artificial intelligence-powered software that automatically converts recorded speech into text, as well as a suite of other features that allow users to easily edit, export, and use the automated transcription. AmberScript has raised seed funding from VentureBuilders Capital, and it’s received numerous awards and recognition from various European organizations.
In the podcast, de Leeuw revealed that one of the main resources he looked into when deciding what to pursue for his startup is the “hype cycle model.” Established by US-based research and advisory firm Gartner, the hype cycle proposes a “life span” of how new technologies are received by the public.
The model details five phases of an innovation’s hype cycle: (1) a technology is first picked up and receives hype; (2) it generates attention that Gartner describes as “inflated”; (3) the hype dies down because of the failure to satisfy high expectations; (4) new products that build on the shortcomings of earlier failures are released and reignite interest in the technology; and (5) the technology begins to be used by the general public.
For de Leeuw, Gartner’s annual reports on where technologies are in the hype cycle helped in his decision to pursue speech recognition technology for his startup. He advises his fellow entrepreneurs who want to build their own startups but don’t know what to do to take inspiration from these reports and see how technologies are being received by the public.
“What really helps is to become really up to speed with the trends in technology,” said de Leeuw. “There are trends and developments [behind] why some companies start now and others start five years later.”
Hype versus traction. Hare or Turtle.
He distinguishes between two types of technologies: the first being those that have large amounts of hype and are often touted as “the next big thing”, and the second being those that have gone through both the highest highs and lowest lows of hype and is now ready to mature. While he doesn’t prefer one over the other, he advised that entrepreneurs should use this framework as a guide for what technologies they should consider if they don’t have any ideas for a new business.
But looking at hype cycles alone isn’t enough. According to de Leeuw, he compared his research on the hype cycles with the investments being made by venture capital firms around the region. The technologies receiving the most hype aren’t necessarily the technologies being used by the most funded startups, so de Leeuw surveyed the market before deciding to work on speech recognition technology.
“Looking at Dealroom or Crunchbase, you can see which areas are being invested in now, and then you can pick a technology. And you can brainstorm from that technology on what’s possible,” he advised. “You connect the technology with the financing part.”
The technology de Leeuw is currently working with is in the latter part of its hype cycle. In the 2018 Gartner report, the advisory firm said that speech recognition will enter the “Plateau of Productivity” stage in the next two years, which means that it will soon experience high adoption not only from business circles but also by the general public. And de Leeuw is beginning to see the benefits: AmberScript now works with over 29 languages, and it’s expanding outside the Dutch market, aiming to become a household name across Europe.
Of course, the hype cycle model isn’t perfect. There have been several studies and reports disproving the framework and arguing that it doesn’t apply to all technologies. While Gartner provides a comprehensive outlook of which technologies are becoming more popular, it shouldn’t be treated as the be-all and end-all of tech innovation.
However, what de Leeuw highlighted was how the significance of timing extends even to the type of technology your startup will focus on. Studying the highs and lows of how this technology is received can give you a much-needed edge with your business, whether it’s from following the hype or by creating the next big thing.
“Timing is really important,” he claimed.
Akarsh Dhaiya has an MBA from INSEAD and is a Managing Partner at Rocket Capital — listen to him unpack the VC and startup world at the European VC Journal (apple.co/2Izu3uD).
