Marie-France Derderian, Director of Glion’s new MSc in Hospitality, Entrepreneurship and Innovation, discusses the different profiles of entrepreneurs and ‘start-uppers’ – which is yours?
It’s very fashionable to say “I’m a start-upper”. Especially for Millennials, or for people in their fifties who’ve been fired from salaried jobs. But what is the reality? What is the difference between entrepreneurs and start-uppers? First of all, we have to look carefully at the words and the meaning behind them. I’ll begin with some definitions, then go further with the goals, tasks and tools for both of them. I’ll conclude with the skills needed for success.
1. Some definitions:
What is a Company?
It’s an organization which runs a business model to sell products and services in exchange for incomes and proﬁts.
What is a Start-up?
It’s a micro enterprise and a temporary organization that looks for a repeatable and scalable business model. As a matter of fact, an entrepreneur is looking to do business from day 1; whereas a start-upper is looking for money to develop and validate his/her final sustainable and profitable business model. Disruption is the essence of the start-upper (and is the core DNA of the start-up) but it is more a diversification, or a tool for portfolio development, in the view of the entrepreneur. Let’s see what an entrepreneur needs to do to be successful:
2. Goal, Task, Tools
The entrepreneur’s main mission is to implement the right strategy in order to accelerate future growth.
“Every business needs to grow – to respond to change, to serve its customers, to invest in its future – but it’s about growing in the right places, and in the right way,”– Sergey Brin, co-founder of Google.
An entrepreneur has to be relevant in his/her mission and vision, alongside the associated governance, compliance and board approval, without forgetting the need for shareholder agreement. He/she has to explore the game changing ideas, the new drivers and emerging scenarios, instead of being aligned with today’s market.
One of the main tools is the business model,which makes an assumption of failure and that your ultimate operating scenario won’t be what you think it is today. It’s a synthetic document where the entrepreneur explains how the company will do business and make money – with whom, for whom and what value will be created. The business model aims to show how to achieve its vision and mission as well.
Key metrics for the business model include:
- Virality & word of mouth
- Early adopter stickiness
- Total addressable market
Example: razor and blade revenue business model:
In this case the company has loyal customers and sells the related accessories at a premium price. This can be compared to the razor and blade, where the razor is a one-time purchase, but the blade is a continuous purchase; and thus the company ensures a constant stream of revenue by pricing the blade at a premium.
Ditto with Nespresso’s coffee machine business model: the coffee machine is cheap or not very expensive; it may even be sold with zero margin (or very little), but the coffee capsule is where the business is done and what makes the business model sustainable AND profitable.
Another key tool is the business plan,which assumes steady improvements to products, markets, and methods but with the underlying strategy remaining constant. It’s a formal document (many pages) which will explain the business model in more depth, including the strategy; its implementation and the associated governance.
Key metrics for the business plan include:
- Return on investment
- Total cost of ownership
- Improvement in KPI and total served market
To summarize, an entrepreneur will start to investigate and explore a business idea, develop this idea thanks to hypothesis and market surveys. Then the business model is created, after which this business idea and model is validated through writing a business plan with figures, forecasts and turnover projections.
For a start-upper, the main goal is to find his/her product/market fit (PMF), which means being in a good market with a product that can satisfy it (as an example, see the E-scooter business case below).
He/she uses some different tools, such as the Lean Start-up, which is a method of testing the assumptions and hypothesis of a business idea in an iterative manner, while validating the product/market fit before he /she ships a complete product.
The key is to eliminate waste, and to minimize resources in order to survive longer and have more chance to be successful. The start-upper will also work on creating a business model; but this will go through many iterations and explore many different concepts before the start-upper settles on the right one.
The E-scooter rental case study:
We can take a ‘real-world’ example with the E-scooter rental market. In this case, the customer appropriation (PMF) is good, easy and quick to find. But three big threats are serious enough to potentially compromise the e-scooter start-up life spans:
The 1stone is vandalism which has been much higher than expected. E-scooter life span is less than three months and, according to BCG analysis, the time to break even is 3.8 months.
The 2ndone isregulation with no rules, the sidewalks are becoming a jungle and hazardous for walkers. Consequently, strict rules and regulations are being drawn up – for example in London, where E-scooters are forbidden, and in Paris, where they are starting to be limited in space and in number.
The 3rdone is competitors as with many previous markets, when business starts to boom, many other players try to establish themselves in order to take a slice of the market share (even Usain Bolt, Olympic gold medalist). The future of smart cities and micro mobility are trendy topics.
Inside the mind of the entrepreneur
With regards to the profile, the entrepreneurial mindset and required skills, what can we observe?
3. Profile, mindset and skills
- a leader
- a risk taker
- an innovator
- and a manager
AND he/she must speak English – or business English at least.
AND he/she has to be aware of the importance of the digital world, such as social networks, e-reputation, influencers, bloggers (i.e. a multi Michelin-starred chef must also be visible on Instagram, since food is topic number 2 on that platform).
We are in the era where customers have the power over your reputation. We are moving from the sharing economy to the experience one: the customer journey (online and offline), that should be processed.
The skill requirements are mainly around soft skills, such as an ability to trust someone, to be an active listener, to share, to delegate, to be a visionary in a VUCA world (Volatile, Uncertain, Complex and Ambiguous). In short, to be an inspiring and motivating person.
In addition, for a start-upper:
As a start-upper, he/she will manage to work with incubators, accelerators, investors and collaborate in open innovation with big corporates (all of which is time consuming).
Another set of competencies linked to the start-upper profile relates to the collaborative community – such as using crowdfunding campaigns. Use of these platforms is more common among Millennial start-uppers than the middle-aged entrepreneurs.
According to a survey by HSBC private bank entitled Essence of Entreprise, another crucial topic for the start-upper is a desire to change the world and make improvements with regard to the climate and our impact on the planet.
Corporate Social Responsibility is also a very important matter for 89% of the Millennial start-uppers surveyed, compared with 63% for middle-aged entrepreneurs. Social and societal entrepreneurship factors, such as keeping the production and manufacturing local, are also key.
Last but not least:
We are moving rapidly from work/life balance to work/life integration. No barriers. You bring your work lives home and your personal lives to work
A quick look at skills
Communication skills are crucial such as abilities to pitch to different audiences, more numerous as your market and customer target is not clear, or not very well defined
The ability to be a strong networker (partnerships are crucial) is mandatory, as is tenacity(extreme) when your 7thbusiness model fails!
Steve Jobs said the difference between a great entrepreneur and a bad one is tenacity.
I have a simple message to entrepreneurs and start-uppers: disrupt or be disrupted!
If you do not shape the market someone else will – and you will not like it when you lose your opportunity!
- Discover more about the new MSc in Hospitality, Entrepreneurship and Innovation
- You can also find out more about Marie-France Derderian here