“Startups work their way bottom-up, trying to develop products that are immediately valuable to the customer and that can grow steadily on the market. Is this a lesser form of innovation? Compared to what, exactly?”
A post from Pandodaily columnist Francisco Dao gives an interesting view on innovation, and the role startup businesses are expected to play in promoting world-changing innovations. Mr Dao’s reasoning reads more or less like this: to change the world requires real ground-breaking technology, of the kind it takes decades and no ROI constraints to develop. Regardless of the venture-capital funds they can raise, startups are constrained by short-term profitability goals imposed by their funding partners. Therefore they will never be able to pursue the innovations that really matter, i.e., long-term, paradigm-changing visions such as the Internet or the self-driving car. For these, we should pin our hopes on public institutions or on the few private investors with sufficient cash to invest on decade-spanning projects with no immediate returns.
Mr Dao’s opinions have a ring of truth, especially to people like me who have been involved in EU’s multi-annual multi-billion research programs. From this perspective Google had, in its startup times, far less ambitious and “important” objectives than it has now, with its monster investment on the intelligent car.
Still I find the underlying assumptions questionable. First, are really startup entrepreneurs set out to change the world? Yes, if we stick to the Hollywood cliché of postgraduate students inventing time travel in a garage. Not at all, if we take a more pragmatic viewpoint on the reality of a startup business. In the “The Lean Startup”, Eric Ries defines a startup as any organization, for profit or not, big or small, set out to develop a new product in conditions of extreme uncertainty. Uncertainties concern the idea, still unproven, the market, still unexplored, and how the idea can be grown into a sustainable business. I think these were the foremost concerns of Google’s founders, in their startup days. They did not set out to change the world, so I find Mr Dao’s argumentation based on a misleading interpretation of what startups really do.
Then, regardless of the entrepreneur’s motivations, who is to judge what is world-changing and what is not? From a user viewpoint both Google and Facebook went a long way in changing the world, as their users’ lives have been significantly transformed. And it might not be entirely true that startups cannot contribute to world-changing innovations, aiming at grand social and environmental objectives. Look for example at the Cleanweb initiative, formed by a myriad of IT startups working on energy-consumption reduction and sustainability.
Startups work their way bottom-up, trying to develop products that are immediately valuable to the customer and that can grow steadily on the market. When they succeed, they actually manage to change the way we work and live. I do not see why we should consider this as a lesser type of innovation than what should be achieved through multi-decennial programs aimed at foggy “groundbreaking” objectives. I may be wrong, but I do not believe that innovative thinking is favoured by being unconcerned by deadlines, budgets or value for the users.
While we wait for the self-driving car, if it will ever see the light of day, we as normal users are happy to enjoy the non-foundational, practical innovations that startups try and bring on the market.
by Paolo Paganelli