I met up with an entrepreneur friend, Vishal three months back and asked him about his new venture, which he had started a year back. My first question was: What is the value proposition of your business? He candidly said “Nothing”. I was taken aback. Unable to believe, I nudged him again.
“How does your business differentiate?”
He clearly didn’t have any answer.
Considering that there were already existing competitors in the industry which were larger and were well-funded, me-too strategy based on the following 2 premises is a flawed one:
1st premise is that the Indian market size is so large and it is under-penetrated: Since India is one of the few countries in the world with such a large young population, still predominantly savings driven, now moving towards consumption; this throws up substantial opportunity for any industry. A large under-penetrated market definitely leads to growth, often a 3-digit growth in some years, but at what cost. Growth with the objective of garnering market share or GMV or topline is living in fool’s paradise. During the period 1920s, over 1,800 car manufacturers were believed to have existed in America. By the early 1940s a most of them had gone out of business.
As Richard Feynman, the American physicist had said
“The first principle is that you must not fool yourself – and you are the easiest person to fool.”
2nd premise is that the larger fish will buy the smaller fish someday or the Greater Fool theory: Greater fool theory works best when there is too much money chasing too few goods; it is like buying something just to pop it some-one else at the right opportunity. Even the business which has been built is based on the intention of getting sold at the priciest valuation!!! It is like going to Cindrella’s ball and wishing to come out just before midnight.
This is what happened when some of the unicorns after having raised billions of dollars when they started pruning their discounts over the last few weeks to focus towards profitability. Perhaps, the party is getting over!!
Last week, when I spoke to Vishal, both these premises were getting debunked since he was shutting shop as he clearly understood the importance of creating a value proposition. After all, a business without any value proposition is like a boat without a rudder.