Start-ups better build Camels Companies, not Unicorns

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CEM – Business Insight, Lagos
Camels are able to survive for long periods without sustenance, withstand the scorching desert heat, and adapt to extreme variations in climate. They survive and thrive in some of Earth’s harshest regions.

Camel business are built to be resilient and withstand some harsh macroeconomic shock. They survive in the most predating crisis as experienced within the past six months stretched COVID-19 lockdown

Description of most of the Silicon Valley business fits into the unicorn mascot. Traditionally, this companies are built with the rapid growth ideology undermining those business architecture which guaranty survival in the face of business crisis.

Unfortunately, this growth-at-all-costs methodology, which the Valley’s top players are exceptionally good at, only works in the strongest bull markets, in the most optimal conditions.

The ongoing pandemic, hitting businesses without exceptions, is teaching strong lessons and giving compelling reasons for start-ups to concentrate in building businesses that can withstand difficult economic conditions.

What differentiate unicorn businesses from those of camel? Alex Lazarow discussed these in an article posted on Harvard Business Review.

Startup camels survive with three strategies: they execute balanced growth, they take a long-term outlook, and they weave diversification into the business model.

Camel companies are balanced

Camels have no interest in “blitzscaling” — rapidly building-up the enterprise and prioritizing speed over efficiency in pursuit of massive scale. They are as ambitious to grow as any Silicon Valley enterprise, yet they take a more balanced growth path. This balanced approach has three key elements.

These elements include

Right-pricing from the start. Camel companies set their price according to the quality of products or services unlike unicorn that view enticing customers with low price. Camels understand that price shouldn’t be considered a barrier to growth. Instead it is a feature of the product that reflects its market position and its quality.

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Cost management through the life cycle. At the same time, camels manage costs through the life cycle of their companies to align with a longer-term growth curve.

Changing the trajectory. Managing burn throughout the life cycle of a company prepares startups to weather tough conditions over a sustained period. The typical Silicon Valley startup has a cash trajectory with a deep “valley of death” — the graph line reflecting steep losses before profitability is achieved. The difference here is that camels maintain the option to adapt their growth trajectory and return to a sustainable business.

Camels are built for the long haul.

Founders at the Frontier understand that building a company is not a short-term endeavor. For many, breakthroughs don’t come immediately, but rather occur later in the company timeline. Survival is often the primary strategy. This allows time to build the business model, find a product that resonates with the market, and develop an operation that can scale. Competition will exist. But the race is about who will survive the longest, not about who goes to market first.

Breadth and depth for resilience.

Entrepreneurs operating at the Frontier face unique constraints which can often become strengths during times of adversity. Because entrepreneurs often are building startups in smaller markets by necessity — which markets are not sufficient on their own to grow and sustain the enterprise — they are forced to be born global, targeting many markets from the get-go. Frontier Car Group, a popular used-car platform, for example, launched originally in five markets, each serving as a regional hub. In some countries, the product caught on, but in others it did not, and the company learned valuable lessons along the way, shuttering those markets where it didn’t see a fit. But had the company put all of its resources into the wrong country to begin with, it might not be around today.

Culled from the Article; Startups, It’s Time to Think Like Camels — Not Unicorns by Alex Lazarow, published on the Harvard Business Review page. Read the full article here

 

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