innovation in dorm rooms and garages

Running Head: Innovation in Dorm Rooms and Garages i

Innovation in Dorm Rooms and Garages Abhinav Jana

Innovation in Dorm Rooms and Garages ii

Abstract

This paper applies the concept of innovation and shows how innovation in dorm rooms and

garages are becoming a trend and challenging the real world market head-on. The paper has

addressed the subject comprehensively while conducting an in-depth research and analysis. How

a Start-up differs in significant ways from a big company and how Start-ups would be more

successful in unbundling Incumbents, is the focus of this paper. Further, the strategies have been

presented together with various types of innovations that drive today’s entrepreneurs. The paper

concludes with my personal experience of working in both an established company & an

emerging start-up and my opinion on the startup culture.

Innovation in Dorm Rooms and Garages iii

Table of Contents

Introduction…………………………………………………..………………………………………………..……1

WhatisInnovation?................................................................................................1

WhatisaStart-up?.................................................................................................1

TypesofStart-ups.……………………………………………………………………………..………2

WhatisanIncumbentBusiness?.............................................................................2

Discussion…………………………………………………………………………………………….……………..…3

HowStart-upsaresuccessfulatunbundlingIncumbents?……………….….……………….3

HowaStart-upisborn?………………………………..……………………………………….…………….4

HowAIRBNBStarted?………………………………………….………………………….….……………….5

SomelegacystoriesofInnovationinDormRoomsandGarage……….…………………..5

Conclusion(Myexperience|RoomerTravelInc.)………………………………………….……….6

References…………………………………………………………………………………………………………..….7

Innovation in Dorm Rooms and Garages 1

Introduction

WhatisInnovation?

Innovation: Innovation is a new idea, more effective device or process (Wiki). Usually, managers equate innovation with creativity. But innovation is not creativity. “Creativity is about coming up with the big idea. Innovation is about executing the idea — converting the idea into a successful business” (Vijay Govindarajan). “Fresh thinking that creates value” (Richard Lyons).

From all the definitions above and from what I understand, I believe that innovation is anything that bridges the gap between our wants/needs and us. We don’t have to go out to the edge of the road to lift our hands to get a ride but just a click at our comfort and our ride is there in minutes. A click can get you a new pair of shoes at your doorstep the right color and right size. To me, answering every problem or finding a better solution to the existing one, there exists innovation.

WhatisaStart-up?

Start-up: Start-up is an entrepreneurial venture or a new business in the form of a company, a partnership or temporary organization designed to search for a repeatable and scalable business model(Wiki). “A startup is a company working to solve a problem where the solution is not obvious and success is not guaranteed,” says Neil Blumenthal, cofounder and co-CEO of Warby Parker. “Startup is a company designed to grow fast. So Startup = Growth” (Paul Graham).

When I hear Start-up the first thing that strikes my mind is innovation and the great mind/minds behind the innovation. It’s a way or an act of starting something new, it could be anything just anything which might change the way to what we did previously that saves money and time. Most of us would relate it to a guy or a two working in their dorm room or garage with an idea to change the idea to a prototype, which will turn into Facebook or Apple someday.

My grandfather asked me what Uber is, the other day. I saw my dad ordering shoes for himself on Amazon. My mom knows what a startup is. During this Internet and information age, startups have become the new cities and young CEO's the new kings. Startups are the talk of the town. Youngsters want to build stuff. The aspiration of working in a large company has changed into aspiration of owning a startup. It is safe to say that working in a startup or owning a startup is much cooler than owning trendy designer clothes. The NYC subways are filled with advertisements of startups. Startups came, Startups saw and Startups are conquering. It’s not only confined to technology but also in areas like agriculture, social, food and entertainment etc.

Having worked in a large corporation in Dubai and having worked in a startup in the Big Apple, I can give a first hand account of the difference in culture. The startup culture is healthily infectious. Working throughout the night in a startup does not make you as tired as working half a day in a large corporation. It is not about your preference or interests, it is about the environment. If there is positivism in the atmosphere, you will be rejuvenated all through the


day. It is the culture that keeps you hooked to your desk solving the problems. There is openness among the employees. Everyone is trusted and every discussion happens in consultation with all involved. Everyone works as a team for the betterment of the company. Closed-door chambers are out of fashion and even leaders sit among their employees and work. There is chaos, there is disorder, there is confusion but there is a hell of a lot of fun.

TypesofStart-ups

According to Steve Blank there are four different kinds of Start-ups and I would completely align with his theory. The four kinds are

§ Start-up in an Existing Market

In an existing market there is a user and a competitor and user could easily tell us about the basis of competition. It’s easier for Start-ups in existing market to plan their product as per customer preference and forecast the revenue streams.

§ Start-up in a New Market

New Markets is just opposite to the existing market there are no users and no competitors and it is an entirely new innovation that might work or might not. It is very hard to create a product or service in this market, as there is no clue about the customer preference. There are no partner channels that you could think of to help boost your Start-up and the revenue remains flat for few years. The cash time and investment needed in New Market is very different than the Existing Market.

§ Start-up in a Resegmented Market

Resegmented Market is a variant in the Existing Market, i.e. there is a giant incumbent who is the market leader and to get head-on with it it’s equivalent to committing suicide. So in order to place our product in such a market it’s essential to form a strategy that would help the start-up have its place. It could be a low cost strategy or same cast and more benefit strategy. It could be also to start with the segment of customer overlooked or ignored by the incumbents and then grow slowly to disrupt them.

§ Start-up in a Clone Market

Clone Markets is to copy a business model from one state, region or a country to an entirely new place with different customers. Reverse Innovation as explained by Vijay Govindarajan could be related to this type of market.


WhatisanIncumbentBusiness?

A firm that is already in position in a market (Oxford Reference). A company that is powerful and has a large amount of market share (Investopedia).

I would term it in a way that an Incumbent Business is any company, which is known to most of us and is a market leader with a brand image. They dominate the market and are the kings of their specific product or service area. It is very hard to penetrate in their markets without a well disruptive strategy as explained by Christensen.

Discussion

HowStart-upsaresuccessfulatunbundlingIncumbents?

“Startups are not smaller versions of large companies, but interestingly we see that companies are not larger versions of startups.” (Steve Blank)

Before 2009 -My flight is at 3am tomorrow morning. Everything is ready now, question is how I reach airport from my house. If by train, I would have to leave 3 hours early and change 3 trains, alright I would go out to the taxi service and wait for sometime I am sure I will find a taxi or why not book one taxi for that time but what if he doesn’t turn up on time plus its expensive.

Now – Wake up at 2am, click for a Ride and my car is outside my house in minutes.

A problem leads to a solution and this process of solving a problem is innovation and innovation finally leads to what we call, a Start-up. Technology is moving with a speed of light before you can settle with one the next one arrives more powerful and cost efficient. The change from before to now is where the Start-ups are born. They follow the speed of light parallel to technology but Incumbents are stuck with the old ones and the process of transition from current technology to the newer one is slow.

According to Hemant Taneja (Managing Director, General Catalyst) Scale isn’t what it used to be. It’s never been easier to start a company, and as a result new entrants are unbundling incumbents’ businesses and chipping away at their advantage. Start-ups like The Honest Company, Warby Parker, and Airbnb are able to quickly win market share from leading businesses like Procter and Gamble, Luxotica, and Starwood Hotels by decomposing markets into highly customized niches so that the incumbents can’t compete on scale alone.

Things are changing and in today’s world they are changing at a faster pace. Customers have become smarter, wiser and know much more about the developments around them. They are more loyal to the value for money rather than the existing brands. If there is a new technology, which is better and faster we wont mind trying it and shifting from our regular habit brand to new enhanced, cheaper and innovative one. Social media and other public platforms have


become the hot spot space for providing reviews openly to everyone with ratings and experiences from a new product or service.

A very good example would be The Honest Company, which is a consumer goods company, co-founded by actress Jessica Alba, that emphasizes non-toxic household products to supply the marketplace for ethical consumerism (Wiki). It started with building a strong customer relationship with the “millennial moms” by selling diapers that were made of organic based materials and replaced the petroleum-based ingredients. By building the brand loyalty it started adding other household products. Today, the company looks like a fast-growing, early version of the next Procter and Gamble.

HowaStart-upisborn?

First think that strikes my mind is The Innovator’s DNA. Innovative entrepreneurs have something called creative intelligence, which enables discovery yet differs from other types of intelligence (as suggested by Howard Gardner’s theory of multiple intelligences). Innovation skills are very the backbone of any innovator or I would say of an entrepreneur.

An entrepreneur always thinks ahead of time and tries to find that one missing thing from the current. They have a strong observation* to see through the problem and find something new to solve it. Now idea turns into a prototype and it is very important to question* “Why?” and “Why not?” and “What if?” After nursing logical answers to all the questions it is important to experiment*. The innovative entrepreneurs are all engaged in some form of active experimentation, whether it was intellectual exploration (Michael Lazaridis mulling over the theory of relativity in high school), physical tinkering (Jeff Bezos taking apart his crib as a toddler or Steve Jobs disassembling a Sony Walkman), or engagement in new surroundings (Starbucks founder Howard Shultz roaming Italy visiting coffee bars).

Associating*, or the ability to successfully connect seemingly unrelated questions, problems, or ideas from different fields, is central to the innovator’s DNA, once everything is put together and the prototype makes sense its time to patent and register the company. Now all we need is to


look for investors where come the networking* skills of an entrepreneur to play. Then finally a Start-up is born.

In the above image it shows how a Start-up is started and launched and how it plans further as per the response from the users.

*Innovator’sDNA5Skills

HowAIRBNBStarted?

Three guys who couldn’t pay their rents are today owners of a 10 Billion Dollars Company. Just a problem that got them into a situation, which later on become one of the major disruptive innovation for the accommodation industries.

The image shows how AIRBNB climbed the ladder of success. They faced some glitches initially but they worked through their business model and finally they are the AIRBNB today.

Some legacy stories of Innovation in Dorm Rooms and Garage

§ In 1975, the 20-year-old Jobs and Wozniak set up shop in Jobs' parents' garage, dubbed the venture Apple, and began working on the

prototype of the Apple I. Apple

§ Mark Zuckerberg started working from a dorm room at Harvard with the intention of getting people to connect and communicate more efficiently.; Facebook

§ Flipkart, now a billion-dollar e-commerce company in India, started as a mere online book ordering website way back in 2007 in a small apartment in Bangalore, India.


§ Jeffrey P. Bezos, at 30 years old, he began to see the Internet revolution take place, and made the decision to quit his job and start an Internet Company which now generates over $61 Billion in Revenue and holds the title as the world’s largest online retailer, was started out of Bezos’s garage; Amazon

Conclusion

My Experience

Either its money or its peace of mind can’t be both is what I concur after working for a big corporation for more than two years but what really changed my mind is when I worked for a start-up as part of my internship. When I started my internship at the very first day I went with a mind set to please my boss with a perfect organized executive image but I was amazed by how friendly the environment was. “You don’t need to suit up for this job” that was the first thing my CEO said as I entered the room. There was no fixed desktop for me and I could work on my own laptop and seat anywhere I want on the couch or on the floor it really didn’t matter but what mattered is the creative quality of work that is required. The ‘Get Shit done’ attitude in the atmosphere makes each one an individual entrepreneur in the room. I could easily share my ideas with my CEO and if he liked it he would just say let’s do it your way. During my tenure as a Planning Engineer with an oil and Gas firm, my work was more repetitive. There was nothing new for me after the first few months of my work. You are bound to follow the rules and get the work done the same way as it was done in the previous project. But while working as a Business Analyst Intern at a start-up, I was allowed to get my own imagination to work. According to me innovation occurs every now and then when you work in a Start-up because you see a problem and you experiment solution till you succeed unlike following the rulebook. On that note I would say if given a choice I would love to work for a Start-up or may be start something of my own. Roomer Travel Inc. Roomer travel is a secondary market place for non-refundable hotel rooms. It provides two services, one is platform where you can buy and sell non-refundable hotel rooms and other is insurance on your non-refundable rooms. The founder Gon Ben David booked a room in New York from Israel but could not make it due to last minute change of plan and was obligated to pay a significant cancellation fee for a hotel room that he did not use. Forbes shows that, in the U. S. alone, more than 221,000 unused hotel rooms are cancelled and paid for each day indicating that $8.6 billion dollars is wasted annually due to non-refundable hotel room cancellations. So Gon discovered that this was not a problem that only he faced but many others


like him did too. It is the concept that makes Roomer unique, and its automatic validation system makes the deal possible in every single reservation to benefit both sellers and buyers. Fox Business announced Roomer as a startup that allows travelers to sell last-minute hotel cancellations, and it is the first ever company that provides a solution for non-refundable hotel room cancellations. Gon didn’t stop with that, he came up with a new innovation in insurance and named it Life Happens Insurance, which is gaining market appearance at a very fast rate. The exceptional business model not only brings money to Roomer but also increases profit to the hotels or online travel agencies who partner with them with their unique profit sharing model.

AIRBNB has surely disrupted the travel industry but as it does not own any inventory, and are, hence, seemingly incapable of controlling quality. Where Roomer according to me in few years has the potential to cover the lacking factor by providing those cancelled hotel rooms at much lower cost than AIRBNB would be able to compete. Isn’t this the definition of Disruptive Innovation by Clayton Christensen?

Lastly I would like to conclude by saying, “Innovations will create start-ups, start-ups will disrupt & grow to become big companies and then innovation will happen again and the cycle will continue……”

References

Jeffrey H. Dyer, Hal B. Gregersen, and Clayton M. Christensen; The Innovator’s DNA

From: https://hbr.org/2009/12/the-innovators-dna

Subodh Kohle; In India, we don’t have garage startups. We start up in apartments!

From: http://yourstory.com/2014/11/indian-startups-from-apartments/

Steve Blank; Start-ups Vs Big Companies

From: https://www.youtube.com/watch?v=6JdlqlyYnss

Hemant Taneja; Why Start-ups are more successful than ever at unbundling incumbents

From: https://medium.com/backchannel/how-companies-can-avoid-the-innovator-s-dilemma-3f980ae533a7#.a8tdp78tj

Richard L. Brandt; Birth of a Salesman

From: http://www.wsj.com/articles/SB10001424052970203914304576627102996831200

Technology editor Jason Fell and research editor Carolyn Sun

From: http://www.entrepreneur.com/article/197538

Clayton M. Christensen, Michael Raynor, and Rory McDonald; what is disruptive innovation?

Steve Blank; Why Lean Start-up Changes Everything.

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