Ted Gross, founder of Idealab, identifies and places the variables that lead to the success of any business in order of importance. Let’s scroll together and analyze its ranking
Founder of Idealab, an incubator of projects, ideas and business, Gross has been able to observe and document the fate of hundreds of startups and companies, drawing a series of conclusions on what are the most determining factors for the success of a company.
Conclusions that have even displaced him!
The conditions necessary for the success of any business
First of all, we identify the variables that together constitute the condition for the success of any business.
5 Gross identifies
- Team (execution);
- Business model;
- Resources / funding;
All these factors are essential, all must be present and functioning. Each is the link of a chain, a chain that must be able to drive the business and lead it to success. Only one weak link is enough for the chain to break and precipitate the entire enterprise project into the abyss of bankruptcy.
Therefore every variable remains indispensable. Yet, according to Bill Gross, some have a greater weight than others, a different relevance in the economy of business success, and then decides to classify them in order of importance.
When one thinks of a startup, the idea is usually put in the foreground. After all, it’s from the idea that everything is born, right? So why do so many startups based on a potentially winning idea ended up failing?
Perhaps because the team was not able to bring it forward in the right way? The team is the executive part of the project, and it is clear that an idea, however good it may be, needs someone who can put it into practice.
But is it possible to put an idea into practice without having defined a business model?
Definitely no. It is essential that the company has a clear path to follow in order to generate revenue from its customers, in order to generate profit. So is the business model the fundamental element of the set of factors that can determine the success or failure of a company?
We admit that there is the right idea, a team capable of realizing it and an unassailable business model. In theory there would be all the conditions for success. In practice, without adequate financial resources, we know that we are not going anywhere. Many startups have established themselves thanks to the trust they have achieved and the funding they have received. Many others, however, have closed their doors without even approaching success, dragging with them even those who have financed them.
And what about the timing? Knowing how to choose the right moment to launch a product or a service – or at least to be lucky enough to be in the proverbial right place at the right time – definitely makes the difference. Will the public be ready to welcome your idea? What is the degree of saturation of the market? Is there any competition already?
The order of importance of success factors
Analyzing big hits such as AirBnb, Uber, or YouTube – and also big failures like Friendster (an “ancestor” of today’s Facebook) – Gross has finally assigned an order of relevance to the five factors.
The result is this ranking
- Team (execution);
- Business model;
- Resources / funding.
According to Gross, the timing affects a good 42% on the difference between success and failure.
The perfect example is given by AirBnb. This venture was initially snubbed by many investors who thought: “Nobody will rent a space in his home to strangers.” The reason for his success, in addition to the good business model, the good idea and execution, was just the timing. AirBnb came to the fore precisely at the height of the recession when people needed money, and this perhaps prompted people to overcome the fear of renting their own home to strangers.
The timing was also decisive in the case of YouTube. In the early 2000s, thinking of carrying video content online was still a utopia. The limited bandwidth and the need to constantly install and update the video codecs made it quite inconvenient for users. YouTube appeared on the market in 2003. A couple of years later, with the expansion of the band and the codecs alternative offered by Adobe Flash, YouTube literally exploded.
When this happened, YouTube did not have a business model. But he had a team of awake and capable people who knew how to seize the moment and move accordingly. Only after having made the bang, they put their hand to the business model, re-calibrating it and optimizing it on the basis of the new situation.
In second place, therefore, Gross puts the team. You can also be on time while waiting for the train, but if you let it pass before you get on it you will not go anywhere.
The idea is put, and here is the surprise of the whole of Gross’s thesis, in third place. It is very important, it is the basis of the whole business project, but without a favorable temporal conjunction and without someone who is able to develop it in the right way, it is always just an idea.
In fourth place is the business model, understood as the capacity for flexibility and adaptation, to be able to change the initial perspective and adapt it to new market scenarios.
And finally, in fifth place, Gross puts the funding. Today there are plenty of ways to finance a start-up, from classic bank financing to crowdfunding, from incubators to business angels. It is relatively simple for a good idea to get an economic boost, so it can no longer be considered a variable that is so decisive for the success of an entrepreneurial idea.
Summing up, then, the execution (the team) counts a lot. The idea matters a lot. But the timing matters even more. And the best way to evaluate time is to see if the market is ready for what you have to offer.
Thinking about it, there had already been someone two thousand and passed years ago?