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OPINION

High Potential Startups And Economic Resilience

High Potential Startups And Economic Resilience

Economic growth without innovation is hard to imagine. The ultimate source of productivity increases is innovation. About two-thirds of Europe's economic growth over the last decades has been driven by innovation. Each Euro invested in cutting-edge innovation through Horizon 2020 and Horizon Europe Programs can return 11 Euro to the real economy. Innovation is also the best ‘antidote’ to an economic crisis.   

Startups, particularly high-potential ones, are responsible for nearly all net job growth, experience growth rates substantially higher than other firms, and have a fundamental impact on overall economic productivity in the economy. Startups also create new markets, or completely overhaul old markets, by innovating products previously unknown that transform the world. Research has shown that small, young, agile startups are more likely to achieve technological leaps and bounds than those more established companies that are focused on gradual improvements and protecting entrenched business models. Small startups with close, vision-sharing teams are able to translate an idea quickly into a product, then quickly iterate it based on customer responses in order to satisfy consumer demand.

Criteria for Startup Success

Following many years of Research & Development, I developed a new Innovation model which: a) Covers all the stages of the innovation cycle (end-to-end process, from idea to global market) and b) uses more than 100 criteria for Startup success which can be grouped into the following 12 clusters:

1. Creativity, Originality, Uniqueness.

2. Differentiated Branding, Strategic Positioning.

3. Product – Market Fit. Definition and validation of concept.

4. Implementation, Strong Team.

5. Excellence, Quality, Standardization.

6. Intellectual Property Management.

7. Engineering Risk and Market Risk, Risk mitigation. Future-proofing, Resilience.

8. Securing Finance. Alternative Tools, Sources and Types of Funding.

9. Replicability and Transferability.

10. Commercialization. Scalability with global outlook. Expand and Diversify.

11. Impact (Scientific, Social, Economic). Added Value.

12. Friendly Business Ecosystem. Culture of Creativity and Innovation. Entrepreneurial Infrastructure.

 

Embedding Antifragility Properties in Startup DNA

In his book Antifragile, Things That Gain From Disorder Nassim Taleb defines a Black Swan as a rare, unpredictable event that has a major effect (large magnitude and consequence). A Black Swan carries an extreme impact (positive asymmetries or negative asymmetries). Black Swan events represent low-probability, high-impact events that are almost impossible to forecast and are increasingly dominating the environment. Complexity not only increases the incidence of Black Swan events but also makes forecasting even ordinary events impossible. Instead of trying to anticipate low-probability, high-impact events, we should reduce our vulnerability to them and lessen the impact.

Nassim Taleb, in his book Skin in the Game: Hidden Asymmetries in Daily Life notes that “I make the case for risk loving, for systematic ‘convex’ tinkering, and for taking a lot of risks that don’t have tail risks but offer tail benefits […] I have shown in Antifragile that making some types of errors is the most rational thing to do, when the errors are of little cost, as they lead to discoveries. For instance, most medical ‘discoveries’ are accidental to something else […] An idea needs to be convex (antifragile), or at least bring about a beneficial reduction of fragility.”

Modifying innovation exposure

The structure of an innovation –antifragile by design– should be such that it gains from volatility, variability, randomness, uncertainty and time by minimizing exposure and harm from negative (unfavorable) asymmetries and maximizing exposure and benefit from positive (favorable) asymmetries (more upside than downside from volatility and randomness). The technical term introduced by N. Taleb for this dual strategy is convex transformation (barbell strategy). The first step is the detection and removal of any fragilities (vulnerabilities) and the elimination of the risk of ruin. Positive Black Swans (opportunities) also have a necessary first step: you need to be exposed to them.

The new Innovation System I have developed:

a) Proposes a number of techniques for modifying innovation exposure. The techniques –which should be applied accordingly– among other include: Rebranding, repositioning, differentiation, diversification, adaptability, agility, modularization, multidimensionality, frugality, reconfiguration, selective change, management skills, alternative finance, crowd funding, microfinance, peer-to-peer lending, scale up and down, concept leap, detection and removal of fragilities, optionality, metaphor, analogical mapping, conceptual blending, viewpoint shifting, new perspectives, new directions, step change, steering metrics (quantitative and qualitative signals to help sense and respond), identification of critical factors, scenario planning, beachhead strategy, network effects (potential for dynamic increasing returns to scale) etc.

b) Identifies the following cross-cutting attributes and tools for harnessing Antifragiity:

- Agility, Adaptability.

- Diversification.

- Circularity. Circular Business Models. Circular Innovation.

- Standards.

- Modularization (intermodal and multimodal aspects).

- Interconnectivity, Interoperability, Multifunctionality.

- Network Effects, Scalability.

- Differentiated Branding, Repositioning.

- Market Fit, Timing.

- Simplicity. If you want to encourage someone to buy / do something, make it easy.

- Transferability of ideas and innovation outcomes.

- Detection and removal fragilities; eliminate the risk of ruin. Increase antifragility – convex transformation: more upside than downside from random events. Optionality. Reveal the uncertainty – turn black swans into grey swans. 

The new Innovation Paradigm described very briefly above: a) Can strengthen the resilience of brands, businesses, cities and national economies so that they can combat the coronavirus-induced recession more effectively and b) is presented analytically in 150-page practical Guide I have prepared – the blueprint for creating successful innovations under conditions of extreme uncertainty.

This unique cross-cutting tool –the first on a global basis that embeds Antifragility property in the innovation process– can be applied in practically all domains and at all levels, scales and sizes: Startups, Large Corporations, New Business Models, Public Sector and Local Government Reforms, Health Practices and Products, Social Innovation and Social Entrepreneurship, Smart Communities, Standardization, Quality Management, Hotel and Tourism Industry, Education, Gaming, FinTech and RegTech, Risk Assessment, Crisis Management, Cyber Security, Economic Diplomacy, Nation Branding, National Security Strategy, Circular Economy, Cultural Heritage and the new Program for Research and Innovation Horizon Europe 2021–2027. Furthermore, it can be applied in Scientific Research for categorizing, combining, analyzing and distilling Big Data into actionable information that becomes useful intelligence. 

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