Is it just me or has the world gone mad for startups and writing software? Don\u2019t get me wrong, I am a big fan of startups and all that they bring to the economy. However, if you read the business papers or listen to investors you\u2019d be forgiven for thinking that they are responsible for all the great innovations of the world.<\/p>\n
Even the definition of startups is controversial. In general, investors expect them to focus on things (usually technological) that can be massively scaled. So many businesses calling themselves startups just turn into small businesses that serve a local region with a specific service or product. And these are the lucky ones, with the vast majority just disappearing within a few short years.<\/p>\n
One of the reasons people put a priority on startups is the observation that the Global 2000, Fortune 500, or any other listing of businesses, changes every few decades. What is seldom recognised is that for every Microsoft, Google or Apple there are hundreds of other companies in the lists that are simply mergers or spinoffs of existing businesses.<\/p>\n
Even established companies are deciding that it is fashionable to get out of their core businesses and become software companies. Whether it is professional services, engineering or retail, there is a strong push to be more like a startup and to work like a software company.<\/p>\n
The greatest opportunities of the 2020s are likely to emerge from some of the exciting technologies that are appearing in fields such as robotics, materials science, autonomous vehicles, machine intelligence and genetics. All of these require greater lead times and research than can be invested by the vast majority of internet startups who are trying to be the next big thing by linking communities and tagging social media.<\/p>\n
Like the gold rushes of the nineteenth century, when professionals abandoned their vocations for the chance at quick riches, too many companies seem to be willing to abandon their core for the riches of the Internet. The reality is that the majority of these ventures will have the same experience as their nineteenth century forebears.<\/p>\n
What the best businesses are doing is looking again at their \u201ccore\u201d, that is what makes them unique. For these businesses, it isn\u2019t about turning themselves into software companies, rather it is about understanding their strengths and then using these to contribute to the evolution of key technologies.<\/p>\n
If a company is brilliant at engineering, it is unlikely that they will translate into being a social media business but they can invent brilliant new products in these new fields using their existing capabilities that will appeal to a new generation of clients. Real advances come from building on each business\u2019s core rather than turning their back on what made them great and moving to the new cool thing.<\/p>\n
Startups play an important role in our economies as they come up with step-change business ideas in sectors that are resistant to evolution or competition. However, if all innovation incentives are directed to this sector, the economy begins to resemble a roulette wheel. The high failure rate of startups is a feature not a problem as they take on risk that established business wouldn\u2019t consider. However, the bulk of wealth isn\u2019t generated by the high risk\/high return nature of startup gambles.<\/p>\n
Small business is the bedrock of employment in most economies. The policies that will support the development of solid small to medium businesses are very different to those that are needed by genuine startups. Similarly, large long-term investments are best made by big businesses that require very different government incentives again.<\/p>\n
We risk repeating the turn-of-the-century dot com bubble. Government policies and investors are leaning towards quick wins and looking for internet startups to take their money. Yet, the bubble always bursts and only a tiny fraction of these businesses, or their ideas, survive. The vast majority of the growth, wealth and advancement of society will come through the success and innovation of existing companies.<\/p>\n
Let\u2019s think about the big wins for society in both new technologies and support for jobs. Let\u2019s then balance our policies to encourage the right mixture of software focused startups, small business jobs and big business investment in future technologies. Let\u2019s also encourage a culture where each builds on their core rather than trying to be something that they\u2019re not.<\/p>\n","protected":false},"excerpt":{"rendered":"
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