Four Essential Questions for Every Digital Entrepreneur to Answer

I want to share with you a few lessons I learned while advising digital entrepreneurs. If you want to digitalize an organization or start a digital company, or if you are interested in digital entrepreneurship and innovation, this article is for you 🙂

As a digital innovation researcher, I follow innovations closely. Every year, I have the opportunity to learn about the business ideas that dozens of MBA students put forward in their Information Technologies course. Many are participants in Babson's MBA program and have experience starting new businesses, running and growing a family business, consulting for multinationals, or working for multinationals. Despite their business qualifications and track record, many have not had the need or opportunity to gain in-depth knowledge of digital technologies as an essential part of modern business, but they are all on equal footing and are eager to discuss and learn the technology.

Bill Gates in 1999 “Business @ The Speed ​​of Thought” He wrote in his book: “Information technology and business are inextricably intertwined.”. I have shared this quote in my classes for years and not a single student has said otherwise. Business students know that digital technologies will play a critical role in their professional careers. Whether they are entrepreneurs, managers, consultants, thought leaders or social activists; Digital technologies are now an indispensable part of society and graduates must now gain the superiority of digital technology to be successful. Moreover, the relationship between entrepreneurship and digital technologies is increasingly deepening and developing.

Last semester, I observed something unexpected, we came together with my MBA students to listen to their business fields. I heard a clearer message than in the previous period, with a variety of business models and valuable business propositions: “I want to be a digital entrepreneur”. They were simply telling me that they were aiming to become proficient in the use of digital technologies or that they wanted to further explore the strategic implications of technology in business; Many expressed a clear interest in disrupting the market status quo with a new digital technology or technology-enabled processes, or in redesigning existing digital technologies.

Although many students shared a common call for digital entrepreneurship, they used very different languages ​​to describe how they understood innovations and their role in the start-up. To help them reflect on their personal interests and better define their entrepreneurial ideas, I often ask them the following 4 questions. If you are a digital entrepreneur or want to become a digital entrepreneur or are interested in digital transformation, you should answer these questions.

1. Are you a digital entrepreneur or digital innovator?

The words entrepreneur and innovator are often used interchangeably. Although in some cases they refer to the same person, they are not always valid. Quoting Schumpete: “Entrepreneur; “A person who implements new combinations, such as developing new products or processes, identifying new markets or sources of supply, or creating new types of organizations.”. Although Schumpeter often referred to the entrepreneur-innovator, these days we use the term entrepreneur to refer to someone who starts a company through personal experience and resource management. Inventions do not have to be part of the enterprise; In such a case, we are faced with a multiplier entrepreneur.

Both innovative digital entrepreneurship and multiplier digital entrepreneurship have pros and cons that need to be carefully considered. To be fair, innovation never exists, nor is there ever a new enterprise: innovation occurs on a continuum.

However, I find the answer to this question in a more detailed analysis of entrepreneurial ideas: How much does it cost to develop the innovation compared to the cost of implementing existing technologies? Do incremental returns from innovation require investment and effort?

2. Are the digital technologies you need common?

A few weeks ago, we sat down with three Babson entrepreneurs who were developing a wearable device. They found three sensors critical to their device, but questioned whether they could hire an engineer to design and build a circuit board. In the end, they opted to build a prototype using an Arduino.

The roughest simplest Arduino prototype is significantly cheaper than custom-made. Also, in my opinion, it was the right start. Because a minimum viable product that exhibited the features they needed to first discover and understand had to be put forward first. Using Arduino allowed them to control the unknowns with widely tested and documented parts. Here we better understand the importance of lean principles for a digital startup.

3. Is your digital initiative reliable with external technological services?

You can launch a start-up based on technological infrastructure offered by other companies, but these should be chosen carefully. Uber, for example, makes extensive use of functionality provided through APIs and integrated into its platform. To mention some examples, mapping service, payment system and text messaging features are provided by Google Maps, Braintree and Twilio respectively. At the same time, it does not have a critical dependency on these services, as Uber replaced Google Maps with the MapBox API a few years ago due to high costs.

If your company is critically dependent on certain APIs and your offering is not significantly different from the API provider, you are in a weak strategic position to begin with. Most likely, your startup file will also violate the API's terms of use. If your idea does not make it past the “thought experiments” stage, then you should continue to develop your digital business model.

A few months ago, I met with a group of students who wanted to share their start-up idea with me and get my thoughts on it. They had designed a recommendation algorithm that gave users the functionality to deprive a well-known app (let's say we call it Instagram). Their thought; was to use Instagram's API to collect post and activity data, analyze it, and serve users tailored messages tailored to their interests through their app. In this case, they needed constant access to Instagram data to make innovative algorithm recommendations, and their business model did not foresee a way to overcome or reduce this dependence over time. In fact, they had an invention that went beyond an entrepreneurial innovation.

4. What is your approach to experimentation?

Why you need to have a clear understanding of experimentation to be a successful digital entrepreneur. In a market where processes are changing rapidly, there is extreme competition, and your ideas in the digital environment may require many possible configurations, and having a systematic approach to identify which changes in your digital services make a difference for your customers is the essence.

Digital entrepreneurs need to have the ability to use data to showcase their experiences and learn how customers interact with the digital product. The entrepreneur's decision-making, based on experience and data, should become a part of an entrepreneur's culture, starting from the settings of the entrepreneurial spirit that creates it.

At companies like Facebook and Google, changes to the user interface or site behavior are not made by checking for each user at once. Instead, each small adjustment is treated as an experiment where business-critical metrics for the new interface are compared to the original offering measurement.

As a digital entrepreneur, you must learn the principles of experimentation, including sampling and hypothesis testing, and this mindset should be applied to every change you make to your startup; This ensures that you have a quantitative research culture at the beginning.