Startups in software business are operating in the challenging and changing environment where risks are involved and success is hard to achieve and maintain. Based on results of four studies it is made following arguments about factors and other elements of software startups´ success.
Three of arguments concerning factors and other elements of startups´ success in software business are following:
- the success of startups depends on objects of competitive strategic and operational decisions and on the competitive implementation and control.
- the success finally depends on capabilities of decision-makers and of the personnel to create, direct and implement competitive decisions toward software startups´ targeted, implemented profitable growth and
- there are principles and criteria both for achieving objective of growth and for achieving objective of the profitable implementation.
Additional basic arguments of success in software business are Information Technology and Informartion. They have not been objects of focused studies which results are published and therefore they are not among arguments of the published book. They are defined in this article as elements of success.
Elements of three arguments are defined, explained and tested by results of my four studies. Results of studies are summarized in the book STARTUPS´ SUCCESS Factors of the Profitable Growth, which is published in 2021 both as Amazon e-book and as the paperback version. The book is the tightly packed package of information including 200 explanations about elements of three above arguments in the framework of two strategic thinking models.
Software startups´ success is a multidimensional concept, which can be explained from different perspectives by different types of explanations.
The purpose of this article is to summarize by following groups of explanations the integrated, comprehensive view about elements of software startups´ Implemented Profitable Growth:
- Origin, Purpose and Types of Capabilities as Factors of Startups´ Success.
- Principles and Criteria as Elements of Startups´ Success.
- The comprehensive view about the competitive Decision making, Implementation and Capabilities toward Software Startups´ Implemented Profitable Growth.
Origin, Purpose and Types of Capabilities as Factors of Startups´ Success
Herbert Simon is the father of defining phases of the decision making and he is one of fathers of the artificial intelligence. Simon has argued that “the lowest level” of decision making is the neurological structure of human brains, which is called in the book by the concept of Brainpower.
By Simon´s logic decision making has three causal phases. They are choices, which are based on created options, which again are based on intelligence. There are intelligence of the brainpower and the artificial intelligence, which is created by the brainpower. Both need information as input.
Based on Simon´s views it is argued in the book that the origin of capabilities of startup decision makers and the personnel is their brainpower as the neurological structure of their biological brains. There are innate and learned capabilities. Based on views on several researchers in psychology, there are following basic types of human capabilities:
- Capabilities as processes of brains such as perceptions, learning and decision making. Information is their input.
- Capabilities as stored outputs of processes in memory such as (a) stored memories of implemented decisions as successes or faults or stored decisions which still are intentions and (b) Capabilities as learned skills and knowledge such as Information Technology.
- Capabilities as traits. Traits in general are understood from the personality perspective as elements of human personality ie. characteristics, orientation and from the behavioral perspective traits are ancillary to human behavior. As examples about entrepreneurs´ characteristics it is assumed that entrepreneurs are creative, analytical and motivated.
Traits are understood in the book as impact factors to all basic processes of brains, to perceptions, learning and to decision making and through those channels, traits are impact factors to stored outputs of processes in memory.
There are capabilities of startup entrepreneurs, of boards and teams and capabilities of members of the personnel, who finally implement competitive decisions
Principles and Criteria as elements of Startups´ Success
Results of my third opinion poll are eleven elements of startups´ success both in order of priority and summarized by their types in three groups. Groups of eleven most important elements of startups´ success are: (a) Capabilities, (b) Objects of competitive decisions and (c) Principles and Criteria of success.
Principle has been defined by one of dictionaries as a fundamental truth or a proposition for reasoning.
By another dictionary logic is the set of principles Professor Watkins has defined in 2017 that strategy is a guiding set of principles for competitive decisions. More than a half a century ago professor Ansoff defined strategy as rules of the decision making.
The logic of the strategic thinking model of the book includes two types of principles and criteria about basic means to achieve startups´ implemented profitable growth.
The first basic principle, as the argued proposition about basic means to achieve competitive startups´ targeted growth objective, is to create by objects of the competitive, strategic decision making the product-service-market-based potential of startups´ targeted growth as the scope of their business.
The basic argued criterion of success is the competitive fit between needs of focused customer groups and between differentiation products-services by combinations of means including technology to satisfy competitively needs of focused customer groups.
In order to achieve and maintain startups´ targeted objective of the growth´s profitable implementation, there is another principle with other criteria. It is argued that there is the need to create the resource-based and structural potential for the profitable implementation process. It is made by objects of competitive decisions about directed actions of internal and external activities of startups organised value chain. Two criteria are efficiency and effectiveness. By Drucker´s words they mean to do things right for right things.
The comprehensive view about the competitive Decision making, Implementation and Capabilities toward Software Startups´ Implemented Profitable Growth
Causal elements of software startups´ implemented profitable growth are first explained and then the comprehensive view about the competitive Decision making, Implementation and Capabilities toward startups’ Implemented Profitable Growth in software business is shown in Figure 1.
Origin and causal elements toward software startups´ targeted, implemented profitable growth are following:
- The origin of capabilities of startup entrepreneurs of boards and teams and of the startup personnel in software business is their brainpower as the neurological structure of their biological brains. Input to perceptions and to learning-decision making processes of brains is Information. Brainpower for decision making and implementation in software business is assisted by Information Technology as the learned capability of decision makers and the personnel.
- Business ideas about product-service-market based- opportunities of startups are based on entrepreneur`s innovations as intuitions created by entrepreneur´s creative capability.
- Outcomes of the competitive strategic decision making and thinking processes are Business Strategies, Business Models as comprehensive decisions and single strategic decisions. Business models are based on the strategic decision making about the development of products, services, markets, resources and of the structure of the value chain. Capabilities of decision makers have impacts on the competitive, strategic decision making.
- Outcomes of the operational decision making are development projects and plans- budgets for the implementation process of the development and current operations. Tasks of operational decisions is to maximize profitability of current operations and to implement development which is directed by Business Model. Capabilities including characteristics of entrepreneurs and of other startups´ decision makers have impacts on operational decision making-, on control- and on implementation processes of strategic decisions and on implementation process of current operations.
- Capabilities of the personnel together with other resources create basis for basic actions of activities of startups´ value chain to make the competitive implementation of current operations and to make the competitive implementation of the directed development. Porter has defined activities of the value chain by following arguments: The firm is a collection of activities, activities can be presented using value chain and in competitive terms the value is the amount buyers are willing to pay, what a firm provides them. There are three assumed basic types of startups´ activities in the book´s model for competitive Decision making and Implementation. They are:
(a) Directive causal activities such as decision making, planning, budgeting and the control activity, (b) Development activities such as R&D, marketing and HR and (c) Operational activities such as purchasing.
Figure 1 is showing a simplified, comprehensive view about the competitive Decision making, Implementation and Capabilities toward startups´ Implemented Profitable Growth in software business. The explicit showing of important principles and criteria of Decision making and Implementation is missing in Figure 1 but are defined verbally above.
Figure 1 is showing Information and Information Technology as input elements to Learning and other general proceses of brains. Learning process is the general human capability which creates the learned knowledge about business and the learned skill about Information Technology as special capabilities of decision makers and the personnel in software business.
Figure 1 Causal elements toward startups´ Implemented Profitable Growth in Software business
Success of startups is a multidimensional concept which can be explained from different perspectives by different types of explanations. Causal elements of this multidimensional concept are explained in this article as means toward the targeted Implemented Profitable Growth of Startups in Software business.
Writer: Paavo Harju. Harju has 30 years of experience as an international consultant and expert.