Startup incentive construct explains why startups often defeat established companies despite the presence of fewer resources. The central idea is that older companies, while having benefits such as money and experience, often accidentally their incentives when addressing problems. They tend to adapt problems to fit their existing incentives, causing them to focus on false issues and disappear in startups. Startups possess a variety of incentives, giving them natural benefits. Established companies often experience a “change of change,” which makes it difficult for them to sacrifice the current income for new opportunities.
In this piece, I explain why the startups won, despite the efforts of older companies to challenge them in the new places they manage. Older companies may come with money, experience and technology, but most of the time, they solve problems, with false incentives.
As such, they solve problems to accommodate their incentives and in the process, solve a completely different problem, resulting in a loss. You read this from me: African and specific Nigerian startups, you can win big players. Your incentives are different, and these are natural benefits to you.
Established companies have a so -called innovation hangover which is a inertia to cultivate existing revenue sources for new opportunities. See this this way: if you run a Treasury operation with a bank that will produce $ 5,000 income but your Fintech unit (a subsidiary) can do the same for $ 200, can you demolish the Treasury unit, and allow the FinTech unit to serve the public because a fintech startup has begun to offer the service for $ 200?
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That's not what we do many times because of the income/income hangover. So, what happens is this: to fix that problem, the bank needs to create a new friction in the market, and try to solve it. Possibly, the new problem can bear fruit for the bank of $ 1,000 income, and it will feel that it has changed, and challenges the pricing. In fact, it can offer more features and services than the FinTech Startup offered for $ 200.
However, that was not the original dispute that the standalone startup went to. Usually, over time, starting can still win because the incumbent hangs on the established income, and solving completely new problems. I called this startup incentive construct.
Summary
- In a video, NDubuisi Ekekwe discussed why startups often raised older companies to the new places they had been planning, despite the latter with more resources and experiences.
- Established companies can fight a “innovation hangover,” which is concerned to transfer the focus from existing revenue sources to new opportunities, leading them to solve a variety of problems than startups.
- African and Nigerian startups have a natural benefit to larger players due to various incentives, allowing them to potentially succeed in competition.
- Ekekwe featured a scenario in which the bank ark unit could make $ 5,000 revenue, but a fintech subsidiary could do the same for $ 200, but the bank could fight the breakage of the Treasury unit due to revenue concerns.
- This hesitation to interrupt existing income streams can lead to established companies to create new market frictions and solve a variety of problems, eventually moving from the original focus of startups.
- Despite incumbents that offer more features and services than startups to competitive prices, startups can still dominate over time because of their focus on original frictions and incentives, a concept called Ekakwe's “startup incentive construct.”
https://www.youtube.com/watch?v=qeqyto7ovqw
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Context
In the video below by NDubuisi Ekekwe, the discussion was removed from the dynamic scene of change and competition between startups and established companies. To understand the essence of this dialogue, it is important to understand the basis of the start of the ecosystem and the challenges facing incumbents in the change.
The main themes explored include how startups use their agility and fresh perspective to pioneer new boundaries, contrasting to established companies suffering from a “change of change,” a reluctance to cover existing revenue flows that prevent their ability to change effectively. The concept of a “startup incentive construct” is introduced, emphasizing unique incentives that drive success for startups in competitive environments.
The context of history plays an important role in the context of this discourse, tracking the evolution of disturbing technologies and business models that have reshaped of industries over time. Recent events showing start -up successes against established players emphasize the ongoing transfer of dynamic powers within different sectors.