Unicorns, muses and other business idea myths: What is the holy grail of innovation?
Essay by Heike Hölzner, Professor for Entrepreneurship und Medium-sized businesses at the HTW Berlin – University of Applied Sciences
Brilliant ideas or favourable opportunities? Many in today’s digital age are mulling over how innovative business ideas are created. Start-ups and corporations alike are seeking the holy grail of innovation: a tool or mechanism that can effectively create ideas for new products.
If one believes management literature bestsellers and business consultants, the solution goes something like this: combine creative techniques and forecasting tools, add a pinch of the right mindset, and assiduously write everything on colourful post-it notes. More and more companies are starting to set up idea labs or to send their management-level staff off on retreats, hoping that inspiration will find them. But is this really how brilliant new ideas come about?
Researchers from the University of Oldenburg have now gleaned empirical evidence* on this issue. They examined the impulses that led to the ideas of the 50 most valuable digital start-ups in the US and Europe. These ‘unicorns’, which is what we call start-ups that are valued at more than one billion dollars, included ‘Airbnb’, ‘uber’, and ‘Hello Fresh’. The researchers compared the origins of their ideas with those of very similar but failed start-ups. The results were astounding!
Only one out of ten ideas were borne from a flash of creativity. Six percent of successful unicorns were produced by taking a close look at the future and predicting technology trends or specific customer needs. Transferring business models from one sector to another, so-called start-up analogies, also has its problems. The start-up scene has repeatedly experienced several downright waves of adaption, like the so-called Uberisation, which produced droves of start-ups pitching the next ‘uber for the x industry’. Only very few were successful. While 30 percent of failed twins tried creating an idea from analogy, only one of the unicorns was created this way. So, what is the secret ingredient used by the unicorns? The answer is simple: in 50 percent of the cases it was an innovative solution to a demand that had not yet been met. However, imitation is also better than its reputation. Fourteen percent of the examined unicorns successfully copied their idea. On the other hand, only one of the failed start-ups was based on imitation. It seems as though a good copy is better than a bad original.
At the end of the day, entrepreneurial opportunities can be discovered as well as created. No source of ideas that the researchers identified is fundamentally good or bad, and approaches can also be combined with each other. The myth of the visionary struck by inspiration does not hold up against a reality check. At the core of any successful idea lies a specific customer problem, a nuisance, or an unfulfilled desire that exists in the here and now.
If we are looking to find a mystical metaphor for illustrating the origin of business ideas, we could turn to the story of the Greek god Caerus. A son of Zeus, he represents the opportune moment in Greek mythology. With a single braid hanging over the front of his otherwise bald head, Caerus rushes across the earth on winged feet. Nobody knows when or where he will be next. One must be vigilant and decisive to meet him. For those who do not, literally, ‘grab opportunity by the hair’ will slip off his bald head just seconds later and miss their chance.
This metaphor can also be applied to business founders and other innovators. In the above-mentioned survey, a good third of the founders of successful unicorns had a strong desire for having their own business before having the right idea. It looks as though, in the end, the best ideas come those who are ready for them.
* Study: Nicolai. A./Wallner, R. (2019): Heureka! Genialer Einfall oder schnödes Abkupfern?
In: Harvard Business Manager, March 2019, p. 48–54.