Our company operates a financial advisory business centered on M&A Advisory, but we also modestly support startups as what could be called our life's work. Through this, we have opportunities to listen to entrepreneurs' presentations and review their materials. Recently, we have the impression that the level is truly high. This appears to be the result of various well-intentioned specialists and senior entrepreneurs who have steadily continued their activities of generously sharing their know-how. We feel the steady advancement of Japan's startup ecosystem.
However, among these, there are still some presentations where we think "this material is tough" or "that approach is going to be difficult." This is a problem particularly common among geeky engineers and those with technical backgrounds. This seems to be less an issue of how to create presentation materials and more a problem of fundamental thinking about business. In this column, I will write about points that engineer-turned-entrepreneurs tend to fall into and what their ideal state should be.
The chart at the beginning is a framework called "Strategic Capability Network (SCN)" developed by IBM Watson Research Center. I would like to introduce this "SCN" framework as a means to succinctly explain the points about problems common among engineer-turned-entrepreneurs. This is a concept that organizes the relationship between the value that corporate activities provide to customers and the means to realize that value. Generally, it is said to be useful when used as a common language between business divisions and IT departments.
Note 1: SCN is a business model framework developed by IBM Corporation.
Note 2: The Yoshinoya case is merely an example to simply explain the SCN concept and does not demonstrate the comprehensiveness of delivery capabilities or realization means.
Two Relationships Between Provided Value and Realization Means One of the relationships that SCN shows is the "vertical relationship." That is, the most important thing in business is "providing value to customers," and as a result, the "company's vision and philosophy" are achieved. "AI," "blockchain," "excellent customer base," etc., are not the purpose of business, but are positioned as means to provide value to customers.
Another relationship that SCN shows is the "causal relationship" between value, capabilities, and realization means. For example, in Yoshinoya's case, in order to provide the value proposition of "fast, cheap, delicious," they have acquired various organizational capabilities. An easy-to-understand example would be the ability to serve a beef bowl within 30 seconds of ordering. Behind this capability, there must be truly many various realization means involved, from store layout to employee training methods to supply chain.
Points That Engineer-Turned-Entrepreneurs Tend to Fall Into The point that "engineer-turned-entrepreneurs" mentioned at the beginning tend to fall into can be summed up as not considering the "vertical relationship" among the two relationships that SCN shows. Engineer-turned-entrepreneurs have absolute confidence in their technology. This is truly wonderful. However, sometimes no matter how much you ask what kind of value this creates and whose problems or challenges it solves, it's not clear at all. This is impossible if you're trying to do business, at least. Business is an activity of solving someone's issues or problems in any field and receiving compensation for it.
You might say "that's ridiculous, there are no such entrepreneurs nowadays," but actually this phenomenon is not seen only on the entrepreneur side. Whether it's "blockchain" or "AI," excellent technologies always create excessive expectations in any era, and attention often precedes understanding of the value they bring. Then, after several years, these expectations are corrected, and this is repeated throughout society. This phenomenon is often expressed through the concept of the "hype curve." We understand this hype curve as representing the repetition of expectation gaps and their corrections that occur between technology and the value it realizes. Of course, some end in disappointment, but like cloud computing, there are technologies that go through the hype curve, greatly cross the chasm, and bring about seismic changes.
Momofuku Ando (Nissin founder) saw 80 iron plates and thought of making salt
To explain the SCN concept more succinctly, I'll take up as one example an episode from the morning drama "Manpuku," modeled after the genius entrepreneur Momofuku Ando, who built Nissin Foods single-handedly. In a recent broadcast, after moving to Izumiotsu in Osaka, Ando discovered 80 iron plates in a warehouse he had bought without knowing what was inside. He then thought about what he could do with them. And triggered by something, he decided to use those iron plates to make salt.
In SCN terms, this can be said to be a case where the "realization means" of iron plates came first and was connected to the provided value of "making salt that society lacks." It can be said that the "causal relationship between realization means and provided value," which I mentioned earlier as one of SCN's relationships, connected in his mind.
In this way, coming up with business ideas from "realization means" is common in itself. That may be more typical. The purpose of this column is definitely not that "conceiving business from technology is wrong." However, what makes Ando great as an entrepreneur is that while having technical knowledge and capabilities, he always had "solving society's problems" as a premise as an inventor. Conversely, no matter how excellent a technician is, if they have no essential interest in "social issues or society," I believe they should not become entrepreneurs.
Why technicians with no interest in problems should not start businesses
Although Ando decided to work on salt-making, naturally he cannot make salt with just iron plates. From now on, he must acquire various organizational capabilities and realization means (salt-making know-how, salt-making craftsmen, sales channels, sales structure) and build a network for realizing value.
The causal relationship between provided value and realization means differs from correlation in that it is a "relationship involving time axis," so ultimately there is no choice but to repeat trial and error to determine what realization means and organizational capabilities are needed to realize value. No matter how much consultants manipulate SCN charts on paper, they will never find true causal relationships. What management resources should be assembled (which naturally includes "people," the most difficult management resource), and how should they be combined to provide value? Spinning out these threads of causality is the suffering of management. Engineer-entrepreneurs who are only interested in technology often cannot endure this difficulty because it is "not what I wanted to do."
Conversely, even engineers who are currently like this might, triggered by something, develop high interest in social and business issues. And if they come to truly want to utilize their technical skills to solve these problems like Ando, I believe they can become excellent entrepreneurs. Soichiro Honda thought that if he mounted small engines abandoned by the US military in the postwar ruins onto bicycles to make them motorized, it would help people who had great difficulty with transportation. He too was always looking at society. And like Ando, this perspective and high technology coexisted within him.
Rather than entrepreneurs who have problem awareness but no realization means (who must rely entirely on others for this), entrepreneurs like Ando and Honda, who have both high problem awareness and excellent technology, have the potential to become great entrepreneurs who can create truly tangible services and products.
