When we hear the word competition, we tend to think of team sports (baseball, football etc.), individual athletic events (tennis, marathons, diving, etc. ), music and dance competitions, spelling bees, and pie or hotdog eating contests. These are fun for both participants and observers looking to experience the thrill of victory and the agony of defeat. In these kinds of events, winning or losing depends on a combination of talent, training, and luck.
Business idea competitions are similar in that they provide forums for engaging and energizing both participants and observers. Business ideas are different in that all contestants as well as potential investors and partners, not just the chosen few selected to receive prizes and recognition, emerge from the process as winners because of what they have learned.
Here are the kinds of benefits that competitions offer idea innovators:
- Encouragement. Opportunities for innovation are all around us, yet few people take the initiative to spend the time and effort to research and refine a business idea. Why? Because we are busy with other activities and finding time to be creative is difficult. Competitions provide a set of rules, tools, and timeframes. I was encouraged to take innovative ideas that I had in my head and do the work necessary to make them presentable and ready for competition.
- Differentiation. Many business ideas overlap with similar ideas that may have already been designed into a product or service. Preparation for a competition forces the idea owner to do research into whether similiar ideas already exist and to either articulate its uniqueness or make changes to the idea so that its differences are clear. I found that one idea that I had several years ago, a real-time home energy dashboard similar to the gas/battery/mpg display in my Prius for enabling changes in behavior, had already been invented and commercialized (I bought The Energy Detective and use it every day). As a result, I modified my idea to include capabilities not found in existing products.
- Collaboration. Participants in competitions are encouraged and in some competitions required to be part of a team. This results in individuals with ideas teaming up with other people whose insights, skills and experience complement what the individuals bring to the table. This tends to make for better ideas and teams that are capable of executing the idea in the marketplace. As the idea owner, I recruited people to join my two professional teams for the MIT competitions. This required me to articulate, defend, and modify the idea with the help of other people with different perspectives and skills.
- Access. In addition to competing for monetary awards and professional resources, all participants benefit from the attention of potential investors, partners and team members. These are necessary if an innovative idea is to ever have a chance of becoming a commercial success.
Competing for competition’s sake
ReplyDeleteNovember 28, 2009
Posted by Simeon Simeonov in startups.
I don’t agree with Vivek Wadhwa that losing a business plan competition is better than winning it. However, I do think that business plan competitions force many teams to aim for the wrong target. Here is the comment I left on the TechCrunch post:
I’ve judged the MIT 100K for many years and am currently an EIR at the MIT E-Center. The biggest problem with business plan competitions is that they skew incentives. An entrepreneur’s incentive should be to build a winning business, not win a business competition. Conversely, good business plan competitions should aim to help build great companies.
The benefit of business plan competitions is that they pace a team and force it to deliver on a schedule. Many teams benefit from that process and from the feedback they receive along the way.
The biggest problem I’ve experienced as a judge is that there is no diligence process. Judges are supposed to pick winners based on the claims of the entrepreneurs alone (and a bit of face-to-face time). Without diligence, the teams have an incentive to exaggerate as there is no penalty for slight exaggeration. Judges can only react to gross exaggerations. Teams that are in touch with reality, customers and that understand the challenges involved in building successful businesses have a higher likelihood of being subtly penalized during judging when reviewed alongside folks more likely to over-promise. No, it’s not easy for judges to correct for this.
The solution is to introduce diligence as an integral part of business plan competitions. The suggestion I made to the 100K was to organize a diligence team that runs alongside teams participating in the competition. The goal of the diligence team is not to poke holes at the entrepreneurs’ dreams. It is to make the teams and the companies they want to build stronger and more likely to survive in the real world. And, yes, in the end, hopefully more deserving companies would win and there will be a higher correlation over time between companies that win and companies that succeed. Wouldn’t that be nice?
Alas, the student-organized MIT 100K competition is finding little interest inside the MIT and Sloan student bodies to participate in the diligence process.
In the end, it is the entrepreneurs that lose.