Are Startups and Growth Hacking really the Magic Words for the Digitalization of Companies?

Startups and Growth Hacking

The initial ecosystem and the integration of innovative techniques, as in the growth hacking are usually considered the solution to the problem of the low level of digitalization of companies.

In particular, growth hacking is one of the most widespread buzz words in the world of work, connected to the new ideas of startups, often young and recent graduates.

But does this world so disruptive, digital and “young” also manage to lay solid foundations in the “offline ” reality , to bring value for businesses and the world of work ?

Let’s start with the state of digitalization in Europe: the DESI report – Digital Economy and Society Index – of Dec 2020 depicts that Finland, Sweden, Netherlands and Denmark has the highest ranks in the 2020 report and stand among the global leaders in digitalization.

The situation does not improve if we consider the DMI – Digital Maturity Indexes – developed by the Digital Agenda Observatory, based on 118 indicators divided into four areas: infrastructures, public administration, citizens and businesses.

Out of 28 European countries, the most developments are noted among Netherlands, Malta and Spain for the results of the digitization initiatives adopted in recent years.

Within this bleak scenario, the trend is to invest in startups, growth hacking and hackathons: minds are fresh, innovative ideas and tax breaks are interesting. Which doesn’t hurt.

The data of the Annual Report to Parliament on the state of implementation and the impact of the policies in support of innovative startups and SMEs in 2020 speak for themselves: the number of startups established sees a double-zero growth – 122% more than in the past 5 years .

But how many startups survive long enough to generate real value?

Benefits, tax relief, investors, mentors: a structured system to favor the birth of startups, especially innovative ones.

But then how many manage to grow and find their role in the company?

If we analyze the situation in the medium to long term, the numbers make us reflect on the results achieved by startups in the current situation.

The four-year survival rate of startups established in 2012 remains around 10%.

The proportion of companies that foresee achieving breakeven in more than 2 years declines at the later stages of maturity of the company.

This outcome might arise because companies with a poorer market outlook in the early stages of development may not even reach the later one’s useful added value indicators-European Startups Monitor 

But the most important data to consider is certainly the exit of the startup : one of the best ways to verify the success achieved, often the main objective of both those who make it up and those who decide to invest in the company.

“The most successful startups are those that respond to a real need of the market with disruptive innovations”

The data confirm the hypothesis that creating a startup is easier than making it survive in the medium to long term and making it successful.

Only those that are truly innovative and useful to the market are able to obtain a valuable exit.

But do these startups really create value for the European economy?

The value created by startups is low. Really too low. From the analysis of the data provided by the Chambers of Commerce’ Growth hacking: the most used formula by European startups

The term growth hacking is one of the buzz words of the moment in the digital world.

We often hear it mentioned, especially in relation to startups and innovation, but what do these two words really mean?

To get a better idea, let’s start from the first definition created by its creator, Sean Ellis, already in 2010:

“Growth hacking is a process of rapid experimentation through a variety of marketing channels to identify the most effective ways to grow a business. “ Sean Ellis

On the surface, growth hacking would seem useful for any company, but then why do we mostly hear about it in association with startups?

Time is of the essence for startups: they need to be able to evolve quickly, build their customer base and start earning in order to survive in a highly competitive market. Where the growth of startups must be measurable in the eyes of investors and supporters.

What is the reason for such low survival and exit rates?

Although growth hacking in theory plays into the rapid growth of startups, stats and results lead us to think of poor performance in the medium to long term .

How can we think of solving the problem of digitalization with growth hacking as the basis for the development of a startup if then in 60% of cases they fail to generate profits? What if less than 1% of startups make an exit?

What are the real benefits of such a disruptive approach?

Certainly, it would be good to take into account the encounter between two worlds still too distant from each other:

Often, too often, these two worlds do not communicate with each other: on the one hand the new generation produces surplus innovation and technology compared to what companies need in the real world, on the other hand the older generation thinks they can stand still. in an offline world, without realizing that it is a reality destined to die out quickly.

“The value of an idea lies in putting it into practice.” Thomas Edison

What is often missing is a solution capable of creating a positive dialogue between the two worlds, of being able to implement innovative ideas in a truly executable method, assigning them a physical asset within the company Finding a meeting point between the growth hacking codes of startups and the elements of processes in physical companies.

The gamification , if properly used and structured, can act as a stable bridge between two realities: providing the method to execute in a practical way the most innovative ideas.

Encouraging digitalization but in a realistic way, without necessarily completely upsetting business processes. Provide the necessary tools to look at a technological but realistic future development

How startups and companies can face the challenge of digitization

The ongoing digitization can represent both an opportunity and a challenge for startups and companies: the important thing is to be able to take into account not only the theoretical part, but also the practical one.

It is important that the staff is really trained and prepared in order to take advantage of the opportunities offered, without leaving anything to chance.

It is necessary to be able to fill the practical knowledge gaps that exist in startups, often made up of students or recent graduates, with structured business systems.

If the existence of such gaps is legitimate, it is not the lack of reaction to them and the proactivity in finding ways to overcome them.

The right mindset in the digital world is the starting point for successful companies and startups: being able to bring a model of business change that is winning for customers and employees.

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