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Startups Adapt The Cashback Shopping Model To Southeast Asia

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In a surprisingly short amount of time, cashback websites in Southeast Asia have started to produce results that exceed the expectations of industry experts, and even the very founders themselves. Their rapidly growing consumer base goes to show how more and more Southeast Asians are not only taking their shopping online, but also relying on cashback to save money on their purchases. How cashback websites work is simple; they partner with hundreds of merchants and secure a certain percentage of cashback for shoppers who click through them, thereby earning commission and passing on these savings to shoppers.

Changing Consumer Attitudes

The overwhelming response from cashback users comes as a surprise for most. The cashback model, though being well-established in the UK and US, is foreign to SEA. The cautiousness and thrifty habits of Asians are well-known and these values can make an influential difference on how certain types of businesses launch and grow locally or regionally. Indeed, the popularity of cashback websites here reveal how such traditional attitudes are gradually shifting to a more accepting and globalised outlook, fuelled by increased access to the Internet that connects whole communities across borders and continents.

Startup Dynamism

Besides consumer response, the speedy growth of cashback sites in SEA can also be credited to the impressive efforts of the startups that brought the cashback model to the region. These small companies are usually composed of young working adults who have cut their teeth at larger e-commerce companies and want to try striking it out on their own. Their areas of expertise range from marketing to technical skills and the dynamic teams that they form are just enough to get a cashback website up and running. Being a compact company has many benefits: manpower costs are cut down and office space is rarely a problem. Their size also makes it easier and faster for them to respond to trends or problems as well as concretise ideas. The lack of hierarchy in startups makes discussion and implementation simpler and it’s this new speed of operations coupled with a culture of experimentation that is propelling so many startups to success.

Support Local Cashback Websites

Homegrown startups have the benefit of familiarity with the region and this thorough understanding of the culture and prevalent trends enable them to engage with customers on a more personal level; most partner merchants are decided on only after analysing which one locals shop at most frequently. Customer service is also naturally more understanding and responsive to consumer needs and woes.

The brains behind these regional cashback websites have plugged the gap in the SEA e-commerce industry, bringing and adapting this new model for online shoppers to enjoy. It’s a win-win situation where both consumer and business reap the benefits of the well-established online shopping sector. It’s definitely a lucrative market for cashback websites as even older generations are getting used to shopping electronically. Lai Shanru, head of Marketing from ShopBack, the top cashback website in Singapore, comments on ShopBack’s growth figures – “There are some 200 million internet users in the region, who are potential online shoppers. Having launched the company in August 2014, we have seen a 50% month-on-month growth in shopping transactions”.

These entrepreneurs have a knack for identifying high-potential business models that they can adopt and adapt – it’s not about coming up with an original business idea but having an acute eye for what works and what doesn’t. Rather than breaking into the market with a completely new idea, competing with an adaptation of a tested and proven business model is the safer and smarter way of doing business. These startups are embarking on a business venture that they know have a high chance of working out because others have already brainstormed and tested it out – that’s strategy and planning.

The Customer is Always Right

It’s safe to say that cashback websites have really taken root in the region and are branching out to more merchants and more customers. Judging from the number of repeat customers and new users, the entrepreneurial teams have their work cut out for them. The satisfaction of the customers speaks volumes about the success of these websites. Online shoppers today want more than just regular sales- they want bigger discounts, better deals and the best price possible for even small purchases. In short, the best cashback websites have managed to convince shoppers that they can save money in the long run and shown reliable results that keep shoppers coming back for more.

It’s a competitive market but no doubt a lucrative one, if cashback companies can grow sustainably and manage consumer demands. The challenge for these businesses is to differentiate themselves from others who have had the same idea. It is only by constant improvement that firms can fight off competition and meet consumer needs. With more planning and plenty of foresight, these new companies will continue to reap substantial profits and the e-commerce cashback industry as a whole looks set to thrive.

Entrepreneurship

The Brittle vs. Ductile Strategy for Business

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Companies and startups often pursue a path of “brittle strategy” and in it’s execution, it can be translated, in layman terms, into something like this:
Heard about the guy who fell off a skyscraper? On his way down past each floor, he kept saying to reassure himself: “So far so good… so far so good… so far so good.” How you fall doesn’t matter. It’s how you land!
– Movie : La Haine (1995)

Brittle strategy :

A brittle strategy is based on a number of conditions and assumptions, once violated, collapses almost instantly or fails badly in some way. That does not mean a brittle strategy is weak, as the condition can either be verified true in some cases and the payoff from using this strategy tends to be higher. However the danger is that such a strategy provides a false sense of security in which everything seems to work perfectly well, until everything suddenly collapses, catastrophically and in a flash, just like a stack of cards falling. Employing such approach, enforces a binary resolution: your strategy will break rather than be compromising, simply because there is no plan B.
From observation, the medium to large corporate company strategies’ landscape is often dominated by brittle “control” strategies as opposed to robust or ductile strategies. Both approach have their strong parts and applicability to corporate win the corporate competition game. The key to most brittle strategy, especially the control one, is to learn every opponent option precisely and allocate minimum resources into neutralizing them while in the meantime, accumulating a decisive advantage at critical time and spot. Often, for larger corporations, this approach is driven by the tendency to feed the beast within the company that is to say the tendency is to allocate resources to the most successful and productive department / core product / etc.. within the company. While this seems to make sense, the perverse effect is that it is quite hard to shift the resources in order to be able to handle market evolution correctly. As a result of this tendency, the company gets blindsided by a smaller player which in turn uses a similar brittle strategy to take over the market.The startup and small company ecosystem sometimes/often opts for brittle strategy out of necessity due to economic constraints and ecosystem limitations because they do not have the financial firepower to compete with larger players over a long stretch of time, they need to approach things from a different angle. These entities are forced to select an approach that allows them to abuse the inertia and risk averse behavior of the larger corporations. They count on the tendency of the larger enterprise to avoid leveraging brittle strategies, made to counter other brittle strategies. These counter strategies often fail within bigger market ecosystem as they are guaranteed to fail against the more generic ones. Hence, small and nimble company try to leverage the opportunity to gain enough market share before the competition is able to react.

Ductile strategy :

The other pendant of the brittle strategy is the ductile strategy. This type of strategy is designed to have fewer critical points of failure, while allowing to survive if some of the assumptions are violated. This does not mean the strategy is generally stronger, as the payoff is often lower than a brittle one – it’s just a perceived safer one at the outset. This type of approach, will fail slowly under attack while making alarming noises. To use an analogy, this is similar to the the approach employed with a suspension bridge using stranded cables. When such a bridge is on the brink of collapse, will make loud noises allowing people to escape danger. A Company can leverage, if the correct tools and processes are correctly put in place, similar warning signs to correct and adapt in time, mitigating and avoiding catastrophic failure.
To a certain extend, the pivot strategy for startups offer a robust option to identify the viability of a different hypothesis about the product, business model, and engine of growth. It basically allows the Company to iterate quickly fast over the brittle strategy until a successful one is discovered. Once found, the Company can spring out and try to take over the market using this asymmetrical approach. For a bigger structure, using the PST model combined with Mapping provides an excellent starting point. As long as you have engineered within your company and marketed the correct monitoring system to understand where you stand at anytime. Effectively, you need to build a layered, strategic approach via core, strategic and venture efforts combined with a constant monitoring of your surroundings. This allow you to take risks with calculated exposure. By having the correct understanding of your situation (situational awareness), you will be able to mitigate threats and react quickly via built-in agility. However, we cannot rely solely on techniques that allow your strategy to take risk while being able to fail gracefully. We need techniques that do so without insignificant added cost. The cost differential between stranded and solid cables in a bridge is small, and like bridges, the operational cost between ductile and brittle strategy should be low. However, this topic is beyond the scope of this blog post but I will endeavor to expand on the subject in a subsequent post.
Ductile vs Brittle :
The defining question between the two type of strategies is rather simple: which strategy approach will guarantee a greater chance of success? From a market point of view this question often turns into : is there a brittle strategy that defeats the robust strategy?
By estimating the percentage of success a brittle strategy has against the other strategies in use, weighted by how often each strategy is used by each competitor you can determinate the chances of success.Doing this analysis is a question of understanding the overall market meta competition. There will be brittle strategies that are optimal at defeating other brittle strategies but will fail versus robust. However, the robust one will succeed against certain brittle categories but will be wiped out with other. Worse still, there is often the recipe for a degenerate competitive ecosystem if any one strategy is too good or counter strategies are too weak overall. Identifying the right strategy is an extremely difficult exercise. Companies do not openly expose their strategy/ies and/or often they do not have a clear one in the first place. As a result, if there is a perception that the brittle strategy defeats the ductile one, therefore the brittle strategy approach ends up dominating the landscape. Often strategy consulting companies rely on this perception in order to sell the “prêt a porter” strategy of the season. Furthermore, ductile strategies tend to be often dismissed as not only do they require a certain amount of discipline, but also the effort required in its success can be daunting. It requires a real time understanding of the external and internal environment. It relies on the deployment of a fractal organisation that enables fast and risky moves, while maintaining a robust back end. And finally, it requires the capability and stomach to take risk beyond maintaining the status quo. As a result, the brittle strategy often ends up more attractive because of its simplicity, more so that it’s benefit from an unconscious bias.

The Brittle strategy bias:

Brittle strategies have problems “in the real world”. They are often unpredictable due to unforeseen events occurring. The problem is we react and try to fix things going forward based on previous experience. But the next thing is always a little different. Economists and businessmen have names for the strategy of assuming the best and bailing out if the worst happens, like “picking pennies in front of steamrollers” and “capital decimation partners”.
It is a very profitable strategy for those who are lucky and the “bad outcome” does not happen. Indeed, a number of “successful” companies have survived the competitive market using these strategies and because the (hi)story is often only told by the winner’s side only, we inadvertently overlook those that didn’t succeed, which in turn means a lot of executives suffer from the siren of the survival bias, dragging more and more corporations into similar strategy alongside them.
In the end all this lot ends up suffering from a more generalized red queen effect whereby they spend a large amount of effort standing still (or copying their neighbors approach). This is why when a new successful startup emerges, you see a plethora of similar companies claiming to apply a similar business model. At the moment it’s all about UBER for X and most of these variants. If they are lucky, they will end up mildly successful. But for most of them, they will fail as the larger corporations have been exposed and probably bought into the hype of the approach.
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About the Author
This article was written by Benoit Hudzia of Reflections of the Void, a blog about life, Engineering, Business, Research, and everything else (especially everything else). see more.
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Entrepreneurship

What Kills A Startup

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1 – Being inflexible and not actively seeking or using customer feedback

Ignoring your users is a tried and true way to fail. Yes that sounds obvious but this was the #1 reason given for failure amongst the 32 startup failure post-mortems we analyzed. Tunnel vision and not gathering user feedback are fatal flaws for most startups. For instance, ecrowds, a web content management system company, said that “ We spent way too much time building it for ourselves and not getting feedback from prospects — it’s easy to get tunnel vision. I’d recommend not going more than two or three months from the initial start to getting in the hands of prospects that are truly objective.”

2 – Building a solution looking for a problem, i.e., not targeting a “market need”

Choosing to tackle problems that are interesting to solve rather than those that serve a market need was often cited as a reason for failure. Sure, you can build an app and see if it will stick, but knowing there is a market need upfront is a good thing. “Companies should tackle market problems not technical problems” according to the BricaBox founder. One of the main reasons BricaBox failed was because it was solving a technical problem. The founder states that, “While it’s good to scratch itches, it’s best to scratch those you share with the greater market. If you want to solve a technical problem, get a group together and do it as open source.”

3 – Not the right team

A diverse team with different skill sets was often cited as being critical to the success of a starti[ company. Failure post-mortems often lamented that “I wish we had a CTO from the start, or wished that the startup had “a founder that loved the business aspect of things”. In some cases, the founding team wished they had more checks and balances. As Nouncers founder stated, “This brings me back to the underlying problem I didn’t have a partner to balance me out and provide sanity checks for business and technology decisions made.” Wesabe founder also stated that he was the sole and quite stubborn decision maker for much of the enterprises life, and therefore he can blame no one but himself for the failures of Wesabe. Team deficiencies were given as a reason for startup failure almost 1/3 of the time.

4 – Poor Marketing

Knowing your target audience and knowing how to get their attention and convert them to leads and ultimately customers is one of the most important skills of a successful business. Yet, in almost 30% of failures, ineffective marketing was a primary cause of failure. Oftentimes, the inability to market was a function of founders who liked to code or build product but who didn’t relish the idea of promoting the product. The folks at Devver highlighted the need to find someone who enjoys creating and finding distribution channels and developing business relationship for the company as a key need that startups should ensure they fill.

5 – Ran out of cash

Money and time are finite and need to be allocated judiciously. The question of how should you spend your money was a frequent conundrum and reason for failure cited by failed startups. The decision on whether to spend significantly upfront to get the product off the group or develop gradually over time is a tough act to balance. The team at YouCastr cited money problems as the reason for failure but went on to highlight other reasons for shutting down vs. trying to raise more money writing:

The single biggest reason we are closing down (a common one) is running out of cash. Despite putting the company in an EXTREMELY lean position, generating revenue, and holding out as long as we could, we didn’t have the cash to keep going. The next few reasons shed more light as to why we chose to shut down instead of finding more cash.

The old saw was that more companies were killed by poor cashflow than anything else, but factors 1, 2 and 4 probably are the main contributing factors to that problem. No cash, no flow. The issue No 3 – the team – is interesting, as if I take that comment ” I didn’t have a partner to balance me out and provide sanity checks for business and technology decisions made” and think about some of the founders and startup CEOs I know, I can safely say that the main way that any decision was made was by agreeing with them – it was “my way or the highway”. I don’t therefore “buy” the team argument, I more buy the willingness of the key decision makers to change when things are not working (aka “pivoting” – point 9).

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About the Author

This article was produced by Broadsight. Broadsight is an attempt to build a business not just to consult to the emerging Broadband Media / Quadruple Play / Web 2.0 world, but to be structured according to its open principles. see more.

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