Startups: forget consumer, B2B is where it’s at

Pssst! Startups. Lose your fixation with consumer-facing services, take a look at solving problems for enterprises and start riding the “techquisition” wave. Techquisition is what Gartner is dubbing the acquisition of clever technology by businesses — in any sector, and is one of the ways they are advising enterprises to get ahead as a digital business.

What’s the background to this? Well businesses are entering a “bimodal” phase, says Gartner. On the one hand, they need to keep the lights on, minimise risk, keep costs down and steer a slow-and-steady course when it comes to technology. On the other, they need to digitalise and prepare for the new algorithm economy by being speedy, agile and innovative, or literally risk extinction. If these two modes sounds contradictory, it’s because they are.

This leaves the poor CIO scratching their head, wondering how on earth they are going to navigate their way through this.

Enter the “techquisition”. According to David Willis, Gartner vice president & distinguished analyst, to overcome this bimodal paradox, businesses should look to internal innovation, crowdsourcing and acquiring technology by snapping up startups, AKA the techquisition in Gartner-speak.

On the face of it, it might seem that someone inside an organisation would have greater insight into solving that company’s problem. Employee innovation contests are not new and have been launched by technology companies and other sectors alike: take a look at what Avanade, for instance, does. And Google is well-known for its “20 percent time“, which has resisted reports of its demise over the years. But anyone who has worked at a corporate — especially a traditional business that still lockdowns things like social media — will know that when push comes to shove, it’s pretty hard to innovate from within.

When it comes to option two, Microsoft and Philips look for innovation externally and take a crowdsourcing approach, with Philips even partnering with Indiegogo, the crowdsourcing platform for its contest.

And finally the “techquisition”, something that came up on several occasions at the Gartner Symposium ITxpo 2015, held in Cape Town at the end of September, as a way to leapfrog your business into its digital future. “Solve for speed and agility by becoming an investor,” said Gartner senior vice president, Peter Sondergaard. “Buy a tech company that adds business capability to a technology platform,” he advised CIOs.

We’ve seen an example of this in South Africa with Garmin’s acquisition of iKubu’s bicycle radar technology. And Gartner vice president and fellow, Mark Raskino, points to the maker of sports gear, Under Armour’s 2014 acquisition of MapMyFitness workout tracking software as another example.

Taking the lead on techquisitions is also an important migration of the CIOs role, allowing them to “lead from an infield position, not by control but through a widened circle of influence,” said Willis. “CIOs need to become trusted allies,” he continued.

Back to my original point about B2B being the new black for entrepreneurs. Of course on the face of it B2C is more sexy: movies get made about the founders of consumer products; investors like them; and frankly, it’s easier to explain what you do to your friends and family, and they are more likely to actually use your service.

But let’s take a look at the six African startups Gartner chose to feature during the conference:

• Nandie: A cloud-based data analytics platform
• Wyzetalk: Employee engagement and communications
• Build: Web site builder with ecommerce capabilities
• Encentivize: Employee rating and motivation
• Mapzania: Geographical information and mapping
• Clevva: Virtual assistants for employee productivity

Notice something? Three of these solve specific enterprise staff-related challenges. And the others all have an enterprise angle. Now obviously Gartner was wanting to bolster its techquisition point in selecting these six, but it did crowdsource the initial list of startups to feature.

The other good news for the founder of B2B startups is that according to Mapped In Israel, which crowdsources data from the Israeli startup ecosystem, B2B startups have a much higher success rate than consumer facing ventures.

In 2013, the failure rate among Israeli B2C startups was almost more than double that of B2B startups, said the company. Sixteen percent Of B2C companies shut their doors and nine percent of B2B companies closed.

So, if you are thinking about your first, or next startup, or planning a pivot, consider how you can help a corporate work better. Preferably by solving a problem that gives them a competitive advantage in their industry, allowing them to do what they do better, or differently, compared to their competitors. What is going to ensure their business, in whatever form it takes, will be around in the future?

And specifically, help companies deal with the masses — and I do mean masses — of information they are going to be bombarded with in the not too distant future. Gartner predicts that within five years we’ll be seeing one million devices coming online every hour. And by 2020, 25 billion devices will be generating information about everything: from how you sleep, to how often you do your laundry, to how you drive. Companies are going to need clever algorithms to make sense of this big, but dumb, data.

Welcome to the algorithm economy. Where, it turns out, for the time being anyway, B2B is where it’s at.