That’s not a click-bait headline. Maybe just a little to get your attention. But it’s true: having a great idea doesn’t matter so much in the business world. Even though, actually, it is a bit more nuanced. Having an idea indeed matters, but much less than its execution. What that really means is that you can have the best fintech idea in the world… if you execute it poorly, it will result in next to nothing. A not-so-great idea executed well can get you much further along than a really great one.
Stupid fintech ideas with a bit of luck
How many times have you thought “this is stupid“, not the general economy, but rather about a business that is actually doing extremely well? That can be in any sector, not particularly fintech. Sometimes, a fintech business might appear stupid at first but actually is doing quite alright. UK fintech Lanistar got into trouble with the regulator last year for its influencer-driven campaign. But guess who got its FCA approval now? All the while gaining followers and brand awareness. Rule of thumb: if it looks stupid, but it works, it’s not stupid.
There are many factors that would determine if a business is successful or not. Most businesses, in fact, fail: 90% of startups ultimately will. You can tinker around with the edges of that number, but you will hardly be below a 70% failure rate. Sometimes, really stupid ideas are actually successful… because the execution is near-flawless. Or because of luck.
Yes, one big factor, though, is luck. Which is hard to swallow for many that want a quick road to success… but that’s nonetheless a central part of the business world. Sorry, not sorry. The issue is that more often than not, people dismiss luck playing a big part in one’s success. Luck includes being born to wealthy parents, by the way. Generally, it is “if things go bad, it’s external factors. If things go well, it’s because of internal factors“. In simple terms, “if I fail, it’s bad luck. And if I succeed, I am a genius“.
Businesses do that too: they would blame external factors for missed targets and numbers. Inversely, brag about their superiority when things are better. It is the eternal dance with investors. This is mostly down to the management trying to find excuses. Or to justify their big bonuses.
Not just luck
But besides luck, one thing successful businesses have in common is a fantastic execution: that is, a clear strategy and the subsequent execution of that strategy. This is the winning combo. What we really mean here is a fintech business that has pinned down everything it needed to in its business plan, the product-market fit is real, all the stars are aligned. It does not mean it will be successful forever, as it is hard to reflect on a young-ish industry like fintech. And many fintechs score early wins but have yet to show any signs of profitability. Actually, so many in that case that it is easier to point at the ones that are indeed profitable… For instance, maybe Lanistar will fail at some point. Time will tell who the real winners are.
Execution matters even more in fintech because of regulation. As opposed to less regulated industry, not implying that other industries are not as regulated. And because financial services are a complex beast.
There is also this myth that a company needs to be incredibly innovative to win big. It is true to a certain extent, however, innovation can take many forms. It can be business model innovation, as in a novel way to make money as a company. Likewise, it can be the way you bring a product to market rather than the product itself. Product innovation for instance does not mean exceptional success. Microsoft, and other companies before it, tried to launch a tablet without real commercial success. Apple came along with the iPad and jackpot. Timing the market is tough.
At the end of the day, it is what you do with that innovation, the execution, rather than the idea, that really matters.
In the fintech world, Simple was the first U.S. neobank but did not quite enjoy the success of Chime and others after it, for instance. You could argue that by staying independent rather than being acquired by BBVA, it might have. Who knows. The business world’s cemetery is paved with stories of “companies that could have if only”. A similar idea to another business but clearly not the same success.
Certain fintech segments, for instance the app-based retail-focused one, are now quite crowded. There are not many new ideas coming to the market…
What will make the difference then?
Most probably an incredible execution… and some luck.