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Monday, October 18, 2021

Startup challenges and how true/relevant are these startup challenges in the context of Bangladesh

Start-ups these days grow so rapidly that it’s difficult for them to correct course once they recognize missteps, which is related the topic “how does one start a new venture company”. When start-ups understanding the mechanics of effective scaling before they reach that moment of truth. The Harvard Business Review Article “Start-ups That Last” indicates that most of start-ups still lack a cogent framework for transitioning to be a successful venture company. However, article had provided their extensive case studies of fast-growing companies and seventy-five years of organizational research for successfully scaling a venture company. Research have identified four critical activities for successfully scaling a venture and they are:

  • Firms must hire functional experts to take the enterprise to the next level, 
  • Add management structures to accommodate increased head count while maintaining informal ties across the organization, 
  • Build planning and forecasting capabilities, and
  • Spell out and reinforce the cultural values that will sustain the business.

The main challenges are many entrepreneurs will resist these activities. They often develop strategies opportunistically, lacking a frame of reference because they are starting from scratch, and they take a similar ad hoc approach to building their organizations. Founders tend to view formal structures and processes—elements common to all four activities—as bureaucratic threats to their entrepreneurial souls. They also worry about losing speed, control, and team intimacy. When they eschew order and discipline, however, they pay a steep price: chaotic operations and unpredictable performance.

Also, instead of focusing on automation and technical advancement, most startups face supply chain, inventory planning, sales & distribution issues, as well as stock-outs, returns, and cash flow issues.

Another significant problem in Bangladesh is people’s cultural mindsets, which are inextricably linked to professions such as doctor, engineer, government service, private, and multinational organizations as good carriers for children. As a result, only a small percentage of the total young generation is interested in pursuing a career as an entrepreneur, especially those who come from a family with a business background. However, very few of the business generation’s latest inventions, fresh concepts, and outside-the-box thinking are restricted to theoretical knowledge or books, rather than being implemented or researched.

The Harvard Business Review from March 2016 discusses start-ups today and the challenges that most start-ups face around the world, including Bangladeshi startups as well. In fact, the real challenges in Bangladesh are much more complex.

Developing countries like Bangladesh are diverting from the old models and shifting towards new economic models of strategic development through the use of information and knowledge in order to generate opportunities for business creation and thus gain competitive advantage in the world market.

Bangladesh has been facing limited capabilities in terms of human capital and R&D investment, continuous emigration of highly-skilled students/workers, cultural diffusion over period of time, under-developed capabilities in technology transfer and knowledge absorption, and more broadly, insufficient investment science and technology, which are all crucial factors to developing private sector and startups innovation and competitiveness.

Start-ups appear to achieve a certain point of early development and then stagnate in the later ‘phases’ and thus stagnate in growth strategy. As a result, they are not generating more sales and employing more workers. The reasons behind such phenomena include the limited business knowledge and experience, management style conducive to micro-operations only, underdeveloped human resource development, the unfavorable disposition to learning, no perfect funding option specially for IT startupsand the overall “me-too” business model etc. Furthermore, a small and limited market negatively impacts the overall demand. One of the main weaknesses of enterprises in Bangladesh, independent of their size and maturity, involve the predominant management style, which is suitable only for small business operations due to lack of understanding of business owners about the importance and benefits that professional human resource development and management can bring to the firm.

During the Covid-19 pandemic-induced lockdown, the e-commerce industry was a lifeline for the national economy. In Bangladesh, the majority of start-ups, including those in information technology and other fields, are focused on the e-commerce industry.

 At present there are approximately 2,000 e-commerce sites. It’s difficult to estimate the number of e-commerce companies in Bangladesh. 50,000 Facebook-based outlets delivering almost 30,000 products a day. Currently, 80 per cent of the online sales are taking place in Dhaka, Chattogram and Gazipur.

During the epidemic, some local organizations have started e-commerce operations to reach out to customers. Three sorts of e-commerce companies are common in Bangladesh: business-to-business, business-to-consumer, and consumer-to-consumer.

In Bangladesh retail e-commerce is growing at 72 per cent a month. At present, more than 35,000 individuals and above 25,000 small and medium enterprises (SMEs) are part of this sector. Till 2018, the number of e-commerce business sites and e-commerce pages equaled 2,500 and 150,000 respectively. It was estimated that the number of deliveries per day added up to about 15,000 to 20,000 at the retail level.

The e-commerce industry in Bangladesh is an emerging industry. This sector is steadily growing and attaining competitiveness. The local e-commerce companies which have been in the market since inception of the e-commerce industry should be given protection. Simultaneously, foreign investments are required in this sector. Payment processes provided by e-commerce sites must be made more secure, and customer information protection and privacy must be ensured. Low-cost, high-speed internet needs to be ensured in the rural areas. The e-commerce industry needs to put more emphasis on delivery logistics and customer service. Immediate action to ensuring consumers’ rights needs to be taken since a regulatory authority is not present to prevent consumers from being cheated and given low quality or date-expired products. Traditional loan or financial facilities may need to modernize for e-commerce or IT start-ups because they have few virtual resources, such as a website, few onsite or remote human resources, few office assets, such as computers/laptops, and sometimes rented office space. As a result, there are no permanent assets such as a production facility or an office permanent building. So, traditional loan facilities looking for some permanent assets against which FIs will provide the easy loan to good start up or e-commerce industry or organization. To move the industry forward, Internet infrastructure must be strengthened, and technology upgrade initiatives must be implemented promptly. A start-up business will need a loan with flexible terms and conditions to fund technology upgrades and hire professional human resources to ensure continuous growth.

Bangladesh’s e-commerce business is predicted to reach $3 billion by 2023, thanks to the government’s digital foundation and a young, tech-savvy workforce.

4IR (4th Industrial Revolution) requires proper quality education for all at all levels to realize and take advantage of combining business and technology together. In order to encourage students and prepare them for the future successful entrepreneurs of the country, academia should include curriculum that welcomes new ideas, creative thinking and natural out-of-the-box notions. As a result, the educational system, particularly primary and secondary education, must include adequate curriculum to improve science, technology and innovation. Information and communication technologies (ICTs) must be harnessed to strengthen education systems, knowledge dissemination, information access, quality and effective learning, and more effective service provision for the implementation of Sustainable Development Goal 4 (Education 2030 Incheon Declaration and Framework for action).

Workforce development through proper gap analysis is a critical component for IT startups and e-commerce in Bangladesh, which necessitates collaboration between government, industry and academia to develop a strategy that aligns with current and future technological advancements such as AI, AR/VR, IoT/IIOT, Big Data, Cyber Security, Privacy, Robotics/Cobotics, supply chain and so on.

Furthermore, while general cyber hygiene is vital for enhancing Bangladesh cybersecurity, no single action, program, or theory can overcome the ubiquitous difficulties of cybersecurity knowledge and job demand. Instead, long-term solutions will necessitate a web of interconnected policies and community-wide initiatives. As a result, rather than advocating for a single solution, the practice’s purpose is to broaden the range of possibilities available. The goal should be to explore and convey the issues and challenges that exist at the national, corporate, and individual levels as a result of the existing cyber security practices gap and lack of technological literacy.

Countries can educate and train cyber security and other technological advancement subject through continuous learning, exchange programs, and re-skilling. Another alternative is for stakeholders to develop tools that improve interactions between government and private sector participants in order to address the shortage of cyber security and other technical workforce capabilities, which will benefit the new start-up and e-commerce industries.

References:

Education 2030: Incheon Declaration and Framework for Action for the implementation of Sustainable Development Goal 4: Ensure inclusive and equitable quality education and promote lifelong learning opportunities for all; 2016 (unesco.org)

Tawhidur Rahman and Muhammad Moinul Hossain
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