In the previous post I have discussed the challenges of protecting the innovation and trade secrets. This is important to keep the secrets of the company inside the organization and make sure the business idea and core competencies are protected well. Flying under the radar is the approach of most entrepreneurs during their seed stage for business idea protection.
I have been involved in couple of startup consultancy projects as well as starting my own firm and I have seen different policies on business information disclosure in revealing/protecting the business idea. On one hand, I have met entrepreneurs who were so cautious about discussing their business idea to others. Some of them were even worried to talk the simplest and the most general information of their business. On the other hand, I have met entrepreneurs who were open to talk about their business idea and even their plans.
During my own company startup I have been dealing with such a decision too and had to answer some questions:
- Can I talk to the others about my business idea before really starting it?
- To what extent can I reveal the information and plans?
- What is my classified information?
- To whom can I talk about the business idea?
Advantages of Information Disclosure
The Juvenile entrepreneurs might think that they should keep the business idea as a trade secret and should not reveal any part of it before starting the business. These entrepreneurs face another challenge that they hardly recognize: limiting their business network.
During the seed stage of entrepreneurship, firms need to build their network. Business network is an essential part of every entrepreneurial activity. This stage is when the entrepreneur needs to build the network. The network of suppliers, potential customers, future business partners, bank and financial institutions, and the most important is the human resource and knowledge network which is hard to make while flying under the radar. In order to build such networks the entrepreneur needs to reveal some information from the business idea. It is not possible to build the startup business network while keeping the whole business as secret.
Another advantage of talking to others is brainstorming the strategies and plans while talking to friends and experts. You can use others’ mistakes instead of waiting to make the mistake yourself and do a pivot which is costly to your company. Once I was in seed stage of my startup in Sweden I used the advice of friends and it was beneficial for me to acquaint them about my business idea even the innovative part of the business. I remember a friend corrected me on the local experience and another friend corrected me on my approach on the language of my online store telling the story of a failure of the same strategy I was going to approach. I found out at the time that acquainting some friends and experts will not only give you the networking possibilities (I have made quite good network from friends to friends of friends that I have used in my startup) but also will help you brainstorm your idea and strategies with which you can correct your plans. In my case, I have used both advantages that the revelation of informing others about my business idea. I was not afraid to talk to these friends and acquaintances I met, as they helped me make my network and gave me good advice on how to proceed and optimize my plans.
When the entrepreneur reveals the business idea and uses the advantages of networking and brainstorming he/she will face a challenge as well. The protection of business idea and making sure that no one copies it before you start is the main problem. I have seen many people who were even afraid of business incubators that were quite reliable and did not even talk to them on their business idea. In this case building business network in the early stage is harder and networking takes more effort.
The Revelation-Innovation Trade-off
The entrepreneur’s approach in information protection or revelation should be planned during seed stage. Innovation plays a vital role in choosing the right path for information management during seed stage. When an entrepreneur has a product or service with high degree of innovation it is essential to make sure that the business idea is protected. On the other hand in a trade concept which is less innovative the entrepreneur does not necessarily need to fly under the radar. The more innovative the product or service is, the lower the entrepreneur should fly.
The golden eagle thinks strategically before every action. In some hunts it flies low under the radar of its prey and when it is so close enough to the prey it makes a fast pop-up and catches the prey. In some other hunts, however, it flies upper to freeze and scare the prey and have a better chance to dive over the prey with faster speed. The golden eagle entrepreneur considers the circumstances before planning and plans strategically for any condition separately.
The answer to some questions can help the entrepreneur make a better decision:
- To which degree is the product/service innovative?
- Can the product/service be copied simply?
- Who can copy it?
- How can I protect the business idea?
…. And more questions that can be created and answered by the entrepreneur him-/herself in order to make the best strategy for information management.
NDAs (Non-Disclosure Agreement) is one of the most popular protection methods that can help the entrepreneur to have more assurance when revealing information. This is so popular in the seed stage in particular when outsourcing or hiring employees.
Classification of the information can also help the entrepreneur and bringing more security for the business. When the entrepreneur classifies the information the company can use some part of information and give some part of business idea out while keeping the core secrets inside the firm and do not reveal.