Startups are the new cool-kids on the block with its swagger and small nimble teams willing to do anything to succeed, disrupting industries long believed to be invincible. How to harness the power of them in corporation?
We’re talking telecom companies, banks, and hotels who’ve maintained an iron fisted grip on the market, yet now forced to acknowledge that these agile teams are moving in ways they can’t keep up.
The market is changing and other industries have been forced to take note, even though they have yet to feel the startup effect quite as forcefully. And as with anything new and cool, everyone wants a piece of it — without actually knowing how to harness its power.
Accelerate, Buy, Collaborate or Build
So far the only way corporations could participate in the startup world, was to run alongside it by collaborating, accelerating and straight out buying startups. But why wait for a partner to collaborate with, when there is an option to build from the ground up?
We get it. It’s hard to imagine a big corporation that is mainly focused on processes and efficiency, associated with the instant decision making and extreme uncertainty of the startup world. Even the thought of it seems back breaking because big corporations are usually compared to dinosaurs instead of unicorns.
Instant decision-making, extreme uncertainty and pivoting during a project is not your typical corporate procedure. Which is why building startups requires unconventional conditions.
Unconventional but Effective
There are few components you need to succeed:
A process that ensures maximum effect with minimum effort
This allows you to make decisions based on data rather than on assumptions, which in turn enables you to draw conclusions quickly and adapt to market reactions. Processes designed on the basis of Design Thinking methodology or the Lean startup provide such conditions.
Building on the knowledge of experienced team members
When building new businesses, taking risks and learning from past decisions, etc.
An independent environment
It uses the power of corporations but also provides the freedom to operate outside of corporate procedures.
This 3-step process might be short, but the implementation of it is anything but easy. Any experienced marketing manager worth his/her salt will have doubts. “Do we have the right people on board?”; “Will building a startup affect daily operations?”; “Won’t such a risky undertaking harm the brand?”. Fair questions! And we’re going to answer them below.
Find the ‘entrepreneur’
First of all, find the ‘entrepreneur’ within the corporation. It’s rare to find ‘first-rate’ entrepreneurs working in big companies — they’re already out building their business. And yet their knowledge about the industry and corporate condition is needed to create a startup that interacts with the ‘mother’ company.
So how do we solve this?
Our experience shows that in every corporation there exists an individual or a few individuals with the soul of an entrepreneur. Someone who has the drive to go beyond the standard and exceed the processes, they are eager for new challenges and to discover new opportunities. With this in place, we look at the skills that other team members should have. This would include:
● Experience from past startup projects
● Awareness and the ability to implement effective processes
● Adequate competences.
Focus for 100 days
Secondly, you cannot build a startup “by the way”. It can’t be a project that you undertake in your spare time. Creating a startup needs complete devotion. With laser focus, you can achieve a lot in a short time. In 100 days, you could effectively create a Proof of Concept, which includes, exploring a topic, creating concepts and testing them with clients at the value proposition level.
After 100 days you would’ve gathered enough evidence to determine if the new concept triggers an adequate reaction from the target market. If the concept is validated successfully, it is easy to decide to invest in the next phase, that is, in the prototype process that will work.
Protect your brand
Just look at Zappos — bought by Amazon, or Zencard — bought by PKO BP. Even Coca-Cola joined the bandwagon. Within 3 years, they’ve established several startups and each of them operates under its own trademark.
Thirdly, building a startup should not harm brand awareness. That’s why the startup team should work in an independent environment and conduct tests under a name that isn’t associated with the mother company.
Ultimately, when the whole business has been tested and validated positively, it is possible to integrate it with the “mother” brand, and perhaps even to incarnate the startup into the corporation, as a business unit.
However, it doesn’t have to be like this. Sometimes startups work most effectively under its own brand. Quite often — if we were to look at investment transactions — startups bought by corporations have remained unchanged, with their own team, culture and brand.
Lost Chance, Or Seized Opportunity?
Often in corporations, projects begin by:
● Defining a product to be launched/implemented
● Creating a plan to convince customers that it’s worth it (Every description of the product states just how indispensable it is, with a precise and time-consuming description of all the functionalities of the product)
● Passing through more decision-making gates
● Transferring responsibility to the relevant departments
● Ensuring a large budget, and
● Having a fairly long lead time.
No startup could handle such a process. If you really want to build startup, you need to have a different perspective and you need to set priorities. You have to accept uncertainty and tune in to exploration and research rather than on accountability with implementation. You have to come to terms that there will be changes and “plot twists” and pivot(s). And again, easy to say, difficult to do.
Many corporate managers need to change their mindset, their defining goals and get comfortable with uncertainty. Our observations show that those who have already experienced the unexpected (for example, startups already nibbling at their business), or have lost opportunities (for example, rejecting an offer to partner with an employee only to have said employee succeed on their own) are more open to the startup experience.
Managers and leaders can avoid similar mistakes made by fellow colleagues and take on the challenge today. Building a startup is a risky adventure, because the only thing that is certain, is that nothing is certain. But at the same time, it is a challenge that offers significant long-term benefits. This is an opportunity that has to be undertaken wisely.
Where To Start?
If you’re a manager who is ready to bear the uncertainty and take the risks, then you’re ready for an adventure with startups. Have a look at the following reflections that come from our experience in creating startups for corporations. Three practical tips:
Treat startup-building as a way to implement a brave strategy
If you want to enter a new market by using trends that will change your industry or significantly improve your business, then building a startup is not only justified, it is encouraged. But if you want to deal with this “for fun“, without a strong strategy, it’s best not to start at all. To inspire true commitment and willingness to sacrifice (both on the corporate side and the startup team), the vision must be genuinely important to the company.
Act like an innovator and investor – create a few startups, not one
You know perfectly well that the greater the risk, the more you need to diversify your activities. Don’t assume that just because you set up a team that is working on a Proof of Concept, you’ll receive good news. Sometimes you will find that something that promises to be a star – fizzles away when meeting with customers. Always just assume that you are investing in three concepts. This way, your chances of finding a real star rises, and it doesn’t have to cost millions of dollars. The board should act as an investor in this case, and gradually increase the financial outlay depending on progress. The cost of conducting the first market validation of the new business concept (Proof of Concept) should represent a few percent of the total investment.
Choose a path tailored to your organization, its agility, entrepreneurial spirit and risk-taking ability
Some managers try to create startups by themselves, using internal forces and learn from their own mistakes. Sometimes it works. Others choose the support of specialized companies such as Innovatika, which employs entrepreneurs and operates according to a proven process. Choose the path that suits you best.
If you want to begin your startup journey then start thinking, or even better — start acting now. Build that startup! Remember, corporations can do it too!