What the big and mid-sized companies can learn from startups and vice versa
- January 13, 2020
- Posted by: Yiannis Zarkadis
- Category: Change Management, Entrepreneurship, Leadership, Transformation
It is estimated that 9 out 10 of startups fail. But also, it is a fact that 9 out of 10 of the biggest companies in the world in 2000 in terms of market capitalisation are out of this prominent list in 2019, just two decades after! Big rate of failure in the first instance, big rate of change in the second one.
So, the challenge for these different types of organisations, startups and big/mid-sized companies is clear enough:
– What startups should do in order to improve their low success rate? And on the other hand, how big and mid-sized companies should move in order to maintain their competitive edge in the long run?
This is certainly a very broad issue to analyse and discuss. In this article we focus on and support the idea that part of the answer lies in trying to bring these two different ecosystems together and learn from each other.
Based on our experience and active engagement, we have noticed 6 elements that if they are transferred from one ecosystem to the other, businesses will do better in terms of their long term viability. These are as follows.
A. What the big and mid-sized companies can learn from startups.
Experimentation is something that startups do very well. It is in their DNA. They put customer first and they are seeking to address a specific customer need. On their way, they test the model, the product and/or service and all the basic assumptions on which their concept is built. Based on experiments they conclude, they move on, they adjust or they stop. And only if there is very strong evidence that they address a specific customer need of high worth, they move on by making or attracting a serious investment.
On top of that, the usual absence of rigorous and inflexible processes during the everyday activity/job, creates an environment and a culture within which employees are eager to experiment and create.
On the contrary, sometimes big and mid-sized companies develop their new ideas in a closed process and isolated from the end-users and their real needs. And yes indeed, they develop their new products and services, based on research, data and trends. But sometimes they do this without the adequate experimentation with end-users. Either because they lack time, or/and because they rely more than they should on their own internal process. Innovation is a kind of race for them. But customers don’t think in this way. They don’t care about corporate race, they don’t even know about it. They will respond positively only to the ideas that address real needs.
2. Scarcity of resources, do more with less
How many times haven’t we find ourselves (me including) witnesses in meetings where executives from big organisations argue that money and budgets are not enough? Definitely a lot. They base their argument usually by comparing budgets vs last year or with competitors. But this is quite narrow, isn’t it? Because many times, in these cases we talk for investments worth millions. So, someone might argue that the real question should be … “What are you going to do with these money?” … because they are too many.
On the contrary, this culture and attitude is very well known to startups. Usually, especially in the early stage, they lack resources and if they find them, they will appreciate and take care of each single euro/dollar to be invested. They are lean and mean and they operate with this attitude in every aspect.
3. Entrepreneurship in leadership
The world is changing. In a few years, nothing will look the same as is now. Doing Business is changing and Leadership too. One of they key leadership skills nowadays is Entrepreneurship.
Working for many years in a big company with thousands of employees, processes and procedures, or within a traditional SME, it is easy enough for an employee to be “trapped” within the complex and sometimes cumbersome organisational structure and attitude. Following the process and the “normal way” is a must, but sometimes this creates inflexibility and it kills speed, problem solving, fighting spirit, passion, experimentation, creativity, risk taking (calculated) and adaptability to the new market environment.
But all these characteristics are becoming very important, as a new style of leadership is required. And usually, we can find this set of skills in entrepreneurs and startups, at least the successful ones. So, big companies and traditional SMEs have to motivate their employees towards behaviours that reflect these kind of skills, moving them sometimes out of their comfort zone, the usual norms, not taking things for granted.
B. What the startups can learn from big and mid-sized companies.
1. Building cohesive blocks
If you talk to a startupper, you have a 90% chance when you ask him/her what their biggest challenge is, to tell you that it is Financing, i.e. to find the adequate capital in order to fuel and develop their new business. But this is a bit contradictory in that today we are living in an age where it is well known that there are plenty of funds waiting and wanting to invest.
So, why is this happening? Why do they say so? I believe that the basic reason is that many of these startuppers lack sufficient business knowledge and basic business skills. And contrary to what they think, their major challenge is not Financing, but to build the right blocks behind a worthwhile idea that will persuade funds to invest. And yes, definitely Financing remains one of the key challenges for a startup to take off, but based on my experience this may be 30%-40% of the challenge, the rest being the idea itself and building these blocks.
This (building blocks) is something that successful big companies and SMEs know how to do it well. Startups have to deepen more in subjects like customer segmentation, channels, value proposition, customer relationships, revenue streams, key resources and people, activity grid, key partnerships, cost structure, etc. If their idea addresses customer needs and their strategy and execution plan are persuasive and fact based, they will have good chances to attract the propel capital and see their business thriving.
Nowadays, startups are becoming popular especially in young people. They join this stream for various goof reasons. Either because they want to let their own personal footprint in business, or because they want to work with Purpose, or because they want to test and have the experience of how it is before they join corporate, etc. And it is also true that many of them follow this path because of lack of alternative career choices, as labor market changes and it becomes very difficult to join in.
Whatever the reason is, my feeling is that there is a significant number of people who lack Commitment. When you launch or join a startup, you have to be aware that the journey will be long and difficult. With a few good moments and many bad ones, especially in the beginning. Full of stress and disappointments, before the dawn comes. You can not sustain this journey, unless you are 110% committed. Many times in this endeavour, you succeed through failure! And this, for many, is hard to understand and digest.
I know some big successful corporations which are still Family companies with a history of centuries, that started literally from nothing. And if you read their story, you will find that many of them along the way have been faced with failures, physical disasters and even found themselves close to bankruptcy. But they endured and did it. But what was the key element of their long lasting? I t was the Commitment of their founders, who then passed it on from generation to generation and to all the leadership teams and employees.
The founders and key people of startups have to go deeper and learn from this beautiful and inspiring stories. They have to be aware, to learn and to harden themselves on the difficulties they will face. Commitment is key.
And after, yes indeed we can find teams who are aware, they learn and they claim that they are committed to Make It Work. As we said, success will not come overnight. It may pass through failures and disappointments and it may take long to come. And especially in the implementation stage a lot of patience is required.
“… If you can wait and not be tired in waiting,… and lose, and start again at your beginnings, and never breathe a word about your loss, … and so hold on when there is nothing in you, except the Will which says to them: “Hold on””. These are just some phrases of Kipling’s wonderful poem “If”, referring in these lines to Commitment, Endurance and Patience, which go hand in hand.
- Key Takeaway
Nowadays, connectivity and sharing play an important role in the business development approach. Different ecosystems get in touch and complement each other. The same can be applied between startups and big/mid-sized companies. There is a common pool of interests like experimentation, do more with less, entrepreneurship in leadership, building blocks, commitment and patience, to name just a few, within which they can dive deeper, exchange their experiences and learn a lot from each other.
- What other ideas or thoughts can you add? Please leave a reply.