Startups exist to solve problems. They run lean and agile so they can pivot easily. Startup culture was born to innovate and like Jack the Giant Slayer, they can disrupt the profit centers of even the most successful corporations by essentially stealing their goose that lays the golden egg. This can leave affected corporations scrambling for relevance but unable to pivot quickly because of the weight of their corporate structure and lack of a top-down innovation mindset.
Just look at some of the most successful startups; companies like Dollar Shave Club, Uber and even Amazon challenged the status quo and took on seemingly (and some may say literally) monopolistic entities to solve customer problems.
Customer Centricity vs. Shareholder Value
“Your strength will become your weakness”- Sun Tsu, The Art of War
What has traditionally made corporations so strong is their hyper-focus on ROI and dedication to shareholder value. Their business models are fixed towards these goals. The focus on shareholder value has created a whole range of financial KPIs which are mainly driven by stock companies. It is these KPIs that make it difficult for a company to invest in long-term innovation initiatives and create solutions for their customers. Corporations can appear profitable simply by outsourcing, removing assets from the balance sheet and only investing in projects with low risk and quick payoffs. Innovating on behalf of the customer based on traditional KPIs is simply not feasible. This is what makes the potential for disruption so great.
In contrast, successful startups work because of a “fail fast” mindset. They make quick decisions based on incomplete information and encourage divergent thinking and a bias for action over risk mitigation and process implementation. They can recognize the true needs of their customers and bring the right solutions to market through the extreme adaptability of their business models. Startup culture relies on dedication to innovation rather than process which is the exact opposite of the prevailing corporate culture which relies on that is based on efficient processes and KPIs. Managers in startups are dedicated to making sure their direct reports have what they need to innovate. Corporate managers are tasked with ensuring their direct reports hit their goals and KPIs. The bottom line is in this type of structure, any innovative idea tends to be squashed in favor of correct execution of set procedures.
But, the major difference between startups and corporate organizations is where the customer fits into their development process. Startups experiment with real customers using slow implementation of easy-to-understand stages focused on finding a solution. There is no fixed or expected result which makes it easy to change course when new information appears. Corporations work completely differently. Customer relationships are managed via sales and customer service departments. Product development and engineering have no direct customer contact so they rely on second-hand information from sales and customer service to make improvements or help develop new products.
It’s Never Too Late to Change
Admittedly, there are many hurdles to overcome for corporations to remain relevant in this era of exponential change and constant disruption.
An innovative mindset comes from the top down. Corporate executives should play the central role as innovators within an organization by constantly questioning long-held beliefs and assumptions. They must look for errors within their business models and promote a customer-centric mindset in their employees. They can promote innovation from the inside out by developing Intrapreneurship, though Open Innovation or by purchasing startup-driven innovation. This is the way global showcase innovators such as Apple, Google, Amazon and Microsoft operate.
Rethink and Reinvent the Corporate Business Model
The basic foundational architecture by which all corporations function starts with something from the 1920s: the Org Chart. The Org Chart is generally thought of as how corporation’s human capital is activated, but is truly how an organization’s human capital is limited. An employee is put in a box within a department, reporting to a manager and responsible for fixed goals and KPIs with no room for innovation or divergent thinking. This also tends to limit the company’s agility especially by contributing to Organizational Debt, by stockpiling unused processes, ineffectual departments, bad policies.
Traditional KPIs can be changed to Innovation Accounting which is based on how improvements and innovations affect the bottom line. This process is based on customer-centric metrics rather than fixed processes and goals and provides better visibility into the short and long-term impacts of innovations.
Be tenacious and determined to innovate and adopt the willingness to forge ahead without guarantee of success. Accept setbacks and total losses are part of the game. Adopting the methods of Lean Startup will allow for small iterative steps which will help reveal product viability earlier in the process. Don’t be afraid to kill ideas that don’t work. Mitigate potential losses and setbacks by diversifying innovative projects throughout the company.
Utilize real customer insights rather than relying on sales or customer service to guide innovation. This type of research will help to reveal true customer pain points and avoid unnecessary development cycles.
Hire and develop risk-takers and intrapreneurs. Recruit people who thrive in ambiguous environments and provide them with the freedom to innovate by fostering a culture that allows for thinking, collaboration and problem solving.
Finally, just do it. Planning takes time. Make small changes, test and learn, evaluate your options and repeat. To innovate quickly, purchase a startup or create an incubator for new startups and allow them to develop and grow unimpeded by the existing corporate structure which will smother their innate innovative nature.
Remember that the worst thing you can do is nothing. Failure is not the end but a learning experience and some of the biggest failures is what has brought us to this age of technological supremacy.