Start-ups and incumbents – the best of both worlds?

We’re not there yet, but soon digital will be part of the core DNA of any company.

Established companies, incumbents, have a lot of assets that start-ups don’t, and vice versa. When big companies try to mimic start-ups or foster the mindset of start-ups, they need to remember they have something that most start-ups don’t – customers. They also have an organisation, people, value in their brand, supporters, loyalty, investors, stakeholders, shareholders and boards. There’s an ecosystem. What the incumbents don’t have is the fluidity, flexibility, speed and agility that start-ups have, and they might lack the talent and the right digital mindset.

There are three main stages start-ups go through:
  1. Pre-start-up stage: they have a vision, an idea. They conceptualise something, thinking about the customer and how they will solve customers’ problems. The most difficult thing to answer is what problems they are trying to solve and for whom. This is the problem-solution FIT stage
  2. Start-up stage: they start showing commitment, have customer validation that they have a market valuable product (MVP) – a product-market FIT. They will do some testing, get feedback from clients, iterate the process. Many start-ups reside quite a while in this phase because moving on, scaling and especially profitably, is far more difficult. This is the product-market FIT stage
  3. Scale-up: they’re establishing growth, trying to get to profitable cash flow, scaling. They are creating bigger customer bases and aim to come close to unicorn. This is the scale-FIT stage.

Each stage has unique elements. Most start-ups will get money in phases one and two, and in the US there’s a good balance between funding for the three phases. In Europe, however, most funding goes to phases one and two, making it very hard when start-ups need to scale because then they need more money, bigger numbers.

At the scale up and grow stage is where only one in ten, just 10%, succeed on average. You could stay on the start-up summits for lifelong constant learning in this amazing start-up ecosystem, but don’t be blinded. At some point you’ll need to go from start-up to scale-up. There’s only one judge of when this time comes – it’s not the coach or mentor, your peers, family, friends, partner, child. The only judge is the customer.

To scale up and grow you will need to find funding. If you don’t find it in your country, go abroad as money has no frontiers; it is ‘pan-world’, as Fred Destin from Accel Partners says. At this stage you’ll need a strong CEO or business manager, often not the person who founded the company. This is where established companies could help to find people with track records in building long lasting businesses.

In the new world it might not just be the big fish eating the small fish, but the fast, smaller fish eating the slow fish. An example is start-up EVA Automation, a young start-up without revenue but with forty employees. Led by Gideon Yu, a Silicon Valley veteran, EVA Automation bought the thirty-year-old audio system builder Bowers & Wilkins (B& W), with 1,100 employees and a $ 120 million turnover. Alternatively, we might see a slow, big fish eating a small digital fish to accelerate its own digital transformation, or bigger fish eating younger fish, like Microsoft’s recent acquisition of LinkedIn.

Which type of fish are you?

Many companies are trying to figure out how to get the start-up mentality. McKinsey believes we can do that through the following: organisational pivots (change the organisation), reverse takeover (ring fencing digital operations), spin-off (slice the business up) or piggyback on other people’s ideas (partnerships). Many other interesting approaches like corporate verntures are on the market and we need to find what fits best. Try, fail, learn, and try again.

In order to grow in the past, to reach international markets, many built structures, organisation, regional headquarters, layer after layer of reporting and scorecards, and hierarchies, resulting in frustrated employees and killed creativity. Leaders of today will need to change the way they are organised. The challenge for companies that have lost their creativity and fluidity is to embrace change and discover the start-up mentality. People are attracted by start-ups because of the freedom of creativity.

Complexity kills 10% of profits every year. An estimated $ 237 billion annually in just the top 200 companies. Jonathan Becher, Chief Digital Officer SAP

Imagine if you could bring the best of both start-ups and incumbents and fuse them, removing the organisational burden, noise and hierarchies. Imagine unleashing creativity for bigger organisations. Imagine decentralising smaller teams or giving them independence and freedom to innovate. Imagine you could embrace Neflix ‘no rules’ and engineering quads from Spotify.

Embracing the millennial mindset doesn’t limit itself in just hiring an army of millennials as the focus should be to change the mindset in the organisation. Take care of all ages in your organisation and be inclusive by retraining and mentoring.

To get the mindset of the start-ups, we need to simplify structures, make collaboration centre stage, remove individuals who do not collaborate, break down boundaries, and adjust incentive, pay and bonus plans to foster collaboration across boundaries, across organisations.

And if that doesn’t help, determine your worst business nightmare scenario, then build a team and business to solve it.

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  Olivier Van Duüren

 As international Public Speaker, Trend Sensemaker, Executive Whisperer and Author, I help businesses to take the pain out of their personal and business transformation, leaving them with a regained sense of spark.