What Corporates can learn from Startups


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Remember Marc Andreesens famous quote "Software is eating the world"? You can see it happening in many industries: Startups are innovating at a rapid pace and are often disrupting established companies. Eventually every industry will be disrupted by digital technology.

Here is what is fascinating:
1. Big corporates have plenty of resources, a huge customer base, experts in market research etc. Why is it that they fail to innovate?
2. Startups most of the time lack resources, a customer base, experts in market research etc. How do they come up with innovative, disruptive and eventually successful business models?

Luckily both questions have been answered. Clay Christensen has described the answer to the first question in his book The Innovator’s Dilemma. Go read it, it is really good.

Steve Blank and Eric Ries have built a framework called The Lean Startup to answer the second question.

This slide deck explains the innovators dilemma, how startups build businesses and what corporates can learn from them. It merely scratches the surface but it is a start for now. Tell me what you think in the comments.

Published in: Business, Technology

What Corporates can learn from Startups

  1. 1. What Corporates can learn from Startups Manuel Koelman Cologne, 2013
  2. 2. manuel koelman dutch entrepreneur | living in cologne | founded three companies | chairman of the pirate summit | consulting on lean innovation and agile enterprise | getcontext | pirates on a plane | the pirates inn | nrw-startups | mailfred | practical philosopher | productivity geek| mentor at seedcamp, startup weekend etc. | father | caotina lover | cheese addicted
  3. 3. There are many areas in which Coporates can learn from Startups. This talk has its main focus on Innovation.
  4. 4. Picture: Andreessen-Horowitz. „Software is eating the world.“ - Marc Andreessen
  5. 5. Consumption spreads faster today % of US households Source: Visualizing Economics
  6. 6. Computer technology is changing industries at unprecedented scale and speed. Remember, the consumer internet is <20 years old. Mobile Internet
  7. 7. Music Hotel Retail Startups are changing industries. Photography News Navigation Television Files / Folders Print / Magazines Cash Registers Taxi
  8. 8. Game changing innovations mostly don’t come from “established” companies. What do Amazon, Google, Wikipedia, Skype and Facebook have in common? in the market
  9. 9. Performance Measure Time Most demanding customers Least demanding customers
  10. 10. Performance Measure Time Disruptive innovations almost always start in a niche and below „normal“ market performance Established companies add features / performance measures that exceed the need of mainstream customers Disrupting innovation Innovation startups tend to do
  11. 11. Performance Measure Time Early digital cameras suffered from low picture quality and resolution and long shutter lag. The convenience of small memory cards and portable hard drives that hold hundreds or thousands of pictures, as well as the lack of the need to develop these pictures, helped. For decades chemical photography was the market standard. Innovation happened mostly around camera features. Kodak, one of the market leaders, invented the first digital camera in 1975. It was dropped because of fear it would threaten Kodak’s photographic film business. In 2012 Kodak filed for bankruptcy after over 130 years of operation. Chemical photograhy Digital photograhy
  12. 12. Performance Measure Time In the beginning mobile telephony was far inferior than fixed lines. It had bad connectivity, bad sound quality and was far more expensive. However, it had the main advantag of being portable. In 2009 there were 1.26 billion fixed-line subscribers and 4.6 billion mobile subscribers. Fixed line telephony has been invented in the 19th century. In the last half of the 20th century digital technology was gradually introduced. Fixed line telephony Mobile telephony
  13. 13. Performance Measure Time Wikipedia is a free, non- profit, community-edited online encyclopedia. It was launched in 2001 and was initially laughed at as a “laymans” encyclopedia. It currently is the sixth most visited web page in the world. The Encyclopædia Britannica ended print production after 244 years in 2012. It was market leader for centuries. The content was written by selected domain experts.
  14. 14. Do you always listen to your best customers and focus where the profitability is most attractive? If yes, you might be in trouble.
  15. 15. Asymmetry of motivation Disruptive strategy Leader is motivated to flee/ignore. Entrants almost always beat incumbents. Sustaining strategy Leader is motivated to fight. Incumbents almost always beat entrants.
  16. 16. The existing opportunities of tomorrow are small today. The larger a company gets, the harder it is to prioritize small opportunities.
  17. 17. Management asks for a new idea “Bring me an idea that is...” Project group goes to work Pitch day ground- breaking fresh super innovative Increase sales sexy bold “If you can prove that these ideas worked before, we will do it.” A true story
  18. 18. WTF!?! They want something new, risk-free which has already proven successful before.
  19. 19. Mindset matters. Manager Strives to keep bad things from happening Focused on efficiency Main skill: Optimization Risk averse … Entrepreneur Strives to make good things happen Focused on effectiveness Main skill: Creation Risk prone …
  20. 20. “What is the ROI of this project?” Disruptive innovations aren’t initially measured by ROI.
  21. 21. Startup = Experiment. Startups act in an environment of extreme uncertainty.
  22. 22. That’s why most startups fail.
  23. 23. Why do startups fail? Rarely because the product doesn’t work. Usually because there are no customers.
  24. 24. Problem (Market) is unknown. Solution (Product) is unknown.
  25. 25. No business plan survives first contact with the customer. Ideas are based on faith, plans are based on guessing. Lean innovation helps to come from faith to fact based business model.
  26. 26. Lean is about reducing waste. Lean innovation too. Everything that does not support “learning” is waste.
  27. 27. Learn Fast. Fail Fast. Adapt. Being “agile” and open for change is key.
  28. 28. € Resources Time The time you have to find a business model / product market fit
  29. 29. Possible problem area A Possible viable solution 2 Possible viable solution 1 Experiment Experiment
  30. 30. Possible viable solution 4Experiment Possible viable solution 3 Experiment Possible problem area A Possible viable solution 2 Possible viable solution 1 Experiment Experiment Possible problem area B
  32. 32. Disruptive innovationSustainable innovation Problem is not well understood New market Innovation is dramatic game changing Market is unknown Market is unpredictable Customer doesn‘t know Problem is well understood Existing market Innovation improves performance, lowers cost, incremental change Market is known Market is predictable Customer is believable Traditional business methods fail Learning organization Talk to early adopters Customer development Test for learning No business plan Traditional business methods are sufficient Executing organization Talk to mainstream Market research Test for process optimization Business Case / ROI planning possible Characteristics Methods
  33. 33. Sustain/ Extend Core Business Lean Innovation Methods Agile Enterprise Methods Grow Proven small business Validate Prototype in unknown markets Idea generation Business ideas (pre- product) Growth stage Business model has shown a proof-of concept (product/market) fit. Full-market potential unclear. Product has customers and some revenue. Ready to scale. Early-stage startups (incl. research projects, prototypes, inventions, products in pilot phase, and strategic investments in external young companies) No revenue. Most will fail. Idea stage. Some customer validation. Technology limited to mock- ups Unknown market. Unknown problem. Unknown solution. Sustainability stage Business model is well understood. Accounting for most revenue. Primary focus is near-term. Full execution mode. Methods used depend on stage and context
  34. 34. Customer Development: “Validating the Problem” Find product/market fit before investing into marketing/sales.
  35. 35. Most important advice!!! Get out of the building. Before you start coding. This is the only slide with red text, that’s how important this is.
  36. 36. Agile Development “Building the solution” Release in small iterations. Continuous deployment. Continuously analyze (gather data and insights).
  37. 37. Problem statement Build Test Launch / Scale Viable? Iterations, Adjust solution Redefine problem / business, „Pivot“
  38. 38. Not only for technology companies. Lean Startup is for all companies that face uncertainty about what customers will want.
  39. 39. Leave the (startup) team alone. Put them in an organization outside of your current corporations.
  40. 40. Encourage contact with creative minds and startup scene. Go visit startup hubs e.g. London.
  41. 41. Choose your reporting metrics based on the stage the team is in. Instead of revenue or profit look at e.g. net promoter score, engagement and conversion.
  42. 42. Not only the F&E department but every employee can create innovations. Google lets employees spend 20% of their time on anything they want.
  43. 43. “Since around 2000, we let engineers spend 20% of their time working on whatever they want, and we trust that they'll build interesting things. After September 11, one of our researchers, Krishna Bharat, would go to 10 or 15 news sites each day looking for information about the case. And he thought, why don't I write a program to do this? So Krishna, who's an expert in artificial intelligence, used a web crawler to cluster articles. He later emailed it around the company. My office mate and I got it, and we were like, this isn't just a cool little tool for Krishna. We could add more sources and build this into a great product. That's how Google News came about. Krishna did not intend to build a product, but he accidentally gave us the idea for one.” - Marissa Mayer, Ex-Googler, now CEO of Yahoo -
  44. 44. Work in cross-functional teams. In idea and validation stage, creativity and effectiveness is much more important than efficiency.
  45. 45. If you haven’t failed, you’re not trying hard enough. Accept failure as part of “learning”.
  46. 46. Any questions?
  47. 47. Websites www.getcontext.de www.leanentrepreneur.com www.piratesummit.com www.mailfred.de @manuelkoelman Find me around the net fb.com/koelman de.linkedin.com/in/koelman