Hello. I’m Jason Goodman, CEO & Founder of the agency Albion.We specialise in partnering with entrepreneurs to help then create ‘the next big thing’.I’m going to talk for 16 minutes about how I believe large organisations need to borrow tricks from entrepreneurial startups, so they can beat them at their own game.
Here’s why.One by one, huge markets are being torn apart and reimagined – enabled by the internet, and how it is re-writing the rules of our economy and society.These disruptions are always lead by tiny, scrappy startups, led by entrepreneurs who are fast becoming the rockstars of our generation.
Think about what NiklasZennström did to international telephony with Skype.
What Daniel Ek is doing to music with Spotify.
What Ev Williams has done to news, not once but twice: first with Blogger, then with Twitter.
And what our clientErrol Damelin is doing to financial services with Wonga.
Now think about what would happen if a well-funded tech startup turned their sights onto your market.The market that allowed your business to grow and become dominant, to afford the marketing budget with which you’ve built a powerful brand.Yes, your lead may seem unassailable but, precedent shows, it could be overturned within 3 years by a tiny business you never saw coming.Here are 4 charts from internet analysts Mary Meeker’s latest deck, showing the next crop of industries that are already being ‘reimagined’.
Photography, with the iPhone and Instagram…
Maps, and evenSatNav hardware, with the iPhone and an amazing app called Waze from an Israeli startup.
Cash Registers, by the other Twitter founder Jack Dorsey’s startup Square…
And even thermostats, with the beautiful Nest, from a startup founded by ex-Apple design guys.
In fact, I’m willing to bet that, whatever sector your companies play in, I can find a startup that already exists in Silicon Valley, Alley, Roundabout or Wadi whose purpose is to disrupt your industry.So, how best to react to prepare for and react to this threat?
The classic large company approach is to get defensive. To hire a team of lawyers to try and take the small company out. But in the age of radical transparency, with social media on their side, the startup will likely win that battle.
Another approach is to acquire the startup, to neuter them as threat by either shutting them down or, more constructively, to learn from them.But corporates are really bad at integrating startups into their operation.
But at Albion we’ve helped a couple of large businesses with a ‘third way’:The Corporate Startup.We’ve helped create a startup business born of, and owned by, the corporate mothership, but empowered to behave in an entrepreneurial way.
We did this 3 years ago for O2 Telefonica, helping then create a new business to address a segment of users who were not happy with any of the big networks, but were savvy and social.
We did this 2 years ago for Aviva, creating a business that took them onto price comparison sites, with a modern low-cost model, and proposition aimed at the underserved ‘safe driver’ audience.
And we’re involved in creating 2 more CorporateStartups right now for other large companies who have realised this is THE modern way to do innovation.
This innovation strategy was first suggested by Harvard Business School professor Clayton Christensen, known as ‘the father of disruptive innovation’.He suggested in back in the 1980s but, in our experience, this is an idea whose time has now come. Why…?
1. The Corporate Startup is fast. It allows you to move fast enough to compete with the startups trying to poach your revenues.
2. The Corporate Startup creates real-world businesses that can get to market fast - not abstract futurological ideas that require years of further development.
3. The Corporate Startup creates engagement for category early adopters, and provides a PR narrative and positioning.
4. The Corporate Startup provides an outlet for the entrepreneurial impulses of your top talent, who might otherwise leave.
So I’m guessing this sounds pretty attractive? But that you’re highly sceptical about getting your organisation to let you ever do something like this?Let me share some practical lessons we’ve learnt by doing this that might help you.First of all, here’s what you need to do to found a Corporate Startup…
First you need to find your product-market fit. To make sure there’s a demand for your new idea.This isone area wherecorporates have a massive advantage over startups, because you’ve already got access to so much market intelligence. Startups have to do it on a hunch.
Then you need to build your team. Look for entrepreneurial and ambitious personnel currently within the parent company, but who always look a bit restless.Be careful though - they need to have proven expertise in building a P&L. Beware of the self-styled maverick who’s never actually done anything.You’re unlikely to find aZuckerberg or a Jobs lurking in your organisation, so you’ll need to look for three people – a hipster (designer), a hacker (technologist) and a hustler (growth driver).
Then, and this is crucial, get your own space. If you stay at head office, you’ll be crushed. Go and find a cheap warehouse space in a cheap part of town. Your core team need to sit together, it’s critical for building early company culture.
It’s important to remember, you’re starting a new business. Repeat arter me: You do no need to appeal to everybody. (Not at first, at least.) Find the early adopters in your category, reach out to them, and make them part of your beta test. They’ll be flattered by being asked to get involved, and they’ll be tolerant of your unpolished launch product. Plus, they’ll talk about you.
Then set clear and aggressive milestones, including the launch date, and run at 205mph to get there. Never move those dates, never delay. Announce things publically to create pressure on the team to deliver them. Cchallenge the team to do something they thought wasn’t possible.
Your first product will be crap. Resist the temptation to hold it back, to polish it. Push it live, and you’ll learn what you need to make it better very quickly. Your early adopter customers won’t mind, they’ll enjoy the process of helping you make it better.In our experience, this is the toughest thing for people from a corporate background to unlearn.
Lastly, do whatever it takes to drive growth. Growth is what a startup is for, nothing else. You won’t have a strategy, only tactics. Try everything, but quickly kill what doesn’t work. Measure everything, and work out what is the one key metric for your business. Forget brand building, and focus on driving down Cost Per Acquisition.
So now you’re saying to yourselves “Well that all sounds great Jason. But how on earth am I going to sell it to my board?!”
Well you’re not. Not at first. You’re going to startup anyway, without permission - under the radar.This is how all Corporate Startups get going.An internal champion, with enough clout and courage, pulls together a few people and gets the thing going. Only share the prototype product and early results to the Board once it’s too real and compelling for them to fillibuster.
Also, it’s going to be cheap. Ridiculously cheap by corporate standards. Your startup’s first year of business will cost what the corporate parent usually spends on a feasibility study for a new product.I’m afraid you’ll have to say goodbye to your assistant, and learn to book your own trains and go and get your own sandwiches.Also you’re going to get your hands dirty, hacking your products together out of the plethora of free tools out there – like an actual startup would.
Lastly, you’re going to seriously under promise and (hopefully, if you do the other things I’ve recommended) over-deliver.Do everything you can to play down growth expectations. Remind your Board how cheaply you’re doing this. How few people you’ve got. How much like a warehouse your office is. How little you spent on the product. How few customers you’re aiming for.And then watch their face at the first Board meeting when you show them your chart – the one with customer numbers growing exponentially, while your CPA reduces at a similarly steep rate. [This is the original newsgroup post by Linus Torvalds that grew into Linux – a $2.6 billion business in 2012]
The Corporate Startup
The Corporate StartupJason Goodman, CEO & Founder ALBION