How Corporations Think and How You Can Use That to Scale Your Startup
I recently sat on a panel about entrepreneurship that talked about the difference between solving a problem and innovating in the marketplace. Many of the panelists had interesting perspectives, but one who quoted Henry Ford caught my attention:
"If I had asked people what they wanted," the carmaker supposedly said, "they would have said 'faster horses.'”
Obviously, cars would not have made the list of what people wanted back then, because cars had yet to be invented. But had Ford merely asked about faster transportation, had listened to what people wanted and then been able to actually make horses go faster, he would have solved a problem. Instead, he decided that transportation needed a little disruption and chose to innovate.
That innovation changed our world: By 1896, Ford had constructed his first horseless carriage. He went on to incorporate Ford Motor Company in 1903 and built "a car for the great multitude" -- the Model T, of which nearly 15.5 million were sold in the United States alone, creating a whole new mode of transporation accessible to the common man.
Startups and founders, you are today’s Henry Ford. Because corporate America has changed, it is built on top of daunting barriers to entry in order to keep out new (outside) innovation. And you, as a startup, have to decide your response.
Think about it: If a new technology enters the telecom, healthcare, or airline industries, the incumbents have padded themselves with all sorts of barriers such as regulation, legal prowess, marketing muscle, brand recognition, cash reserves and lobbyists. This is why we in the United States still pay $100 for basic wireless service, vs. the rest of the world, which pays much less. It's why we spend 17 percent of GDP on healthcare, compared to less than 10 percent in Western Europe, and still lack the luxury of universal healthcare.
The problem -- and opportunity -- for startups here is that corporate America is on the innovation defense, not the offense. If those corporations really wanted to win the game, they would never wait behind those barricades until the Ubers of their industries eventually broke through and flooded an entire market.
Instead, they would recruit the best and brightest, would put together a bold and unexpected offensive and would try to win tomorrow's battle before it's too late. It seems like bravery has no place in corporate America today; we are all just trying to optimize and tinker with huge static machines designed for profitability.
Related: 2014's Most Overhyped Innovation
But not all companies are defensive. A few manage to see the startup world as partners and perhaps even their own fountain of youth. Intel, for example, works with global startups to win the emerging wearable technology market; Verizon engages thousands of startups in solving tomorrow's big challenges; and Procter & Gamble has a strong record of sourcing innovation from the outside in, as it takes on new markets and trends.
The rest of corporate America, meanwhile, spends much more on lawyers and lobbyists, believing that the incremental innovation of existing products (R&D departments) will keep the Ubers at bay.
So, again, what do you, a startup founder, do? Most importantly, recognize that corporations are in a different place than Henry Ford was. They are not all prioritizing innovation (beyond talking about it), so you need to fit into other waves, projects, or targets internally in order to get started.
Understand that those corporations are huge machines -- that each of their departments, managers and budget staffers is not thinking about the corporate business value as a whole (as a startup founder would) but rather about how to optimize a specific vertical within the overall corporate strategy.
Every corporation has bright minds and creative people in its ranks, and those people often feel trapped within their respective structures. So, if you can offer them a way to further their desire to disrupt and change, they will be your internal advocates and pitch your startup or product is if it was their own.
Oftentimes, momentous changes in corporations (new products, new business models, acquisitions, etc.) start with one extremely committed internal advocate. Your job as a startup founder, then, is to find, convince and work with that corporate advocate to gradually immerse your product and service into the core of the corporate strategy and vision.
Easier said than done, of course, but take heart and focus on the first step, the first advocate and the first minimum viable product you can deliver.
I believe that corporations need to become more entrepreneurial, and this is rarely accomplished through management consultants and tech acquisitions. It's done by opening up these corporations to the outside world of entrepreneurs and innovators.
Imagine if you were a corporate executive and invited 100 of the most talented entrepreneurs in your industry inside your company to camp out for a month. Gave them free access to everything you own, encouraged them to talk to anyone in your organization they wanted. As scary as that would potentially sound to you and the boardroom, you might just end up uncovering what is about to become disrupted, before that happens, and perhaps more importantly, uncover what is going to disrupt your core business.
Imagine if the music industry had understood and appreciated Napster, iTunes and Spotify before they went global. What if the industry had simply joined forces somehow, instead of sending in the lawyers? Billions of dollars in revenue could have been saved, and perhaps an entire industry could have accomplished what Henry Ford did to the horse and carriage business.
In our wonderful new, globally connected world, corporate barriers simply won't hold up over time, so the best thing corporations can do is to understand and embrace the world outside, before becoming the next MBA case study for the wrong reason.