What Big Companies Can Learn From the Entrepreneurial World
Making a pivot is hard for a startup trying to make a name for itself, and pivoting gets even harder as that name becomes established. Just ask Jawbone: The maker of wearables and speakers, once valued at $3 billion, found itself struggling in a saturated fitness tracker market. As the company struggled to pay vendors, it shifted to clinical-grade health monitors in an effort to save the business -- but not soon enough, as the brand shuttered its doors in July.
Big companies benefit from economies of scale. Their size, in and of itself, accrues benefits in terms of internal and external costs, talent recruitment, consumer awareness and procurement -- bulk purchasing, after all, saves money. They’re the Goliaths of the business the world, the heavyweight champions, the burly linebackers; size, however, has its own distinct drawbacks.
Each Sunday, the NFL shows us that a massive, powerful linebacker can crush a smaller wide receiver, but it’s often just as challenging for that linebacker to run down a wide receiver who’s smaller, speedier and more nimble. Can those businesses that start out small and nimble maintain that agility as they gain the advantages that come with growing larger?
Yes, but it’s not simple.
How big companies fumble their own pass.
Big companies say they want to be more nimble and innovative; they want to be able to move to market as quickly as their smaller counterparts. However, the very structures that have allowed these enterprises to grow as large as they have are the structures that hold them back.
These organizational structures usually begin with good intentions. Smart entrepreneurs try to limit their risk, and as they implement risk aversion measures, they think, “Why not apply this approach to everything?” Thus stems the biggest weakness of defined processes: They grow larger on a foundation of best practices that made sense at the local level.
As these companies get bigger, accumulating thousands or tens of thousands of employees, they find themselves needing to implement strong controls to ensure resources are allocated appropriately. But these controls become a vise grip around the throat of innovation.
Stunted creativity leads to stunted growth.
The very essence of innovation requires a willingness to start without assumptions or a legacy view of “how things have always been done.” Innovation is about asking critical questions, testing assumptions against evidence, breaking open the array of options and ultimately disrupting the current market.
That means that the more assumptions and structures that need to be tested and removed, the more challenging and slow-going the innovation process will be. Startups have the advantage of not being encumbered by historical paradigms that have to be pushed away to make any forward progress. To gain access to this line of thinking, many big companies attempt to partner with early-stage companies. This is the right move, but it’s often executed badly.
Getting big businesses out of their own way.
Legacy-free small businesses see clear advantages to pairing with big companies: They gain resources, PR, visibility and opportunities. What they also inherit, however, are cumbersome policies that inhibit the very work they’re trying to accomplish. Enterprises’ internal structures dictate specific guidelines for maintaining partnerships, but asking nimbler players to play by the same rules is like asking an evasive wide receiver to lift heavier weights and bulk up: It doesn’t work.
There are a few things large companies need to do to ensure these partnerships succeed:
1. Set realistic technical expectations.
Enterprises often have unrealistic expectations of their smaller partners’ technical abilities, such as anticipating small companies will have data security infrastructures with the same complexity as their own. The heightened privacy and data security concerns that belong to big businesses aren’t always applicable to early-stage companies.
Because small companies are, by definition, nimble and flexible, enterprises should be able to find a way to work with them if they’re sufficiently creative. If a large company has a policy, for example, that insists that no internal data can sit on a server with other data, that puts the onus on the smaller partner to possibly create a custom server for the data. The large company thus needs to maintain a flexible and open approach to finding solutions, creating caveats in their policies for their partners who may need to be exempt from certain expectations.
2. Selectively drop requirements that don’t pose much business risk.
Large enterprises should start experimenting with low-risk pilots; because they have more to lose, it’s important that they isolate their risk when possible. As they work through these pilots, however, they must calibrate the risk they’re engaging in with startup partners and drop requirements that should only be applied to sensitive, high-risk work.
One business my software company worked with initiated a pilot program with a smaller partner. The program operated in stages, beginning with early “proof” phases that had to meet more stringent requirements. After the larger business and the smaller company learned to work together in a manner that streamlined their work without suffocating it, each stage of the program became more flexible as individuals were empowered to handle their areas of expertise.
3. Develop fast-track programs for small companies.
Big companies can benefit from dedicating an in-house department or team to working with startups more flexibly. By doing so, their earmarked departments have less onerous processes and systems for working with startups. These flexible in-house teams can collaborate effectively with small businesses to create a proof point before other teams join in.
Big corporations are starting to see the value of speeding up processes throughout their enterprises to smooth the way for their smaller partners. Virgin, Unilever and Telefónica, for example, created a fast-track procurement program to streamline the conditions of their procurement process for their startup partners.
Resolving the tension between growing large and remaining agile doesn’t mean giving up one for the other. To have the best of both worlds, big businesses need to partner with startups in a way that doesn’t put the burden of a big-business mentality on their more nimble partners. By not obscuring what makes agile small businesses great, large companies can experience some of that greatness themselves.