Startups versus Corporates – Don´t mix them in a wrong way

We need a different approach to innovation and implementation when comparing Startups versus Corporates. To quote Steve Blank: “In the last few years, we’ve recognized that a startup is not a smaller version of a large company. We’re now learning that Corporates are not larger versions of Startups.”.

Large companies have finite life cycles and prefer sustaining innovation. Most grow by offering new products that are variants of their core products. Their size and culture make disruptive innovation extremely difficult to execute. The Business Model Canvas comes in multiple shapes and sizes, but it is the easiest way to outline the structure of the business model and implications for any party involved, and different for Startups versus Corporates departments and culture.

The Startup Case:

Business Model Canvas for a Lean Startup

You may keep things easy using a reduced version of the business model canvas, called the “Product first Canvas for Lean Startups”.

The Work Order looks like this:

  1. Problem
  2. Unique Value Proposition
  3. Solution
  4. Cost Structure
  5. Key Metrics

The Product Development comes in 3 stages

Here starts an iterative number of pivots, based on real-world experience, measured by initial results.

  1. The Low Fidelity Minimum Viable Product
  2. High Fidelity Minimum Viable Product (Beta)
  3. Launch

The Corporate Case

There are some reasons, why corporates aren´t open to change.

  • Reputational damage – When a client or corporate data is involved in the product development process, failures may damage the brand and reputation.
  • Lost investment– Many start-ups fail, so the investment risk for corporates is high compared to their usual investment projects.
  • Misaligned employees – Corporate employees are trained to follow processes and tend to regard failure as jeopardizing their career. They might feel threatened by the start-up’s unfamiliar culture and remain overly protective of the status quo.
  • Unsure outcome – When projects include unfinished products or work with start-up entrepreneurs and inexperienced teams, results are difficult to predict.
  • Maturity misalignment – When corporates engage with start-ups that are proposing a new business model or a new technology that the corporate enterprise is not yet ready to adopt or to experiment with, this inherently leads to a fruitless collaboration

Prototyping and pivoting hardly work in corporate culture.

If it´s worth to conduct a diligent preparation, then we do it. If it´s not worth it, it probably won´t work in corporate culture.

  1. Value Proposition – Your starting point of the process. How do you ensure that provide more customer value than the alternatives available to your customers
  2. Distribution Strategy – A thorough analysis of the sales and marketing channels and processes for your type of product or solution and provides a foundation for making implementable and realistic decisions concerning the distribution
  3. Organization Assessment – This will enable you to make the required adjustments (development or changes) to your staff and your organizational structures.
  4. Technology Assessment – This will enable you to handle and manage the product and technology-related requirements arising from a sales channel.
  5. Market Outlook & Forecast – Trends which sooner or later will affect all relevant markets
  6. Market Analysis – Demand Side and Supply Side – insight into what your potential customers are currently using and when they are planning to change.
  7. Distribution Framework Definition – Programs and the legal agreements required to enable the internal organization to successfully implement the distribution strategy.

In order for collaboration between Startups and Corporates to succeed, both parties need to adapt. In many narratives, the blame for barriers to adoption to innovation is put on Corporates. And it’s true that most Corporates have work to do in updating processes to enable more flexibility and speed, as well as accepting the idea that in order to truly innovate, some failure will be necessary. But Startups also need to understand that most banks are large businesses, which entails a certain level of bureaucracy in order to safeguard the business and ensure regulatory compliance. Collaborations, where Startups and Corporates are willing to compromise, will be the ones that see the best results.

Collaboration between Start-ups and Corporates – A Practical Guide for Mutual Understanding, published in January 2018 by the World Economic Forum offers some practical guidance to a better mutual understanding as to the basis for successful collaboration between start-ups and corporates. Collaboration could become Europe’s strong point.

It is a tremendous opportunity to strengthen Europe’s competitiveness and to allow its best start-ups to expand and create jobs in Europe instead of leaving for the US and Asian markets.