Companies across the globe are under increasing pressure from multiple stakeholders, with many failing to meet expectations or outperform their competitors. In today’s increasingly volatile, uncertain, disrupted, complex, and interconnected environment, it’s more important than ever for companies to learn how to adapt faster than the rest of the market in order to survive.
R&D departments are no longer considered the cradle of the “new” that they once were but the mantra “innovate or die” is truer than ever. The stability that corporate giants could once rely on is no longer a given. With markets changing and evolving rapidly, companies’ life cycles are shrinking alongside their markets as startups radically disrupt their markets.
Think about InterContinental Hotels Group, one of the largest players in the hospitality world, with over 925,000 rooms (as of June 2023). Now compare it with Airbnb, which has created more than one million new “hotel rooms” over the last seven years without owning a single square meter of property.
Another example is the financial world, where new entrants bring with them new business models. The disruption started with standard services like payments and savings – think PayPal, Apple Pay, TranferWise, and Knab. New, disruptive models are now coming thick and fast in insurance, pensions, services for wealthy clients, and even complex business services.
In the current market situation, large companies are standing face to face with their younger, more agile, flexible, and adaptive competitors. Of course, Doomsday for corporations isn’t around the corner, but there’s a rising threat for corporations that don’t jump on board and surf the “change wave.” Instead of making a safe bet by clinging to the present, companies must find a way to ensure a steady inflow of ideas and products that will deliver value to clients.
Large companies that fail to innovate are at risk of extinction. And when they can’t find the right solution inside, they must search for it outside the company’s boundaries. High-performing and forward-looking companies generate more value by responding to trends and by being prepared for, or even shaping the future. But to some extent, corporations are prisoners of their past success and their conservative culture, creating issues when it comes to surviving the law of disruption.
The law of disruption compares the acceleration path of political, social, and business systems, which change incrementally, with technology, which has been accelerating exponentially. For many incumbents, it’s hard to imagine the possibilities of new technologies. They often incorrectly perceive technology as changing incrementally, which creates many opportunities for new entrants in the market.
Accepting and fighting their risk-averse nature is a difficult step to take. Not that long ago, corporations had everything they needed to sustain a constant flow of products to market – the best talent, market influence, resources, financing, and technology. Today, however, the traditional, closed approach to innovating is no longer fit for purpose. Uncovering the next breakthrough idea is a challenge, especially if you restrict yourself to thinking only inside your own organization’s boundaries.
Many large companies are bad at innovation. Typically, they are relatively conservative, at least in comparison to their younger counterparts, and won’t engage in risky activities with an uncertain outcome.
The risk-averse culture within large organizations is, in fact, counterproductive when it comes to achieving positive results from innovation efforts. If an innovation manager fails to comply with their performance indicators, they risk losing their job. This stimulates incremental instead of radical innovation, which is the true source of innovative value. And while waiting for the right circumstances, bureaucratic organizations are losing their competitive positions to smaller players that are more prone to taking risks and experimenting.
By starting off with a “non-friendly innovation” perspective, corporate innovation behavior is destined to fail at launch. Hampered by their philosophy and culture, corporations are arriving way too late to the innovation scene. Often, the biggest barriers to innovation come from within the company.
Many C-level managers recognize that in order to grow, remain competitive, and deliver new value, it’s imperative to start collaborating with startups. However, often, middle management teams are wary of doing things differently and prefer to stick to proven techniques.
Meanwhile, talented young people are dropping out of university, and even out of high school, to start their own companies. There are numerous well-known examples from the past few years, including Arash Ferdowsi, who dropped out of MIT to found Dropbox, Mark Zuckerberg of Facebook, Bill Gates of Microsoft, and Matt Mullenweg of WordPress. PayPal’s co-founder Peter Thiel is among the rising number of proponents claiming that going to college is not worth it in the age of startups.
The chances are that the next big market disruption is already underway among a group of smart tech grads who joined forces and understood what the market wants – better and faster.
Every company wants to be innovative and disrupt the market. Innovative companies get bigger and live longer. But being a successful company doesn’t necessarily mean that the organization is a disruptive one. Faced with innovation challenges, more companies are starting to recognize the need for a different approach.
For corporations, it’s important to stay on top of global trends and to seek inspiration in industries other than their own. Pushing limits is essential if they want to innovate, hence, many are now recognizing the need to become more flexible.
In recent years, a growing number of large corporations have implemented startup-like techniques, such as lean startup methodologies, in their efforts to be more sustainable and efficient. Innovation managers can’t wait on the sidelines for a new technology to hit the market and try to buy it or they risk lagging behind. By the time they’ve managed to get their hands on the technology, the opportunity to turn it into a viable product of interest to the market will have long gone. Instead of waiting for innovation to come knocking on the door, organizations must strive to keep pace with current disruptions and be explicitly involved with the startups responsible for the disruptions.
For startups, there are countless benefits to collaborating with corporations:
In some ways, cross-organizational interactions mimic interpersonal ones. Before initiating communication, people observe the situation they’re in and gather insights. If there’s a mutual interest, the actual meet-up and match-up take place. At a later stage, when experiences and learnings are exchanged, a more profound interaction takes place. In time, conversations about experiences graduate to sharing experiences.
When it comes to corporations and startups working together, that collaboration doesn’t (and shouldn’t) happen immediately. Collaboration is an ongoing, gradual process comprised of stages with different intensities of interaction.
Collaboration between startups and corporations starts when insights about the situation, possible collaborators, and techniques for approaching them are being gathered. The actual match happens after that point, followed by cross-organizational exchange of knowledge and learnings, experimentation, and collaboration. Every new stage of collaborative interaction involves stronger engagement, commitment, and trust between both sides.
Corporations can undertake a range of activities to help make scouting and connecting with startups much easier:
Startup strategies are not just for startups; there’s a lot that corporations can learn from startups’ culture of experimentation and adventurous spirit. Larger companies can undoubtedly benefit from assuming some characteristics of the startup mentality:
The lean startup
Corporations are relatively risk averse, especially as, for them, failures are more public. They tend to spend months and even years developing a new product without unveiling it until it’s perfected and ready to go to market. Ironically, as new products are being delivered to market at an increasingly rapid pace, their approach has the very risks they’re aiming to avoid – not meeting customer needs and wants, higher development costs, and, eventually, failure.
The adoption of lean startup methodology within corporate innovation programs is starting to become a mainstream technique for bigger organizations. The approach changes the process of innovation and starting a new venture, focusing on rapid experimentation, customer feedback, and iterative design development. Lean startup adopters ask a “should” rather than a “could” question, namely: “Should we build this product?”
Companies like General Electric, Amazon, Qualcomm, and Intuit have already started to implement the lean startup methodology to transform the way they innovate. At the core of the methodology is the build-measure-learn feedback loop. They start with a minimum viable product (MVP) that addresses a problem. Once an MVP is established, it goes through a learning process of validation, assessing what the customers want and how much they would pay for it, and tailoring the product according to these learnings.
This methodology advocates the failing fast and cheap approach. Failing is something that large companies should embrace – if there are learnings attached to the failure. It’s a common misunderstanding that failure is valuable in itself. It isn’t. The build-measure-learn loop lowers development costs by minimizing the risk of a final product failing. Instead, the process provides timely feedback that allows for improvements during the early development stages.
Growth hacking
Whether in a startup or a corporation, growth is an organization’s lifeblood and should be integrated into every aspect of the organization. Typically, within large companies, there’s a clear structure and delineation of the responsibilities of different teams and departments – the coders build, the marketers push, etc. Yet growth should be a priority not only for the sales and marketing departments but also for every team across the organization.
A product designer should think about growth in terms of user experience. Similarly, a customer support specialist should think about growth in terms of customer satisfaction. After all, displeased customers leave, and negative word-of-mouth doesn’t generate new leads. Traditional marketers are skilled at understanding traditional products, but because the internet has radically changed the way we define products, traditional tactics don’t cut it anymore.
Growth hackers are not substitutes for marketers. They’re just different, being obsessively focused on the single goal of growth, and doing things in a non-traditional way. Currently, growth hacking is the realm of startups. Because startups usually lack the resources and partner affiliations that would allow them to effectively apply traditional marketing tactics, they are, in effect, forced to growth hack.
Yet there’s nothing in a growth hacker’s toolbox that can’t be applied within larger companies. The practice of growth hacking can clearly work without large-scale investments. Imagine what the outcome could be with the investment of resources...
If you want someone to market your product, hire a marketer. But what if you’re looking for someone to be actively involved in helping you shape your product? Your organization needs a growth hacker. Growth hacking is still a developing field. A growing number of growth hackers are looking for opportunities to learn and gain experience, but the number of experts with a strong history of delivering results is still relatively small.
At that stage, potential hurdles are being discussed and questions and concerns about the shared future spring up: