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The corporate startup: Bridging two very different worlds

Category: Insight & Vision
Published: 08/12/2016

George Bernard Shaw famously said that Britain and America were two nations divided by a common language – as an American married to a Brit, this quip pops into my mind on a surprisingly regular basis. Although far less at home than in my moonlighting role as board member and advisor to large corporate enterprises, all deeply concerned about keeping up with the pace of innovation in the new talent driven economy.

These companies have rightly observed that their futures depend on absorbing the skills, techniques, and processes from the tech startup world and have been very quick to adopt the lingo. Walk into any forward-thinking Fortune 500 company and you’ll hear much the same talk of agile sprint-based development as you’ll hear in any Silicon Valley incubator. You’ll see whiteboards full of customer acquisition costs, cohort analyses, and monetization strategies, and you can meet as many chief experience officers as you may like.

Likewise, walk into any startup and you will find all the usual marketing, sales, product, and engineering departments as you would in any established company’s organisational chart, along with the same shareholder and board governance structures.

Enterprises and startups have an enormous amount to offer each other

But while the nations of large corporations and the nations of startups may seem to share a common business language, their core assumptions differ so much that their use of the same words actually disguises the radically different meanings ascribed to them.

Enterprises and startups have an enormous amount to offer each other. Established companies have capital, customer bases, supply chains, and distribution channels, but can’t attract top talent with the creative, analytical, and technical skills that startups take for granted.

Startups and big business - both are not exclusive to one another

Startups and big business – both are not exclusive to one another

Startups, on the other hand, struggle mightily as they grow because building efficient, large-scale markets is both really hard and really expensive. And yet, like Brits and Yanks, attempts at combining enterprises and startups, whether through joint ventures, commercial partnerships, or acquisitions tend to result in a tragedy of misunderstandings.

Corporate startups

The root of the enterprise/startup cultural divide can be summed up in a single word: “existence”. For a large corporation, continued existence is such an unquestionable constant that it’s literally never given a single thought, and good leadership is measured by its ability to preserve existing enterprise value while incrementally growing that value through prudently balancing risk and reward.

For startups, on the other hand, imminent failure to exist is a clear and present danger, and good leadership is defined solely in terms of creating enough value quickly enough to justify being here 12 months from now.

This dynamic creates entirely different meanings to common terms that everyone thinks they understand. A product that is “good enough” in a large enterprise means that it has to be incrementally better than the product it replaced and more or less on par with those being offered by the competition.

The answer lies in investment and acquisition

In a startup, striving to wrest market share from the enterprises that hold all the incumbent advantages, “good enough” means building a product that’s at least twice as good or half the price (or ideally both!) – anything less won’t justify the startup’s continuing existence.

Similarly, “experience” in a large enterprise means managing a hierarchy of subordinates performing a repetitive task, whereas startup experiences are about solving new problems with unique solutions.

So how can enterprises and startups bridge their cultural divides and reap the benefits that a free exchange of capital, innovation, markets, and talent should yield? I believe the answer lies in investment and acquisition, where enterprises can leverage their capital to buy future innovation and ultimately preserve their own existence – a concern more executive teams and boards should be focused on given the accelerating pace of change and disruption (as currently being seen in the automotive industry).

However, the traditional playbook of buying promising young companies only to squash them under the weight of integrating them has to evolve. Instead, enterprises need to build new corporate development competencies specifically geared around nurturing, acquiring, and realising value in much smaller startups.

Something has to change when it comes to acquiring startups

Something has to change when it comes to acquiring startups

Enterprises need to recognise that they are marrying two extremely different cultures

Enterprises need to recognise that they are marrying two extremely different cultures and like any good marriage, the differences need to be cherished and supported rather than processed out of existence. At a bare minimum, acquiring companies should allow their merger targets to operate independently for at least two or three years – long enough to actually absorb some new ways of thinking and identify the high-talent individuals who are willing and able to cross the cultural divide into leadership positions.

These bi-lingual enterprise/startup translators are the key to unlocking the massive synergistic potential yet to be realised, and if an enterprise is truly serious about transforming their culture, it has to be eager to transplant new talent into key senior corporate-wide roles with significant headcount, budget, and power.

Imagine yourself on the board of Kodak, Tower Records, RIM, or Blockbuster when those companies were still a decade before bankruptcy. I’m certain their executive teams were not remotely stupid or ignorant of the looming threats, but I’m equally certain there was no one in the room who had the right combination of vision, disruption experience, and leadership to steer those juggernauts away from the abyss.

Could a Steve Jobs or Jeff Bezos have saved them? Of course we will never know, but it’s hard to imagine survival without a significant infusion of talent and culture from the other side of the enterprise/startup pond.

Be open to innovation and risks and the possibilities are innumerable

Be open to innovation and risks and the possibilities are innumerable

And if all that sounds risky and expensive, that’s because it’s both. But for corporates, the risk of doing nothing is to barricade yourself behind your walls ignoring the legions of super smart entrepreneurs designing fiendishly ingenious battering rams outside.