Don’t innovate like a startup — identify and solve problems

In a global economy that is constantly shifting, companies agree that innovation is crucial to both survival and success “According to McKinsey, 80% of executives think their current business models are at risk to be disrupted in the near future. In addition, 84% of executives say that innovation is important to their growth strategy”. Startups are viewed as sources of disruption and innovation-think about the impact that Uber, Slack, and Venmo have had in their respective industries. It’s probably only natural then that big corporates would (sometimes) want to “innovate like a startup”. Numerous articles, many of them very insightful, offer big corporates tips, tricks and actions they can take towards “startup like” innovation. But is this really achievable? Can a big corporate entity really identify internal and external problems, ideate-prototype-validate-iterate, and move as fast as a small (or relatively small) startup team? Or do they require help along the way?

What’s a startup?
So, what is a startup? A young, disruptive technology company? A high-growth focused innovation company? Eric Ries, the creator of the Lean Startup Methodology defines it as “A human institution designed to create a new product or service under conditions of extreme uncertainty.” Stephanie Caudle, Founder of Black Girl Group, has a more focused definition “A startup is a company that solves a problem. If your company isn’t solving a problem, your company is simply an idea.” If you asked 10 other startup founders, employees or investors, you might get 10 other definitions. While there might not be a single accepted definition of a startup, there are a series of characteristics that most startups share:

• Pinpointing and solving a problem or an unmet need
• Ideating and prototyping a solution, often a new solution
• Validating a solution
• Searching for and (hopefully) establishing product market fit
• Lean, adaptive, and ready to change
• Focused on growth, and scale
• Searching for and (hopefully) building a sustainable business model
• Starting with a small team
• More often than not, employing technology as a tool to achieve a solution

There are others, but this is a solid foundation. We could spend equally as much time defining what innovation means-I personally think it’s also pretty context dependent. When in doubt, turn to the dictionary “ 1) The introduction of something new; 2) A new idea, method or device”. Innovation, then, centers on doing something new. Big corporates can certainly do “something new”, but can they do it like a startup? In order to figure that out, we need to compare the differences and similarities of the 2 models.

Can apples imitate oranges?
If big corporates are apples, then startups are oranges- they are different in pretty much every way:

We can see there’s a pretty wide gap here. Despite that, actually because of it, big corporates and startups are increasingly looking for ways to partner with one another “Between 2010 and 2016 in fact, the use of corporate incubators and corporate accelerators among the 30 world largest companies in the world rose from just 2% to 44%”. A few of the ways that these 2 opposites are collaborating are: open innovation initiatives, corporate accelerators, corporate incubators, excubators, corporate venture capital, strategic partnerships, venture client relationships, and acquisition. Apples and oranges are finding ways to work with one another, but are big corporates really “innovating like a startup”? Whether it’s an open innovation initiative, an accelerator or an acquisition, the partnerships between startups and big corporates are facilitated through an interface (accelerator, incubator, etc.). That interface allows these opposites to attract, to make the most out of complementary sets of characteristics. The interface is necessary to bridge the (huge) gap between how big corporates and startups operate. In the majority of cases, the apple doesn’t become the orange.

What can the apple learn from the orange?
Even if the apple can’t become the orange, they can still learn from them. Big corporates get access to speed, products/services, ideas and mindsets; startups get access to capital, network, brand power, and experience (company + people) that they wouldn’t otherwise. But what else can a big corporate learn from these partnerships in order to become more “innovative”? It’s unlikely that big corporates will (drastically) shrink in size, (dramatically) increase the impact of individual employee contributions or become (huge) risk takers.

Any decent startup pitch deck will identify and explain a problem or unmet need they are addressing. The remainder of the deck is essentially an explanation of the size of the problem, how the company plans to solve it, and the size of the opportunity that results from solving that problem. The focus here is on identifying problems and creating solutions to solve them. This is absolutely relevant for big corporates, and it’s a focus they can apply both internally (via their own systems, models and strategies) and externally (market facing). Kaihan Kripperndorff doubles down on this idea, pinpointing how companies can embed this approach into their DNA, in his Fast Company article“Great Companies Solve Problems That Matter”. Given that the rate of change is accelerating, embedding a “problem solving” approach into your strategic vision is both wise and necessary. However, since big corporates are big, move slowly, and are risk averse, solving problems and implementing the solutions quickly and effectively in the short-term, will take collaboration with an outside entity (startup, accelerator, consultancy, etc.) to build the capabilities, methodologies and teams necessary for innovation. These collaborations can help companies effectively change their thinking and toolset, and therefore to become more agile in the long-run.

Blockbuster’s fall from prominence is now a very well-known story: they bet that Netflix’s on-demand platform would be a niche play, they lost that bet and went out of business. However, according to Greg Satell’s article “How Blockbuster, Kodak and Xerox Really Failed (It’s Not What You Think)”, the reality is more nuanced than that. Recognizing the shift in consumer behavior (“analog to digital”), Blockbuster actually launched an online platform called Total Access that was gaining subscribers and competing with Netflix. An internal struggle with Blockbuster’s biggest shareholder, increased costs from the launch of the program, and fear from franchisees resulted in the CEO John Antioco getting fired and the replacement CEO sinking the Total Access program. The rest is history.

Total Access was a solution that solved a customer problem/unmet need, and it was working. Blockbuster’s large structure, and complicated stakeholder positions, ultimately sunk the program and therefore the company. Total Access was a dramatic business model pivot, a startup-like pivot, and Blockbuster’s large corporate structure stymied it-they couldn’t “innovate like a startup”. Had they had some outside collaboration-an accelerator program, an innovation department, an innovation consulting partner-they could have developed the tools, internal structure, stakeholder buy-in and business model necessary to navigate this bigger change. But they didn’t, and they weren’t capable of “innovating like a startup” without imploding. For big corporates and startups alike, solving problems and addressing unmet needs is foundational, even if that problem is only a recognition that you can’t manage the innovation process alone.

Are you interested in innovating like a start up (successfully)? Feel free to contact us.

This blog is written by Evan Madden-Peister

We are a global business design agency specializing in strategy and innovation.