It is easy to think that start-ups are only a small version of established companies, and the organizational structure is roughly the same only smaller. In reality, this is probably not entirely true. An established company is set in its organizational structure, culture, and manners, while a start-up is more loosely connected to these factors. One of the biggest advantages of being established is probably the competitive advantages that result from being large, such as economies of scale, already captured market shares, etc. The established companies are usually very good at exploiting their advantages. On the other hand, start-ups are good at adapting, being flexible and exploring new paths and opportunities. Could it be that these factors help make start-ups better innovators? And what can established companies do to think more like start-ups?
The world around us is constantly changing, and while the average lifespan of a business is declining, it also takes less time for a business to achieve its first billion (dollars).
Figure 1. Average business life expectancy (statista, 2022)
Figure 2. Number of years to first million dollars, the red dots represent different startups (tomtunguz, 2014)
At the same time as this is happening, the established companies are struggling. It’s just like they don’t get to innovate (Viki et al., 2017). This means that established businesses need to open their eyes and see the challenges they face. One way to do this is to look to startups. There are several reasons why startups can innovate as they do, and some of these factors can be imitated or replicated by established businesses. In this article, we’ll look at ambitious organizations, Lean Startup, Design Thinking, and Agile work methodologies. Finally, we’ll look at how your organization can use these tools to move in the right direction.
In this article we look closer at:
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Ambidextrous organizations
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Lean Startup
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Design Thinking
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Agile work methodologies
Ambidextrous organizations
Being ambidextrous means being two-handed or using both hands equally well. In this context, we link it to two ways of running an organization. First we will look at two kinds of companies. On the one hand, we have established companies that are very good at exploiting resources. Be it money, benefits, people or other resources the company possesses. This is an important property for utilizing resources in the best possible way. On the other hand, we find startups and what they are good at – exploring. Exploring in this context means constantly looking beyond corporate boundaries, “what else can we do / profit from / grow on?”. It is one of the characteristics of a startup that makes them good at pivoting and iterating (Viki et al., 2017). Thus, as a two-handed user, one uses both of these skills. Both exploring and exploiting are used interchangeably. An established company that masters both of these qualities can thus succeed with growth in its core business while succeeding with new innovations.
Lean Startup
The book “The Lean Startup” (Ries, 2011) presents a framework for streamlining the innovation process in the company. The methodology will help the company to more efficiently build products and services. This is done through experimentation, early and continuous customer feedback and the use of iterative and flexible design methods. Companies that adopt this innovation methodology see a need in their customers. Based on this need, a prototype or MVP (minimum viable product) is created and tested on potential customers. As you get feedback from customers, you adjust or discard the MVP. In other words, it’s all about “build – measure – learn“. This sounds confusingly similar to the actual start-up process in a startup, don’t you think?
Design Thinking
Another innovation methodology we want to familiarize you withis Design Thinking. This methodology is often divided into five phases, empathize, define, ideate, prototype and test. At the core of Design Thinking we find the customer and its needs (Viki et al., 2017).
The empathy phase is about spending time building empathy for customers, before developing ideas. Building empathy is then about getting to know and familiarizing yourself with the customer’s point of view. When you spend time on this, you can see what is natural for customers and what is challenging. In other words, it allows you to more easily set limits on how far you need to go to meet customer needs.
The defining phase is about creating a clear picture of the problem after getting to know the user. The problem is defined in a Point of View (POV) where you mention who the customer is, what the customer needs and why the customer needs it. In this phase, it can be good to make a map of what you learned in the empathy phase. Take out a whiteboard and draw lines between situations, users and challenges, be creative!
In the idea development phase, we bring creativity with us, find post-its and try to come up with as many ideas as possible. There are many different methods for bringing out creativity in the idea development phase. In this phase, we will both brainstorm and evaluate the ideas.
Prototyping is about creating a model of the solution we found in the idea development phase. This is about getting the ideas out into the real world and visualizing. This can lead us to see new possibilities in our ideas. It also becomes easier for others to see what our idea is really about. Remember that a prototype should be a SIMPLE model.
In the test phase, we will test the prototypes. This means that potential customers get to explore our idea. What’s impoartant in this phase is to get feedback from customers. We want this to improve the prototype and get to know our customers better.
Design Thinking can be an important tool for getting to know customers, solving problems but also improving existing processes and services.
Agile work methodologies
Both Lean Startup and Design Thinking are examples of Agiled work methodologies. But what exactly is being agile? What does it mean in working life? It means, in short, about the ability to respond to changes and uncertainty. This way of working helps companies succeed in uncertain and turbulent environments. The cornerstone of agile is adaptive planning, self-organization and short delivery times. It builds on trust in the employees, adapting to changes and new needs, being faster, communicating, feedback and adaptation. Agile work methodology was actually developed for the IT industry, but today we see that it is beneficial for the vast majority of industries to organize themselves in this way. The advantage is that the company responds much better to change and uncertainty.
There are many factors to the success of these methods, good teams, time, feedback and trial and error are important ingredients for making the right progress. Do you want to learn more about how your company can become more innovative or think more like a startup? We can visit you and your company for a chat or a course on this topic. We could also help you improve your innovation processes.
References
- Ries, E. (2011). The lean startup : how today’s entrepreneurs use continuous innovation to create radically successful businesses. Crown Business.
- Viki, T., Toma, D., & Gons, E. (2017). The corporate startup : how established companies can develop successful innovation ecosystems. Vakmedianet.
- Statista (August, 2022). Average company lifespan on Standard and Poor’s 500 Index from 1965 to 2030, in years. https://www.statista.com/statistics/1259275/average-company-lifespan/
- Tomasz Tunguz (2014, 16. Desember). Why the Time to $1B in Valuation for Startups is Decreasing. https://tomtunguz.com/years-to-a-billion/
This blog post was written by Astrid Öhlund Levåg
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