Sunday, November 10, 2013

Five Lessons Startups and Enterprises Can Learn from Each Other

Entrepreneurs are continuing to launch startups at a rapid pace, and the majority continue to fail.  At the same time, large companies are looking to increase their innovative activity to remain competitive, and many have turned to investing in new ventures or establishing innovation centers in order to gain a foothold on the emerging technology landscape.  Startups and Enterprises often have romantic notions about how easy it is for the other to thrive. There has been a lot of talk about having the right “DNA” to be successful (we used to call it “company culture.”) The truth is, there is a lot that startups and enterprises can learn from each other.  Here are the top ten.

The top five lessons enterprises can learn from successful startups

Failure is a given
Startups often know that the early stages include a lot of experimentation and that the assumptions about such things as customer buying behavior, business models for success, and the ability to build and ship the product are often incorrect.  Successful startups keep trying even after early failures.

Play to Win
At any given time there are likely to be a few competitors with the same or similar business ideas.  Competitive analysis is very important. However, startups who become too obsessed with looking over their shoulders at the competition’s every move may be too slowed down. Successful startups lay out their unique value proposition, stick to their message, and go out to win—on their own terms.

Passion
Most successful startup owners have intense and continued passion for their business. Being able to pursue one’s vision keeps that passion alive. You know a passionate founder when you see him or her driving an eight-year-old clunker of a car.  Yes, they may have made enough money to buy a fancy car, but they often have neither the desire nor the time to drop what they’re doing and go after a vanity purchase.

Ownership of Outcomes
The currency of success and failure for startups is real. If their products or services don’t sell, or if their costs go through the roof, they may deplete their reserves and have to close up shop.  Passing the buck or blaming someone else for a mishap doesn’t do much good. Therefore, startups tend to take ownership and accountability for the outcomes of their work.

Measure Revenue
Revenue is a crucial metric to a startup. It means that someone will buy their product.  Startups may not yet be turning profits, but if they have paying customers, they have great incentive to manage their costs and cash flow to stay in business.

The top five lessons successful startups can learn from entrepreneurs

While startups have the courage and energy that most large enterprises lack, they are often challenged to sustain and scale their businesses. Here are five lessons startups can learn from enterprises:

Infrastructure Support
If you work in a large company, chances are great that you got your computer set up, that someone else handles the billing, the accounts receivable, the HR policies, the marketing, advertising, finance, and operations.  This structure allows people who excel at various tasks to do what they know and like best.  For startups, various support activities should be outsourced or delegated (as they are in large companies) so that the startup can focus achieving the vision.

Marketplace understanding
The most successful businesses allocate resources to keep up with what is happening in the marketplace, unlike startups, who oftentimes do not have resources and may not even be clear on the marketplace where they are playing. As a result, large businesses may be able to distinguish between a fad vs. a trend vs. a tectonic shift. 

Due Diligence
Enterprises often have trusted, in-house resources who are familiar with their business and can advise on legal matters. While startups should not be excessively looking over their shoulders at the competition, they should make sure they have adequate legal support as well as the necessary patents and trademarks in place.

Project Management
Although project management is often maligned as drudge work, it is an important part of any operation, new or sustaining, as it provides key visibility into where things are on track or not as well as key insights to help plan for future initiatives. Being lean and agile does not mean that project management goes out the window. Large companies tend to have established processes and practices around project management

Measure Profits
Because large companies must demonstrate their ability to be profitable to shareholders, owners, or their board, they need to consider not only revenue, but profits as well.  Profits provide an important measure of sustainability and business viability.  They may point to areas where costs are out of control or prices charged for goods and services are too low.

These are both challenging and exciting times, filled with a world of opportunity for startups and enterprises alike. Opportunities can multiply when startups and enterprise are able to apply the lessons of each other.

Ivy Eisenberg is founder of Our IdeaWorks, an Innovation and Lean Customer Research™ consultancy that helps companies connect to customers and other stakeholders to discover business opportunities, accelerate growth, and build and deliver successful products and services.  Ivy has more than 25 years of experience in the Front End of Innovation, user interaction design, and software product and project management. She has worked in healthcare, financial services, B2B, consumer goods, and telecommunications sectors.  Ivy is also an award-winning humor writer and storyteller, with an MBA in Marketing, Entrepreneurship and Innovation from NYU’s Stern School of Business.

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