Flexibility is essential for both small and big companies.
Established companies must be innovative; otherwise, they risk losing to disruptive startups that either offer completely new products and services or provide cheaper and more convenient alternatives to existing ones.
In theory, enterprises understand the benefits of adopting agile and lean methodologies to launch new products; yet corporations are sometimes unwilling to give up established practices to adjust to the current era of digital disruption.
Resistance to change is precisely what puts big corporations in danger. Remember Kodak and Circuit City? Kodak ignored the rise of digital imaging, and Circuit City neglected to strengthen its web presence. Both of these companies ended up filing for bankruptcy.
Perfectial helps startups take off and grow successfully and builds new, innovative, digital products for large enterprises. We’ve figured out over the years which actions tend to help both startups and enterprises successfully launch new products and services.
This article describes how startups and enterprises approach innovation differently and provides four tips to help big companies become more lean and startup-like and thus better at nurturing new ideas.
Launching a Product: Startups vs. Big Companies
Large companies develop detailed business plans before launching a product, while startups take a more iterative approach.
The golden rule in the business world is to have a well-thought-out business plan before pitching a product or service to a corporate board and investors.
Large companies have significant resources, such as research and development departments, established business procedures, and experts who are skilled at planning for business change such as launching a new product. They prepare financial forecasts concerning profits, incomes, and cash flow three to five years in advance.
What large companies typically don’t have, however, are the tools to operate in conditions of extreme uncertainty: when the market, a product, or the business’s future is unclear.
This is where startups have an edge over big companies; they are prepared not to know.
Startup founders don’t waste time guessing, predicting, and researching every little detail. Instead, they embrace their assumptions, knowing they are untested and may turn out wrong, and hurry to introduce a new concept in its most basic form to their clients.
Startups aren’t about executing a business model; they spend most of the time looking for a viable one.
Startup founders build and launch minimum viable products (MVPs), or the most pared down version of a product that can be released.
Startups then decide whether to pivot (change the concept substantially; throw a lot of work away), apply minor adjustments, or persevere in their initial idea.
Before they figure out a clear direction and thus start to resemble mature companies, startups tend to fail and collect feedback, all while adjusting to changing market needs.
For example, the founders of Twitter initially launched a podcasting platform called Odeo. By the summer of 2005, the company employed 12 people, but a few months after the release of Odeo’s platform, Apple announced the launch of iTunes. The popularity of iTunes’ podcasts made Odeo pointless.
Twitter’s soon-to-be founders, however, didn’t lose heart; they encouraged employees to brainstorm ideas, held hackathons, and decided to pull the company in a new direction.
Finally, in 2006, they came up with an idea: a social network based on users’ statuses, and that’s how Twitter was conceived.
Because of the founders’ persistence, millions of people have their favorite social network for short messages.
4 Tips for Applying the Lean Startup Approach to Your Business
There are four main steps to becoming more lean and startup-like: Figure out what approach works, find a partner experienced in agile development, adopt the startup approach among company leadership, and give employees independence on projects.
1. Choose an Approach: Standard Process or Lean Startup
Identify whether your project requires a standard business approach (the big company method) or a more agile approach like a startup.
Ask yourself the following questions:
- Is the product or service similar to what your company already offers?
- Does the market for your product already exist?
- If a market exists, will the product fulfill clients’ needs?
If the answer to these questions is “Yes,” don’t bother adopting agile startup practices. Your firm will be better off using what works and what’s tested – your standard business processes.
For example, if Samsung or Apple launch a new smartphone, they can use the same business process they used for the previous launch. Both companies have been through the launching process many times before, unlike young ventures. At this point, their only concern is improving the efficiency of their established business practices.
2. Find a Partner Experienced in Agile Development
Enterprises that want to launch products in a new way should hire seasoned technical partners who specialize in lean, iterative software development.
Ayasdi, a machine intelligence software platform, began as a startup run by a few Stanford mathematicians. After venture capitalists invested in Ayasdi, the company grew quickly, raising more than $100 million in seven funding rounds and hiring 150+ employees.
To manage its quick growth, Ayasdi hired Perfectial, a full-cycle software development company, to experiment with new ideas and the latest technologies.
Agile development companies use an iterative approach to creating new products, making experimentation easier.
3. Adopt the Startup Approach Among Company Leadership
Using the lean startup approach to launch a new product or business process is more likely to succeed when a business’s leadership team buys into the process.
A company’s leader should:
- Create a corporate culture that embraces learning
- Encourage entrepreneurial behavior in employees
- Provide a system of rewards for employees who come up with ideas
- Create a safe-to-fail environment
One way to motivate the entrepreneurial talent in your staff is through incentives (beyond a pat on the back): Offer to share profits from successes, give bonuses to the initiators, and increase budgets as projects achieve market validation.
Munich RE, a reinsurance company based in Germany, says innovation is its key priority. The company has a tool for employees to submit innovative ideas, which may become part of an idea bootcamp.
During the bootcamp, ideas are polished, and the best of them are prototyped in Munich RE’s Innovation Lab.
4. Give Employees Independence on Projects
Give employees the independence to come up with ideas that are different than your core business processes.
Bet small on projects within your company, and see what happens. Consider establishing a milestone-based investment system.
E-commerce company Alibaba promotes and encourages entrepreneurialism by giving employees space to experiment with new ideas. The company launched a “horse race” program, where staff can submit ideas and receive and resources to execute.
Businesses Benefit From a Startup Approach
Digital disruption calls for companies to innovate – to find ways to disrupt the market. Businesses that ignore or fight emerging trends instead of embracing them risk being pushed out of the market.
However, businesses that are willing to implement changes may find that new technologies and agile methodologies can benefit their business.
So, here is what big companies can do to become more flexible and startup-like:
- Develop a system to recognize whether to use standard business processes or startup-like methodologies.
- Find a reputable vendor that specializes in lean, agile software development.
- Build a corporate culture that’s conducive to innovation, and make sure that the entire company embraces agile practices.
- Give a bit of freedom to employees: Encourage them to take initiative and experiment.
About the Author
Andriy Skoropad is a co-founder and CEO of Perfectial. After starting his IT career in 2000, Andriy advanced from software developer and project manager to the company’s founder and lead executive. As CEO, Andriy oversees the company’s global strategy and operations, making sure Perfectial keeps up with the highest standards of the industry and meets customers’ expectations.