What can startups and incumbents learn from each other and what are the biggest threats?

The Impact of Entrepreneurs

by Paul Hobcraft

Entrepreneurship has become a really important aspect for large companies to recognize, it has a growing role to play in innovation management within large or established companies. Let me expand on this under the more common “intrapreneur” banner. I have been exploring this whole area a fair amount in the past year. Let me offer a more extensive reply here on why this is becoming important.

Firstly, we are seeing a growing change within large organisations’ mentality towards encouraging individuals to ‘break out’ and become more intrapreneurial within their part of the business.

Is this tapping into this increasing desire to be part of creating something new, to grab back the engagement needed; that sense of identity needed to perform and feel a growing sense of ownership that companies need to tap back into, and individuals need to feel for that sense of identity and re-igniting their creative passion?

We are seeing that large, well-established organisations sense they are missing out on radically different business opportunities. Established organizations are increasingly casting their envious eyes towards the young startup and looking themselves not just in coming up with original ideas to solve existing problems, but equally wanting to exploit all those pent up needs they know are often hidden or buried within their organization.

It is clear this start-up and entrepreneurial spirit is making many senior executives nervous. It is forming this intrapreneurial need to be established. Organizations want to find ways to harness this within their own organisations and the intrapreneurial movement has been born and is growing fast, but it is being partly held back by some seeing the work as potentially disruptive to those managing in the existing space and this becomes a real challenge to resolve.

It is tapping into a real internal need for everyone involved, to innovate in different and more radical ways. Partly we are seeing a restless younger workforce who wants to break out of restricting and confining jobs. They want to find more meaningful ways to contribute, to engage, to find ways where they can be impactful, not just in their careers but in making something happen, that is different and better than the existing.

So the conditions are in place for more entrepreneurial work to take hold within established organisations. Yet the question remains “how can they be unleashed?”

The challenge is in the structure and format and character of those intrapreneurs.

There is no single way to do intrapreneurship. It needs a significant amount of attention, commitment and determination. Each design perhaps is unique to fit individual circumstances.

From the organisations point of view, they need to set up a clear, distinct, more than likely separate business practice that liberates people to build upon their emerging entrepreneurial personalities. They need to build the walls and fences, protect the ideas, support the work in progress, nurture the people involved and allow for a higher level of patience to see a return coming ‘down the line’.

The individuals wanting to take on this intrapreneurial role need to think through how to serve the interests of the organization in different ways, often ones that break with the existing and normal, they need to think ‘dual,’ to learn to exploit and explore all the inner and external relationships to advance their work and learn to adapt constantly as they learn, as they go, as they adjust to failure, and equally as they are building upon a series of successes.

There are real antibodies that lie within any organisation. They are waiting, those that fear change, and those that feel threatened, jealous or protective of their turf for fear it is being trampled on. The ones who will want to frustrate, exhaust and determine a pathway towards the project death by any means, as preferable, are a constant threat. Intrapreneurs and management alike need to be utterly vigilant in attacking these antibodies if they really see value in promoting this intrapreneurial culture.

The mountains that are there needed to be climbed so as to unleash that intrepreneur spirit.

It all starts with belief, pure and simple. A belief that having intrapreneurs working within organisations will make a difference in the innovation work, that they are needed and then identifying and encouraging those able to take this task on and bringing them into taking up the task, by parting the ways, easing the path. Somewhere in this conviction, you can see ideas that can be translated into successful outcomes by unleashing this intrapreneurial spirit.

These ideas need to be bigger ideas, perhaps radically different, ones that might threaten disruption; they are not the everyday stuff where the organisation should have already set up an innovation process to ‘grind’ these through to successful outcomes but separate to operate within.

This identification needs to send out a powerful signal that the official licence to change has been granted and better support innovation and growth can partly come from deploying intrapreneurs. It announces this as part of the parting of ways from just the “busyness of business as usual” by exploring new ways to seek out the innovation that can be (distinctly) different but does clearly need to be managed differently to be achieved.

So what is different and what does that mean to whom?

Intrapreneurship has to be established as a specific system that can be set up and provided to those wanting to take on a different challenge. It needs to become a solid part of the strategy for innovation otherwise it is quickly seen as ‘just another experiment.’ This would fail to attract the right type of person; it signals a lack of commitment, so those budding intrapreneurs stay hidden in the woodwork or looking to leave, so as to break free to pursue their personal goals and dreams, even taking away the emerging blueprint to disrupt the very firm that has given them this understanding.

There are many enablers to make this transition happen.

The most critical is a deep management support, creating a culture for entrepreneurship to thrive and knowing the type of people that can make this happen. The quality of any ideas, the mandate that goes with that idea and the funding and milestones needed to be in place and the clarity of failure and what that means. Each of these becomes a critical enabler to make this concept work.

So then we need to consider values, personalities and the operating conditions.

Firstly not everyone can simply become an intrepreneur you have to have a certain resilience and toughness. They need high levels of tenacity, this mental toughness and commercial zeal to drive through the concept they are working upon. The optimism, staying ready to adapt, be flexible but also the underlying ‘steel’ to be assertive, creative and determined to push something through, to overcome the many barriers and resistance that comes with exploring more radical innovation.

Intrapreneurs must be constantly ready to continually make the business case, negotiate and navigate around the system they work within, to achieve their ends and that often requires a deep knowledge of the many ‘ins and outs’ of where to find resources and support. They need to forge their business community, building the identity with what they are undertaking, reaching out to the network both within and outside the organisation. They need to unpick and unlock resources that bring additional ‘scarce’ resources into helping them. They need to foster constantly this underlying culture of resilience needed, both personally and within the project management work they undertake.

Always this attributes need nurturing and supporting and this is where a clear sponsor comes in. This person needs to provide ‘air cover’; they need to help the intrapreneur to navigate through the obstacles thrown up within the parent organisation. They need to ensure there is always a high level of trust provided, as the decisions and progress is being made, it encourages that necessary ‘bold action’. It becomes more reliant on relationships, not processes being put into place. The job and the relationships need constant engagement and nurturing.

The shared belief is based on some essential points; as innovation is a discovery process the people involved in finding the solutions are as equal to the ideas they are pursuing. It is toughest at times of setback or failure; it is being agile enough to deal with ambiguity, uncertainty and making a change, even when change is painful. It is about dealing with measured risk and returns.

Intrapreneurship offers the potential of being a vital part of your innovation strategy.

As organisations seek growth they need to encourage higher levels of impact. Those that take the route of becoming an intrapreneur share in this desire to build something that has a valuable contribution and impact.

To take on this challenge requires a different mindset and most probably set in a ring-fenced environment. One that conveys flexibility and agility but a need for pace and speed, have higher levels of risk-taking and a clear realisation that failure is part of the learning, a commitment level sometimes beyond ‘belief’ and simply don’t take existing procedures, barriers and established rules of engagement, as a reason not to do something, intrapreneurs are true ‘bunker busters’.

So in summary, we have been recognizing more and more value creation is coming from the start-ups, they search for dynamism and points of significant competition, to deliver those more radical, sometimes disruption solutions.

To overcome the built-in risk-adverse and generally slowness in large organisation environment, or established structures, they need amazing energy to ‘push the obstacle and barriers’ out of the way and still stay ‘utterly fixated’ on the opportunity to bring it to commercial fruition.

This is not an easy role or task but one that is running in parallel to the entrepreneur outside, demonstrating they can deliver on a dream and opportunity that does make a clear contribution and impact. It is tapping into this can offer a real ‘force of change’ within established organizations and giving it the energy, passion and commitment to make changes that are worthwhile and valuable.

Paul Hobcraft researches across innovation, looking to develop novel innovation solutions and frameworks where appropriate. He provides his views and answers to many issues associated with innovation with a range of solutions that underpin his advisory, coaching and consulting work at  www.agilityinnovation.com.

His aim is to support the individual, teams, and organizations, in their innovation activity, applying what he has gained in experiences and knowledge, to further develop core innovation understanding, so clients and those seeking innovation understanding can achieve positive and sustaining results from their innovating activities.


Scaling Startups in Corporate Settings

by Dr. Ralph-Christian Ohr, Corporate Innovation Expert

In recent years, an increasing intensity in collaboration between incumbent companies and startups has been observed. Meanwhile, close to 80% of corporations and startups have already been or are collaborating. The mutual - actually complementary - benefits seem pretty obvious:

Benefits for startups include

  • availability of office space, hardware, networks, support and potential funding
  • access to market and customer base for rapid scaling
  • leverage of corporate capabilities, brands, sales channels and resources
  • increasing likelihood of survival and success, given that corporate-backed startups tend to be more successful than startups under the umbrella of independent VC firms.

Benefits for corporations include

  • tapping into novel, occasionally disruptive, technologies or business models - most of which are not created inside the company walls
  • access to wider future growth opportunities and entrepreneurial talent
  • ‘outsourcing’ uncertainty, particularly in early phases of radical/disruptive innovation activities
  • ‘early pick’ option in case of startup takeoff.

How is startup engagement organized in corporate settings?

Drawing on a variety of vehicles and third-party support in order to leverage early-stage startup engagement, depending on the rationale for collaboration, corporations have recently been using mainly three of them (see chart below): corporate venturing (CVC), incubators and accelerators (See an overview of operating Corporate Startup Programs in Germany here (as per July, 2016).)  Those tools are often organized as independent units or activities within the corporation or are ideally embedded in a single unit dedicated to explorative innovation altogether along with internal ventures. The primary purpose for their employment is to help existing core businesses extend their growth options by serving defined search fields. However, startup engagement is also increasingly used for tapping into entirely new markets or technologies as well as spotting disruptive innovation opportunities.

What turns out to be the main challenge for startups in corporate settings?

It may already be ambitious to set up and align startup engagement vehicles properly, gain sustainable senior leadership support and overcome the most critical relational barriers to going about corporate-startup collaboration, such as difference in speeds (e.g. decision-making), lacking coordination and cultural mismatch. The primary challenge for increasing ‘return on exploration’ in corporate settings, however, appears to manifest somewhere else: along the ‘scaling up’. As we have recently pointed out, corporations and startups are required to jointly manage a variety of areas and inherent tensions in the process of transitioning validated ventures into impactful businesses, such as:

  • Organizational scaling of the startup and finding a ’home’
  • Workforce development (entrepreneurial vs. corporate talent)
  • Business model / technology readiness and connection to core processes
  • Strategic and operational alignment with core business
  • Changing leadership and management style

This transition phase features very distinct characteristics due to its objective to bridge the - in most respects opposing - environments of startup and core business. In fact, upon collaborating with an incumbent, a startup’s game changes significantly. In contrast to an external startup, that ‘solely’ needs to win in the market, a scaling startup within a corporation has to succeed  at the same time at a second front internally to become integrated as an upcoming growth business. Therefore, both face rather different contexts and can therefore be compared to each other only to a limited extent.

An essential prerequisite to prosper in the scaling phase is a mindset shift on the part of the corporate partner. Traditionally, corporations have been heavily focused on gaining equity of new ventures as well as maximizing their valuation and financial impact. This seems to have been changing recently in favor of taking a more strategic and business impact perspective. Selected collaboration types including degree of ownership by and integration in the incumbent are to be tailored according to the collaborative purpose at hand. A careful balance seems also backed by the finding that up to 90% of startups, acting on their own, fail - while the failure rate for M&A, at least when it comes to meeting expectations, seems just as high.

What is the major implication for startup engagement in corporate settings?           

Startup engagement is a vital part of modern corporate innovation management and digital transformation processes. While setting up adequate, protected yet aligned collaboration vehicles is necessary, it is not sufficient to driving radical and disruptive innovation in corporate settings. The complex scaling transition, seeking to translate startups into business impact, seems the hardest part for successful collaboration between incumbents and startups. Both are ultimately forced to jointly develop ‘scaling up’ capabilities in order to cope with the apparently biggest challenge in corporate innovation and build future growth businesses.

This connection between the front end of the innovation process and the back end […] is an area that really needs a lot of attention. – Henry Chesbrough on being asked where he sees the biggest innovation challenge for established corporations.

Dr. Ralph-Christian Ohr has held various senior positions in innovation management, corporate development and consulting for international and local Swiss companies. He also advises organizations and practitioners on modern innovation management. Dr. Ohr authors the awarded Integrative Innovation blog, whose unique focus in particular covers increasingly sought-after dual approaches to corporate innovation. He can be followed on Twitter under @ralph_ohr.

A Quick Guide to Collaborations Between Startups and Incumbents

by Ryan Ayers

Startups have been getting a lot of attention lately, but they’re not the only companies pulling strings in the economy, of course. There’s always going to be competition between startups and incumbents for the next big idea, the next disruption, the next big success. But does it have to be that way? Some startups and established companies have crossed the aisle and successfully created some powerful collaborations. Here’s a quick guide on how startups and incumbents can learn from one another.

How are Startups and Incumbents Different (and Similar)?

There are a lot of key differences between a business that’s been around for 50 or 100 years and a brand-new startup. First, there’s perception and reputation. Established companies have a lot of trust surrounding their brands, but they may not have the curiosity and excitement that surrounds a new company—especially if that company is growing at lightning speed.

However, an established company isn’t necessarily so different from a startup in its internal structures. They may have more money to work with, but generally, both startups and successful incumbents are always working to innovate and explore new ideas. Startups often come onto the scene to disrupt entire industries, but the large, established companies are often responsible for maturing new markets (take VR as an example, an industry in which Google, Sony, and Facebook dominate).

Successful Startups and Incumbents

New companies like Dollar Shave Club and Netflix, offer consumers a more affordable way to get what they want, jeopardizing the market share of cable companies and manufacturers like Gillette. However, other large companies have stayed agile—Amazon and Google are two good examples. Instead of relying on what they’ve always done, they’ve explored new ideas with startup-like curiosity, always trying to improve the customer experience.

Lessons and Threats

Startups like Uber and Airbnb are known for disrupting their industries so well that established players start getting nervous. However, there’s a lot to be learned on both sides of the aisle. Incumbents can learn that agility in the marketplace is necessary for long-term success. They should also take note of how product-centric these companies are—they’re formed on solving a specific problem, and they work relentlessly toward that goal until they achieve it.  And startups can learn from the business know-how and strategies these big companies used to achieve their success—after all, the majority of new businesses do end up failing, and incumbents have remained in business.

Though startups are seen as a threat to incumbents in disrupting industries, there are advantages each type of business has. Startups are a threat to incumbents, because they can dismantle entire industries, while incumbents can be a threat due to their power in the marketplace and deep pockets. Each type of business needs to be aware of these lessons and threats they can take from the other.

Working Together

Incumbents and startups can learn a lot from each other, and they can work together without a large company resorting to making an offer on an entrepreneur’s dream. A small company struggling to make ends meet while producing revolutionary technology could pair with a larger incumbent to produce a new product that could neither would be able to create on their own. Companies can also work together to help solve environmental or social issues, doing good while increasing brand awareness and customer loyalty. The possibilities are exciting—but they do require creativity and teamwork to be successful.

Ryan Ayers has consulted a number of companies within multiple industries including information technology and big data. After earning his MBA in 2010, Ayers also began working with start-up companies and aspiring entrepreneurs, with a keen focus on data collection and analysis.