Sabrina Francis is the strategy director at Arena Media. In this article, she explores how already-established companies can use their strengths to their own competitive advantage in a world where startups are increasingly fashionable.
Startups are in fashion. Understandably so; the successes of Uber, Netflix and Airbnb along with the glamorous portrayal of Silicon Valley have caused a wave of envy across the media world. As a result, large corporations have become obsessed with trying to act like startups in a bid to compete with the perceived hotbed of innovation and agility. Yet, I would argue that established companies can never truly replicate the world of a startup – and most importantly, shouldn’t need to.
The desire for agility
The harsh reality is that 90% of startups fail. The primary reason for this is that there is simply no consumer demand for their products. Those that succeed are compelled to be agile; firstly because of the threat of fast-moving competitors, and secondly because employees have to play multiple roles in the company due to limited headcount. Large companies are unlikely to experience this kind of risk as they will already have an established and successful business model. Established companies are much more agile than they realise as they have a stable model to be able to experiment, fail quickly and try again. Startups often don’t get a second chance.
Scaling quickly
A startup is someone’s baby; attention-seeking, expensive, but something you’re emotionally attached to. I watched my previous CEO go for years without taking any holiday because he became so entrenched in the everyday running of the company and didn’t have time to build a long-term vision to scale up. We tend to forget that even the most successful startups take years to gain any traction in their chosen market.
Take Airbnb’s growth story: we now know the company as a $10bn dollar company, but it began when designers Brian Chesky and Joe Gebbia couldn’t afford the rent on their San Francisco apartment and decided to turn their loft space into lodging. It took seven years of painful bids for funding and often negative PR to get to where they are now. Large companies however have the luxury of building scale and recovering from failure. Startups have more reasons to envy established companies than the other way round.
So what can established companies do to stay ahead of the competition and become better places to work?
1) Innovate and fail quickly
Established companies already have a successful business model which makes them even better placed to try out new things without great financial risk to the company. If it doesn’t work out, they can change direction quickly without jeopardising the whole business model. And if it’s successful, they have the power to innovate at scale.
2) Stay in touch with what consumers need
Get closer to the consumer by regularly investing in research and modelling. Don’t make sweeping generalisations about consumer groups. And find out how your product can genuinely change their lives in a meaningful way.
3) Create a happy workforce
A company is only as exciting as its employees. Enable people to get involved in projects outside of their day job and allow them move around within the company to understand how the business runs. Google is a great example of a large corporation getting this right; they are increasingly freeing employee’s time to work on their own business ventures or projects in an attempt to re-energise and retain employees.
Large companies needn’t be unfashionable. They are in a much stronger position to access talent, breed creativity and drive growth than the majority of startups. Rather than trying to be what they’re not, they should focus on their strengths and turn them into competitive advantage.