There’s been a wonderful evolution happening in large corporations over the last decade as they’ve sought to emulate the way in which startups innovate. But anyone who’s embarked on innovation in the corporate setting knows that this progress doesn’t come easy. The Lean Startup, which guided startups on how to be lean, has given way to The Startup Way, which teaches large corporations how to act like startups. Interestingly, we’ve come full circle since a lot of the lean methodologies were in fact inspired by Toyota (a non-tech company), and their famed processes and innovation-minded company culture.
This has given rise to the term “digital transformation,” which is innovator inside a large organization.There’s plenty of literature covering the obvious organizational and cultural challenges that come with this shift. But being inspired by entrepreneurship and startup culture can only take you so far as an
In this article, I will cover some unique challenges to adopting entrepreneurship and how startup methods need to evolve to truly help non-tech businesses bring digital products to life.
Failing fast isn’t easy.
One key tenet to entrepreneurship in the realm of startups is to “fail fast and fail often.” The rationale for this is covered plenty already so I won’t go into it here. But suffice it to say that the idea is that failing fast allows for quicker iteration on a product to help establish product market fit.
But failing in large corporations isn’t quite as easy. For one, failure is hard to spin to upper management. Intrapreneurs, the entrepreneurs in large organizations, should be so lucky to have relationships and latitude to fail, but board members and stockholders won’t be so forgiving. Startups have the advantage of failing before they gain widespread market awareness. Large corporations launch ideas under the pressure and responsibility that accompanies widespread market awareness. Everyone over 30 can remember the Crystal Clear Pepsi disaster (though it turns out there’s more to that story), but most don’t know that Instagram started as Burbn. As a startup, failure (or pivots) can be done without long-term damage, but for established companies, there’s a lot to lose.
Lastly, failing as an established brand can be detrimental to the bottom line. If a non-tech company releases a new digital product, it’s not just the product that can fail but it can impact the company’s existing product line. For a startup, there is no such concern. In fact, pivoting both in terms of a product line or a brand is almost welcomed in the early stages.
As a startup, failure (or pivots) can be done without long-term damage, but for established companies, there’s a lot to lose.
- Fail in small ways with specific, forgiving customer segments. Test your innovative digital product initiatives not just with a target market but a subsection of that market which will provide valuable feedback and become advocates. In this way, you can use your market knowledge to your advantage by being able to accurately identify these target customers.
- Define and socialize the risks of failure early on. Often, failure is simply misunderstood at large corporations. When a product doesn’t generate revenue, it is viewed as a sunk cost. But if you follow lean methodology, you will discover non-revenue metrics to use and then socialize them with leadership. No false promises!
Corporations have a brand to protect, not a brand to build.
Startups work hard to build brands. They build brands around their digital product, and as they work through buggy MVP’s, sometimes their brand is all they have in the beginning. Early adopters are forgiving and often become advocates pulling for the upstart entrepreneur trying to change the world.
For large corporations? Not so much. Instead, brands are in survival mode. And with so many failed digital initiatives spawned by non-tech companies, consumers have lost their patience.
Here’s a quick anecdote: When I purchased a home alarm system from a top home security brand (which shall remain nameless) in 2013, I thought it was cool that they had a mobile app. Alarm systems had always been accessible by an inconveniently-placed keypad (you know, so the robbers couldn’t get to it), so having an app made this pain go away. However, the app was horribly designed and as iOS updated, the app didn’t. After two years, what started as a “cool” feature had become so frustrating, I paid a fee to get out of my contract early. Frankly, the newer security options had become more attractive.
What happened? The app was created to “keep up with the Joneses.” It was clearly not created to build customer loyalty or to enhance experience as a competitive edge. The company was simply protecting their brand rather than finding ways to rebuild it in the digital landscape. This makes sense because large corporations evolve to protect revenue rather than grow it, and that applies to brands as well.
- Use new digital products to create opportunities for ways your customers engage with your brand. The mobile alarm app could have enhanced the experience in using the alarm system but instead felt forced and was ultimately abandoned.
Connecting with customers has unique challenges.
It’s one thing to do green-field research as a startup, but it’s more challenging for a large corporation who has long-standing customer relationships and an established brand. There are unique ways that internal innovators can overcome this obstacle, but the startup mindset doesn’t help much here. As with the risk of failure, approaching and accessing customers is more sensitive.
In cases where a large corporation is going after a new market, the “startup rules” apply. But this means utilizing more in-depth market research, researchers trained in ethnographic research, and budgets and patience to fund long-term studies. A mistake large corporations make is pretending they know new markets and shortchanging the research.
- For innovations with existing customer bases, coordinate efforts with groups already working with customers—either through customer service, sales or outbound marketing. Not only will new initiatives need to be coordinated with these groups, but they often hold a vast amount of customer opportunity waiting to be tapped for hidden digital product opportunities.
- For new markets, be prepared to go slow and plan green-field research before diving into any new product initiative. The old adage, “what got you here won’t get you there” applies when creating product innovations for new markets and well-planned research is the key.
A mistake large corporations make is pretending they know new markets and shortchanging the research.
Innovation doesn’t always need to be home-grown.
As a startup, your company is your innovation. They are intrinsically tied together. But with the capital and brand of a large corporation, you have many more options. This isn’t necessarily a new concept—I didn’t go to business school, but I know that growing by acquisitions and partnerships isn’t a new concept. That often gets lost in translation between startups and corporations.
Imagine if Blockbuster had purchased Netflix in 2000 and let them run independently? Today, a lot of the startup mentality tells corporations to keep innovating. But Blockbuster itself wasn’t built to create a streaming platform in-house. And while they made some failed attempts at acquiring technology to build it, they could have had it all with Netflix. If you’ve followed the previous piece of advice and done your research, you may find that the best way forward is partnership or acquisition of an independent brand that can help achieve your goals.
- When starting digital innovation initiatives, non-tech companies should also look for outside possibilities. If a large research and strategy effort leads to an acquisition, that’s certainly worth the downside of wasting months and triple the resources to embark on something you aren’t internally structured to achieve.
Digital transformation isn’t all that different from entrepreneurship. However, established corporate processes, entrenched approaches to brand, and relationships with existing customers can make it a difficult transition. But large corporations have amazing opportunities to leverage assets that would-be disruptors don’t have. By approaching digital transformation as a door to new opportunities for a non-tech company, you can achieve