What it really means to innovate like a startup

August 22, 2018

How to innovate like a startup

Large companies can emulate the best innovation practices of startups through organizational, process, and cultural adaptations, and these go beyond size and agility.

Innovation is becoming increasingly important to company profits as the main engine of economic growth in the 21st century. Many of the major disruptive developments are coming from the world’s leading startups and smaller, nimbler companies, creating waves across industries old and new. Innovation today has become synonymous with small, agile, and digital. Meanwhile, large, established companies are growing more dependent on a continued pipeline of new and successful products and services to remain competitive.

There’s no doubt large companies are hindered by their size and the entrenched, perhaps outdated business processes and systems that often result. Increased bureaucracy and exposure to legal and regulatory restrictions also limit these companies’ efforts in successfully pursuing innovation opportunities. However, the key traits enabling innovation within startups and smaller organizations go beyond their size, agility, and technological prowess. At the very core of the innovation process are supporting organizational, process, and cultural factors, which large companies can also incorporate into their business.

Multi-disciplinary organization

Developing products and services should never occur in a vacuum. The process should involve real customer and market insight, which can only be gained by having mixed teams with a broad set of skills and expertise. In a startup, this happens automatically because, by nature, startups consist of small teams where each individual has multiple functions to perform and team members can have very broad resumes.

Mixed teams mean product development is not engineering-, software programming-, or IT-focused. Rather, the team builds on the input and insights of marketing and sales personnel from day one in order to design a product around the customers’ needs and what they really value. As the complexities of the market continue to multiply and industries increasingly overlap, companies should also look to neighboring industries and establish external collaborations to obtain key expertise and insight.

Product development is often hindered by the rigid structures inherent to larger corporations, with insular thinking being the death knell of innovation.  In larger organizations, the different functions are usually separated, and the marketing and sales people needed to build a product that will succeed in the market are involved much too late in the process.

Customer-centric processes

Successful innovation hinges on setting up a systematic process that answers the right questions at each stage of product development — company size and status are irrelevant. Startups are typically under a lot of financial pressure, causing entrepreneurs to lie awake at night ruminating on their product’s viability. From day one, they’re asking, “Am I going to make money with this product? Will I make money in a couple of years or a couple of months?”

This dictates how product development teams operate within the confines of the small entrepreneurial ecosystem of a startup. This environment naturally ensures the product development process is completely geared towards the customer and their needs and that failures are identified early and fast. It’s an ecosystem that should be replicated at larger corporations.

Creating a successful product or service requires companies hardwire the needs of the customer and what they’re willing to pay for into every stage of product development. This is done by identifying the potential winners and losers of your product before a long and costly product development process ensues. What components will my customers pay for and what can I eliminate? The question of what the customer values and what they’re actually willing to pay for very often enters the equation too late at large corporations.

Open culture

Startups often follow the mantra “it’s okay to fail; from failure is learning and, therefore, better innovation.” This is frequently misinterpreted. It should be okay to fail, but it must be done early by having a systematic process in place that recognizes failure in the initial stages of the innovation journey and not after having invested a lot of money already. This applies to both startups and big companies. Learning from failure is also crucial, and these lessons must be identified and incorporated into the innovation process as soon as possible. 

Creating a culture that both spots failure early on and learns from it must start at the very top. Central to this is allowing for honest business cases that reflect a true analysis of a product’s viability. Most business cases we see only pay lip service to upper management and do not thoroughly assess a product’s worth.

If a team member comes up at decision gate number one and says, “We’ve analyzed everything. Our suggestion is not to pursue this project, as it won’t be successful and our customers won’t go for it. We believe we should focus more on this other project” and this team is then dismantled, honest feedback will never make it to the upper levels again. If instead, they are rewarded for their valuable analysis and for saving the company tons of money by not taking the wrong path, then, step-by-step, you are creating an innovation culture.

The takeaway

Great innovation comes down to organizational, process, and cultural factors, where startups have a natural advantage. However, large companies don’t have to fall behind. By emulating the best practices of leading startups, corporations are in a prime position to initiate some of the major advances of our time.