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Can Start-ups Be a Good Example for Large Organisations?


Author: Reinhard Wagner     Source: IPMA website
Start-ups are trendy, they are attractive for young professionals and they are able to create innovative products and services. This is all what large organisations desire to represent, but typically fail to achieve. Due to its size, number of people, processes, structures and traditional values, large organisations are increasingly perceived to be rigid, unable to adapt to change and to create offerings that are innovative and attractive.

Being under pressure of market developments, large organisations tend to move small teams into a garage kind of setting and ask those teams to work like a start-up and deliver what start-ups are able to do. This may work during the early phase of developing products and services, but at a certain point in time, the “start-up” needs to be re-integrated, products and services need to be integrated into the large organisation´s product and service portfolio and be managed by the existing organisational structures and processes. This is the moment, when the nice idea of using a “start-up” setting typically fails. The line organisation might prove that the new product or service does not work in “normal life”, that cost for production or operation is too high (accounting for all over-head of the line organisation) etc.

Another approach might be to acquire a start-up and integrated it into the existing (large) organisation. This will also be very difficult, as the people used to work in a start-up might be frustrated to work under the regime of a large organisation, including but not limited to the leadership style, the space to manoeuvre, the incentives offered to work etc.

However, why not use start-ups as blueprint for redesigning large organisations, at least in those parts of the organisation that are tasked to be creative and develop new products and services? Nestholma, a venture accelerator powering the collaboration between start-ups and large organisations, for example financial institutions, summarizes the benefits of such a cooperation in a Whitepaper: “The benefits that a corporation can get, when collaboration is done right, fall in three categories. From least to most transformative, the first category is branding: the corporation creates a good reputation in the market and among its employees. The second category is innovation: together the corporation and the start-up can bring new technologies to the market faster and better. The third category is learning: corporations can create an innovation culture, make their processes more agile, and improve the skills of their employees to prepare them for renewal.”

Another option is to learn from start-ups and adopt some of the principles, approaches and methods they use. One approach is “Lean start-up”, first published by Eric Ries, a methodology for developing products and services, which aim to shorten product development cycles and rapidly discover if a proposed business model is viable. Products are developed through several iterations of “Build-Measure-Learn (BML) Cycles”, achieving a “Minimum Viable Product (MVP)” and avoiding products that are outdated when delivered to markets after a time-consuming sequential development process. Agile methods for product development, such as Design Thinking or Scrum may be fit for purpose, but require a change of the organisation to become agile and give space for a “start-up” kind of endeavour. It means to allow the team to self-organize, to be failure-tolerant, to avoid micro management by top management and to think beyond products and see the value proposition for customers. This radical turn towards “real” customer orientation will be a trigger for the overall organisation to rethink the way it organises and works, it may end up in a change proposition for all functions and units to align to the start-up alike parts and open up for the future set-up.
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