What can technology companies learn from entrepreneurs

What companies can learn from start-ups

Start-ups have been experiencing a real hype for some time. That is a good thing because, as I said, a new economy needs new companies to survive. What is less good is that many companies have not understood that start-ups do
can give established companies important impulses and act as partners, but their structures and working methods cannot be transferred directly to established companies. And also the integration into a "finished" organization
seldom works, because then, as a rule, exactly the advantages that a start-up has are eliminated.

"A start-up is NOT the small version of a large company."

Johannes Ellenberg

Eric Ries, Silicon Valley entrepreneur, author and founder of the lean startup method describes start-ups as “a series of crazy experiments”. In his book, Ellenberg writes: “Start-ups are looking. They don't (yet) know what their product and business model will look like, and they don't have a market. You want to solve a problem and it is unclear what the best solution is. So you are also looking for an idea, for a new idea, for an innovation. The extreme uncertainty that start-ups are exposed to is mainly due to information technology, which accelerates every development extremely. "

That is what makes the start-ups so fast

Searching, acting under extreme uncertainty, limited resources, combined with digital competence and special working methods, make start-ups fast and flexible and therefore interesting for existing companies. Requirement,
that one can actually learn from start-ups, however, is communication and cooperation on an equal footing and the willingness to at least partially change one's own culture. There are now several books about the working methods and tools of the start-up scene and many companies have already started to work with so-called agile working methods such as Scrum, Design Thinking, MVP or Business Model Canvas in some areas. Whether such attempts are crowned with success or not depends on how intensively those responsible deal with them and whether they understand that the most important thing is not the methodology, but the associated change in the mindset. And it has to start with the leadership.

“The key to success is to allow a different leadership to find a broader basis for decision-making. All departments have to decide together what is important and what is not. Today we say 'we instead of you'. As a collective we get stronger
and can develop better than one person or when each department works for itself. Things are far too complex for one to understand alone. "

Richard Borek, entrepreneur

Tip: I recommend anyone who seriously wants to learn something from start-ups to read the book "The Startup Owner’s Manual" by Steve Blank and Bob Dorf. Here is an interview with Steve Blank.
The three most important things I think established businesses can learn from startups are

  • Access instead of possession
    Loop instead of waterfall
    Speed ​​instead of perfection (including failure)

Customer focus, customer focus, customer focus

Most important of all, however, is “customer obsession”. Have you ever wondered why all companies focus on the customer, but the customer rarely appears in an organization chart, for example in the form of a Chief Customer Officer? Right, it is not absolutely necessary. Creating a position does not automatically mean that it is actually filled.
In their book “The Startup Owner's Manual”, Blank and Dorf urge you to leave the office, because: “There are no facts in your office, so go outside.” The authors recommend that the founders take on this task themselves . Only through feedback from (potential) customers are they in a position to make the business model really customer-focused. That means nothing else than that it is not the company and its employees who decide what the customer wants, but the customer himself. It is not about “putting a product on the market” that its developers think is great , rather
to offer what people / customers lack, make their lives easier and / and better.

What companies can learn from start-ups: Loop instead of waterfall

The principle of “loop instead of waterfall” ensures that this requirement is met. In many companies, development is still based on the waterfall model. The concept behind the waterfall model is linear and not iterative. It consists of six phases, the results of which are the binding specifications for the next phase. It's about producing the best possible end product with little flexibility for changes once the product is finished. There are certainly projects for which the waterfall model is suitable, but not for the development of innovative business models.
The loop is recommended here, a feedback loop, so to speak, with the stations Build - Measure - Learn. This method is iterative and not only allows speed and flexibility, but is also resource-saving because not a lot of money is invested in a development that nobody wants in the end. For the start-ups, this means that they can quickly go onto the market with a minimum viable product (MVP) that has the core functions but is far from perfect. In the digital sector in particular, this first test on the market is sometimes carried out with a "fake" that is only set up to test customer reactions. Based
Based on the feedback from the first customers, the product is improved and then tested again, etc. On the one hand, it becomes apparent very quickly whether the product will find a market and it is developed together with the customer and thus optimally corresponds to their expectations and wishes. Another advantage: the experiment can be terminated at an early stage if there is little customer interest. One then speaks of a pivot.

Speed ​​instead of perfection

This method already contains the next principle “speed instead of perfection”, after all it is based on trial and error. But there is no room for that in the perfect world of German medium-sized companies. Our companies pride themselves on the outstanding quality and technical perfection of their products. But that is exactly what makes them slow and inflexible, especially at a time when technologies are developing at breakneck speed. However, we can only achieve a higher speed if we say goodbye to perfection and allow ourselves to make mistakes every now and then. And no, that doesn't mean that you suddenly serve half-cooked products to your customers. That doesn't work because your customers have different requirements. But when it comes to innovations or a new business model, it makes sense to proceed differently in this project. Give to the team
the freedom to make mistakes and allow for the failure of the whole project. You can't swear your entire organization to new ways of working overnight anyway, but start with the teams that are looking for new ones
Looking for business models and innovations. Mistakes are only bad if you don't learn from them and repeat them.
What remains is the principle of “access instead of possession”.

Access instead of possession

Newly formed companies have limited resources. You don't have a lot of money, employees or all the necessary skills, but that's not a big deal, on the contrary, an advantage. Possession encumbered. Anyone who has a lot of real estate, production facilities, employees, etc. is inflexible and carries dead capital with them that they cannot invest in future projects. He finds it difficult to react flexibly to changes. Possession is ballast. The most important asset of the
Start-ups are the access to the customer. Everything else such as know-how, production capacities, offices can be used temporarily, rented or shared with others. They use external resources and thereby expand their scope considerably. Digitization makes it possible. Let's take the example of employees: It doesn't matter whether the ingenious IT person is sitting around the corner in the office or in Shanghai or Mumbai. Flixbus doesn't own a single bus. They belong to the medium-sized bus companies with which the company works. Give up everything that others can do better and concentrate on the customer, because the customer
brings the money into the house. Big data? No problem. What are cloud services for? Work with others, build networks, so that you multiply your knowledge and your possibilities.

Conclusion: what companies can learn from start-ups

I definitely don't want to encourage you to sell your new logistics hall and lay off your employees. I just want to show you the opportunities you lose if you do it all by yourself. And I advise you, if you are setting up a digital unit or setting up a project to digitize your business model, to bring in people from outside the company who have experience with start-ups and agile working methods.

Dr. Hubertus Porschen is the managing director of App-Arena GmbH. He was also chairman of the Association of Young Entrepreneurs (Die Familienunternehmer). He also lectures at conferences and meetings on topics related to the social web, digitization and innovation topics.