Why Large Organizations Can’t Act Like a Startup

flexible product development, uncertainty and risk

Can an established organization act like a startup? No.

Can they learn from start-ups and apply techniques from startups? Yes.

 

Waverly Duetsch, Clinical Professor of Entrepreneurship, University of Chicago Booth of School of Business reported[i] the burning question she gets from CEOs is “How can we be more entrepreneurial?” Her answer was that established organizations can’t be entrepreneurial, but an alternative is experimentation.

The more relevant question for CEOs is: How can established organizations be more nimble and adaptable? This is where entrepreneurial techniques, like experimentation and Exploratory PD, can be leveraged.

It may be helpful to explain the differences between an established company and a startup. According to serial entrepreneur and author Steve Blank, a startup is a “temporary organization designed to search for a repeatable and scalable business model.”[ii]

Differences Between an Established Company and a Startup

Established Organization/Enterprise

  • Infrastructure: Existing infrastructure (salesforce, distribution, service, customer base, etc.) creates constraints on product development
  • Tasks: Departments with defined skill sets (marketing, engineering, operations etc.)
  • Processes: Policies, procedures and processes (HR, Operations, Product Development, etc.)[i]
  • Suppliers: Established supplier base
  • Markets: Defined markets
  • Wages: Salary
  • Products: Multiple product categories
  • Work: Maintenance and support of existing legacy products is a large percentage of the workload
  • Money: Funding is provided by existing profitable products
  • Culture: Established and difficult to change

Startup

  • Infrastructure: Figuring out how to create, sell, distribute and support the product at an appropriate cost and price is the critical goal
  • Tasks: Typically one person wears many hats
  • Processes: If existing, typically in flux
  • Suppliers: Finding suppliers is part of the task
  • Markets: Focus is on finding the right product for the right market (product-market fit)
  • Wages: If lucky
  • Products: Typically, one product
  • Work: Developing one product that has a unique value proposition (product-market fit)
  • Money: Investors, families, friends
  • Culture: Evolving

Because there are so many constraints on an established business, it is difficult to be entrepreneurial. But the alternative approach of experimentation and adaptability can be leveraged to achieve similar results.

Experimentation and Adaptability

Experimentation and adaptability is a key element of, Exploratory PD® iii (ExPD). It is an alternative approach to the overly prescribed phased and gated process that most companies have been following for the last 50 years. ExPD differs from the traditional processes is in its fundamental redesign of reducing uncertainties and risks.

Traditional phased-and-gated processes address risk by spelling out every step of the process with prescribed activities: who is responsible, what deliverables should look like, and how decisions are made. The idea is to make sure nothing is missed; it’s a means of reducing the risk of failure and loss from poor project implementation and decision making. But this approach creates its own risks because it is slow and burdensome.

Being slow when the rest of the world is changing quickly from globalization, increased competition, and new technologies carries its own set of risks. You can lower profits if you miss opportunities or release outdated products. If you delay activities and decisions to specific points in the process, you run the risk of wasting resources on projects that should be killed.

As demonstrated above, it is difficult for an organization to act like a startup, but adaptable processes can help organizations be nimbler to changing market and technology changes.

Business Fit Framework – Software Tool to Manage a More Nimble Process

Do you need a software tool that helps you to manage a more nimble process, like ExPD? Consider using our business intelligence software tool, the Business Fit Framework®. The BFF works by enabling product teams to identify, evaluate and prioritize the most significant sources of uncertainty and risk associated with a product idea. It employs a variety of behavioral economics approaches to root out uncertainties and risks, including a risk framework, reference class forecasting, and nudges. Contact Mary Drotar [email protected] or 708.829.7470.

[i] The University of Chicago: Booth Women Connect Conference, October 23, 2015. http://www.chicagobooth.edu/faculty/directory/d/waverly-deutsch
[ii] Steve Blank, Post: Why Companies are Not Startups, March 4, 2014. http://steveblank.com/2014/03/04/why-companies-are-not-startups/
[iii] http://www.exploratorypd.com