Stop trying to act like startups — the real role models for established businesses are ex-startups

If successful startups don’t maintain their own behaviour as they become established and successful, why is anyone trying to encourage…

If successful startups don’t maintain their own behaviour as they become established and successful, why is anyone trying to encourage established business to behave like them?

by Mark Wilson, Founder Partner, Wilson Fletcher

Along with its sibling disruption, innovation is surely one of the defining words of our age. The principles encased in it have been important to everyone who was sitting back and ignoring how the dynamics of business were changing. Most long-established businesses had become ponderous and their cosy market positions were suddenly being disrupted by lean, fail-fast teenage upstarts with startups. To survive, let alone compete, they needed to become more innovative.

However, somehow, somewhere along the line, the imperative to be more innovative got bastardised into ‘act like a startup’ and everyone got swept up in it. Many digital agencies and consulting firms adopted it as their mantra and packaged up startup-like methodologies as processes they could sell in.

They’ve been giving out design thinking toolkits and innovation frameworks, taken the Board to a disruptive business techniques workshop and got the CEO wearing jeans. Organisations have been convinced that by using these tools, by following specific methods and following frameworks, they too can behave just like those silicon valley rocketships that go from idea to island ownership in months.

The reality is, however, a little more complicated. Startups (typically technology-centred new businesses) are themselves a product of innovation. They are fundamentally organisations set up to make an idea happen, often driven by a single person’s vision about a single thing, a big pot of money and no risk other than failure (and most do fail: something like one in twenty startups succeed with one in 1000 making it big — hardly success rates to aspire to). Oh, and they’re usually staffed by young teams who know they can just hop onto the next startup if this one doesn’t make it.

Established organisations are very different animals and have a lot more at stake, which means that they can’t just start acting like startups. What they can — and must — do is adopt new practices and shift their behaviour. The ‘act more like a startup’ imperative is the wrong emphasis, and not least because the good startups don’t stay startups for long.

What happens to startups if they become successful? They become secure and self-sustaining, they expand and grow, they become ‘real’ businesses, sometimes employing thousands of people on hundreds of floors in office buildings in multiple countries. Bit by bit, they stop behaving like the ‘startups’ they were and start behaving like mature digital-age businesses.

The really interesting, great role models for businesses aren’t startups, they’re these ex-startups. We call them Upstarts. They quickly shed many of their most startup-like behaviours, adapt some new behaviours for their increasingly established businesses, maintain a few key principles and philosophies and add an increasing dose of rigour to their thinking. Combined, this allows them to evolve and adapt their offer better and faster than many traditional peers.

Evolve and adapt: that’s the crux of the challenge for an established organisation. Successful innovation if you have an established business is rarely about developing radically new ideas; it’s about building on your strengths. In a recent interview, Lego’s CEO, Jorgen Vig Knudstorp, summed up their internal innovation approach nicely: “It’s about discovering what’s obviously Lego but has never been seen before.” It’s worth noting that he said this shortly after Lego became the world’s biggest toy manufacturer.

This goes some way to explaining why few well-known ex-startups have gone on to subsequent success with dramatically new offerings, because radical innovation or startup-like shifts in direction (ok, I’ll say it, pivots) became increasingly risky and commercially inappropriate as they became successful. The more customers they had, the more revenue they generated, and the more mouths they had to feed, the more they had to lose — just like those old-school peers.

Of course, the smart ones recognise this and accept it as part of becoming a ‘real’ business, typically using their cash mountains to acquire new products and services to offer their customers instead. Today’s Mark Zuckerberg is the smart CEO of an ex-startup: a big business, with some powerhouse lieutenants, that does what it needs to in order to deliver continued success. The new Facebook for Business can hardly be described as a startup-like innovation — it’s an evolutionary step, and many would say a defensive one at that. If there’s one thing startups should never be, it’s defensive.

So the question is: if successful startups don’t maintain their own behaviour as they become established and successful, why is anyone trying to encourage established business to behave like them? Why try to take a business with solid market foundations and make it more like one without? Clearly, we shouldn’t. Many established organisations are simply incompatible with startup behaviour.

You can’t simply introduce innovation to established organisations like it’s a new HR system.

The real message in the innovation agenda is ‘you need to listen to your customers constantly, pay close attention to what is going on around you, proactively look for new opportunities and rapidly adapt your business to explore and exploit them’.

You can’t simply introduce innovation to established organisations like it’s a new HR system. You can’t install an internal innovation team and expect them to make your entire organisation innovative, nor can you graft something onto the edges and hope for a halo effect. This behaviour needs to be learned and adopted, built on smaller steps and the progressive confidence that comes from forward momentum.

It’s time to own up here. I found myself reviewing a plan for a long-standing client the other day: a plan, ready to be implemented in the next few months, for setting them up a standalone innovation lab. An innovation lab that, separated from the pressures and innate behaviours of their core business, would help them generate a steady stream of new product ideas and give them a sustainable engine for innovation.

I realised that we were actually proposing something that sounded great, but that I simply didn’t believe will work. We were planning to help them run faster by growing them a new arm. What they need is a fitter heart and stronger legs.

The reality is that we can, and will, help them become a more successful digital-age business, but we won’t do it by trying to make them into something they’re not. They are never, ever, going to behave like a startup. Instead, we’ll focus on helping them become a much better version of what they are: an established, successful business with long-standing customers and healthy profits that most startups would kill to have. We’ll help them rethink what they need to, evolve where they should, and introduce new services where there are compelling opportunities to do so; but we’ll do it centrally, and we’ll do it carefully.

This is a business that’s decades old. It will take them time to learn new habits. They’ll absorb new techniques and practices rather than have them imposed. They’ll adapt positively and progressively and they’ll do it without breaking their existing business, something startups never have to consider. Startups have nothing to break, established organisations do. Ex-startups do too.

We’re only just seeing the first generation of ex-startups operate in the broader business context, and time will tell how well they maintain the competitive edge borne of their origins. However, based on what we’ve seen so far and a little faith in their leadership, I believe they provide a much better role model for how established organisations should behave than startups ever will.