Why the fast not the big dominate the future

Source: FutureShapers

Author: Nate Nasralla

The shared concern of 78 different innovation teams.

I spent the last three months meeting with 78 different Fortune 500 innovation teams (yes, lots of Zoom calls). These innovators came from dozens of regions and industries, yet they all revealed one shared concern. “How do we make a case for engaging with startups to our corporate leadership?”

Here’s what’s unsettling about that question. All of these meetings were held with open innovation and venture teams — those who literally have “engage startups” written into their job descriptions. What’s more, the case for innovation through startup engagement has never been stronger. 

Coronavirus has reshaped supply chains, consumer behavior, and the global economy in a matter of months. As Ralph Waldo Emerson once said, “In skating over thin ice, our safety is in our speed,” so innovators are being pressed on both sides as they’re forced to deliver faster and faster results with thinning resources. 

That’s a near-impossible job description, but it’s the very job embraced by every startup founder in history. 

The next question to ask, then, is what’s the source of the disconnect? 

Why it’s better to be fast than big.

Optimisation has been the corporate’s mantra of the century. When fractional improvement is applied across the scale of the enterprise, it yields results and rewards shareholders. This has led to corporates competing as if they’re in a strong-man contest. Believing size, mass, and power are what it takes to compete on the global stage, they’ve squeezed efficiency from every process, and they’ve forced their core products into wider and wider distribution.

But what happens when you place a strong man on the tennis court? 

Tennis is a game of agility. The most thrilling part of any match is when the athletes collapse in toward the net. As the speed of their volley increases, their time to react decreases, and the victor is the one who can react the fastest without compromising their strategy. 

Can you imagine the world’s strongest man stepping onto the court at Wimbledon? Well, you don’t have to imagine. It’s happening all around us. Business and product cycles are accelerating at dizzying rates, forcing executives to predict, plan, and react within a moment’s notice – the startup’s game. 

If they can’t, they’re eliminated, as evidenced by the fact 50% of S&P 500 companies have disappeared in the last 20 years (with the lifespan of the S&P 500 shrinking from 67 to 15 years).

Speed is what separates startups from the enterprise. 

Speed is the essence of startups, and it’s the fundamental differentiator between them and the enterprise. There’s a certain swiftness knit into how they build and deliver their products. Startups have a finite amount of capital, or “runway,” as it’s called, so if they’re unable to reach their next milestone, get a product to liftoff, or generate enough revenue, they crash. That crash creates a mindset and level of speed that just doesn’t exist inside large corporates. 

Yet, that speed is exactly what innovators need and seek to maximize because all breakthrough innovation both requires and results in speed. For example, every major communication innovation, from the invention of the printing press to the rise of social media, has contributed to spreading more information, faster. The same applies to transportation, retail, and so on. 

But if small startups move fast, can’t their larger corporate counterparts move faster? 

The answer lies in the size of the impending “crash.” Scaled enterprises need to protect themselves. Unchecked risk and bad decision making can result in catastrophic consequences across a far larger number of customers, employees, and the broader economy. But the irony is the corporate who can’t move fast enough will be left behind and rendered irrelevant — the greatest risk of all.

So then, how do you balance both? 

Becoming both big and fast. 

Genuine, breakthrough innovation is marked by addressing unsolved problems, defining new markets, and navigating unfamiliar contexts. It has little, if anything, to do with optimising, cost cutting, or releasing new product features within well-established markets (the strong man contest). 

Therefore, the number one job to be done by every corporate innovator is learning as much as possible, as fast as possible, for the lowest cost possible, inside new and uncertain markets.

By engaging startups and harnessing their approach to rapid, low-cost learning, innovators can build a roadmap into new markets one small step — or one “pivot” — at a time. By partnering with startups and allowing cheap failure to correct their course, corporate innovators discover new markets, release products that fit that market, and begin the process of scaling far sooner and more economically than competitors. 

Practically speaking, this looks like structuring a series of small bets — investments, pilots, and commercial agreements — with startups who can change course quickly and inexpensively, adapting according to customer feedback (especially during times of a global crisis). 

The reality is speed can be harmful if you’re headed in the wrong direction. By building, buying, and partnering with startups — developing a startup engagement portfolio — corporates can identify early successes before putting their full weight in support of them. 

And once they do, this combination of mass (the corporate) and velocity – speed in a given direction – (the startup) is deadly to competition, and the recipe for dominating future markets. Finally, corporates who embrace the startup’s speed to stay ahead of the next great innovation unlock: 

  • Higher Market Share — Companies that identify new markets and maximise speed-to-scale are able to create brand and customer loyalty, develop barriers to entry, and grab share before the market declines into a commodity. Think ride-sharing ten years ago.
  • Lower Costs — Rapid learning through startup engagement minimises waste, insulates the corporate from expensive failure, and focuses financial and operating resources on truly value-added activities.
  • Increased Stability — As the current global crisis has revealed, corporates who are able to diversify their core business with new revenues, products, and markets are most likely to thrive in a variety of economic conditions. 

%d bloggers like this: