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Six Lean Lessons For Corporate Startups

Egg Incubator

Big corporations want to build the next Facebook, Twitter, or Groupon as much as you, I, and the entrepreneur in a garage somewhere.

While corporations might have an advantage in resources and capital to do so better than anyone else, they do at the same time meet with challenges that independent startups don't.

Over the past years I've been fortunate enough to learn from corporate finance analysis, product launches, and early-stage M&A assessment on the one hand, and from founding and funding new startups on the other. And there is a pattern; the methods used by big corporations often turn counterproductive when launching new ventures.

Besides from knowing your customer development and lean startups basics, I share here some musings that you should consider if you want your corporation to innovate like a startup.

Rehabilitate from analysis paralysis

While a challenge in corporate business planning is that it often is comprised with mountains of information—in an early stage startup there usually is a minimal quantifiable track record.

Doing what they do best, corporations cram old information about existing products and markets to that of the startup. Executives and managers have founding teams develop detailed financial estimates and market analysis way too early.

Secondary data may be good for known and proven conditions, but not for unknown conditions, which most often is the case of new startups. The answer lies not with your thousand dollar Gartner report. Rather, it is time to un-MBA and get out of the building.

Learn like your kids would

With time grown-ups gradually stop learning. Kids, however, learn all the time. Kids experience their environment and make assumptions which are tested against reality, again and over again. For companies adopting new technologies in a fast pacing and quickly changing market the learning process is not much different.

Emerging entrepreneurial methods such as Lean Startup and Customer Development assume that startups are children, not smaller versions of mature companies. So, startups need their own methods and tools, which means it is time for even high-paid managers to get their hands dirty.

Separate the wheat from the chaff

In corporations new projects compete over attention and resources. When a startup have its project's performance compared to existing, competing initiatives within that corporation, it often falls short—because known products and markets are often deemed less risky and pay higher dividends in the short term.

Instead, a corporate venture should answer to its own key metrics and not to be evaluated against the corporation's. You'd consider to create distinct business or even corporate units that control their own processes, structures and cultures—ideas also known from ambidextrous organization design and disruptive innovation thinking.

Hire true entrepreneurs

Recently, I learned from a startup in residence at a global corporation that they're hiring 30 new people, before their product is in beta (its technology is not rocket science). At this stage, large investments in teams have little to do with customer traction and mechanic growth like this would put red numbers at the startup from the very beginning.

This same corporate startup was looking to hire experienced project managers with experience from, yes, big corporations. They were issuing a 10 % of the startup's total shares among the several co-founders.

What is wrong with this picture? Naturally, startups need entrepreneurs that are driven by a risk/award formula. Entrepreneurs need to work their own magic apart from existing policies, structures, and corporate requirements—from which they often flee.

Peel the onion

When innovating new products and services many enterprises would hire a consultancy to do the job. What happens then is that the consultants impress their future customer (the enterprise) with sexy ideas and features in order to win the project. The corporate (customer) gets hurried and negotiate the most possible features answering to their budget, and a rigorous roadmap is made.

The truth, however, is that most startups do not work out as planned. They pivot. Consequently, corporate ventures tend to build the wrong things and are stuck with features that customers don't want.

Whether or not hiring a consulting shop, the same lesson applies to new internal projects competing for resources within the enterprise. Either way, the more the merrier is usually counterproductive to a startup.

Beware unicorns and rainbows

In enabling corporate entrepreneurship I often most see companies talk about carrying out 20/80 pet project programmes ala Google, or pulling off idea contests investing in expensive idea management software. Such usual suspects are nice enough, but they do not account for the fact that startups are more about execution than delightful ideas.

Corporate venturing, corporate entrepreneurship, intrapreneurship, spin-outs - dear child has many names. At its best it is all about enabling entrepreneurship. With that comes everything that belongs motivation;  freedom, opportunities, lifestyle, visions, risk, and awards. Never kill that.

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