“It will always suck to work for large organizations, and the larger the organization, the more it will suck.” Paul Graham
Almost completely overlooked right now is the story of how many Grown Digital companies – media companies, telcos or FMCGs – are reinventing the ‘skunkworks‘ concept in the image of the Silicon Valley tech company. Skunkworks, or corporate ventures, have been around since Lockheed pioneered the concept way, way back. But with digital disrupting everything, corporations can no longer afford to simply launch new products. They need to change the way they conceive, build and evolve them as well.
Enter a new breed of business: part corporate, part disruptor. Henrik Werdelin, founder of PreHype (one of a handful of venture development firms successfully selling ‘Startup as a service’ into the FTSE 100) calls these creations ‘Fat Startups’. I get where he’s going with that but I’m not sure about the choice of words and Ben Horowitz used ‘Fat Startup‘ in another context. I prefer the less imaginative label: Corporate Startup.
Eric Reis and Steve Blank have both acknowledged that Lean Startup has gained far more traction inside corporations than it has in the world of orthodox startups. The latter don’t really need to read the book as lean thinking is a natural response to their circumstances. For large businesses, on the other hand, the change is very real and new behaviours must be learned.
Some say a ‘Corporate Startup’ is an oxy-moron. They believe ‘startups’ are the polar opposite of ‘corporations’ and stand against everything they represent. I suspect PG supports this point of view. Animosity towards ‘big company thinking’ and those from the corporate world prevails within the startup community. Most objectionable of all is that ‘Corporate Startups’ dare to exist at all. These are the dinosaurs that unicorns expect to disrupt. Surely they should face reality and let extinction in? Trying to keep up is pointless.
But, like dark matter, Corporate Startups exist everywhere and continue to proliferate. Hidden in plain sight.
How is Product Management different in a ‘Corporate Startup’?
Product Management inside a Corporate Startup is like being a double-agent. You’re expected to embody new thinking, innovative practices and challenge the status quo. At the same time, you need to be deferential to established hierarchies, share learnings and deliver instant results. You have to be mean and lean at the same time.
The characteristics of a ‘startup’ are commonly believed to be:
- Agility – ability to make decisions and act on them quickly or almost immediately.
- Speed – startups need to move at ‘digital speed’ in order to avoid being outpaced by the competition. This means releasing code frequently (weekly, often daily) and regularly changing tactics in response to market data
- Comfortable with the unknown – startups are trying to open up new markets, develop new products and acquire new customers. They accept that many fundamental questions about their business are ‘known unknowns.’
- Experimental mindset – startups are rooted in data-centric ways of working. They develop hypotheses about the ‘right’ way of doing things and use real market data to determine which routes are successful and abandon those that are not.
- Lack of bureaucracy – startups are young organisations so they lack formalised process, bureaucracy and red tape.
- Empowered individuals – in the absence of a formal organisational structure, individuals are empowered to (and responsible for) making decisions on all aspects of the product and the business.
- Clear objective(s) – startups have a clear definition of success, usually defined by 1 or 2 ‘Metrics that Matter’. They focus intensely on influencing the Metrics that Matter and remain flexible about the specifics of how they achieve them; as long as they work.
- Working within constraints – startups often begin with little financial resource and get used to moving forward within tight constraints, hence the term ‘bootstrapped.’ These constraints are often key drivers of innovative thinking.
Corporations want to copy this formula but most of the characteristics above are wholly absent from corporate culture. People and processes exist not to question but to carry out orders and maintain an established business model. Big businesses, observes Blank, became “so focussed on execution, they forgot how to innovate.”
New products, on the other hand, require new processes, structures and skillsets in order to function efficiently. Applying the wrong ones can be counter-productive or even fatal.
Viewed from the inside, many things are different about a Corporate Startup. Security is one thing. Large organisations are more reliable in terms of paying their employees and the additional benefits they provide. Outcomes are another. Acquisition is less of an option. Corporate Startups are about revenue and profit rather than equity.
Depending on the nature of your funding, a Corporate Startup might benefit from bigger budgets. Corporate Startups have often been accused of enjoying all the benefits but none of the necessary risk that a traditional startup operates within. But, in my experience, Corporate Startups won’t necessarily give you more runway in terms of commitment to the product.
Public companies have shareholders that demand revenue and growth each quarter and their appetite and patience for loss making new ventures is less than that of a VC who understands the risk and is hedging the loss across a wider portfolio. I’ve often been told ‘You’re not working at Facebook, we can’t afford to keep you alive for 7 years at a loss.” The main difference is that when a traditional startup fails, everyone is out of a job. In a corporation, the team can always be redeployed elsewhere.
Viewed from the outside, there is next to no difference at all. The market will judge a new product on the same terms, irrespective of the brand behind it. Established companies can’t market products into profit like they used to. In the end, a product no one wants is one that will fail.
What’s the point of a ‘Corporate Startup’?
Paul Graham defines a ‘startup’ as :
“A company designed to grow fast.”
Startups aren’t just ‘new’ companies. Startups are businesses capable of massive scale in a short period of time. As growth for most big businesses is flat they seethe with envy at the staggering growth of the new Unicorns (Snapchat, Uber or AirBnb) who have come from nowhere to become some of the most valuable (private) companies in the world.
The objective of a Corporate Startup, therefore, is the same as any startup. Who doesn’t want a business that grows fast and is capable of massive scale?
I was once asked to document the insights I had acquired in my time managing product in Corporate Startups. The paper I subsequently passed over was politely received but immediately shelved and comprehensively ignored. Most likely, what it recommended was too near the bone. Too much, too soon.
I recently unearthed it and decided to publish it more or less unedited. The next post will detail what I learnt inside the world of the Corporate Startup. The names have been changed to protect the guilty.