Why startups need to think and act like high growth businesses

As recently as 10 years ago, startups were thought of just as smaller businesses. The basic day-to-day of what they did or at least aspired to do was more or less the same as a large business; it was just a question of scale. Someone good at marketing in a 10-person team needed the same skills and mindset as those working for a big brand. Maybe this was in part because the big business schools taught that marketing was marketing, and finance was finance?

Then along came a new wave of thinkers like Steve Blank, Eric Ries and Alex Osterwalder to change everything. The way businesses perceived themselves began to change, boundaries blurred and startup founders started to realise that they didn’t have to think like their competitors to get ahead of them.

But we’ve hit a problem. At a time when technologies and ways of working are converging to create a more nimble and entrepreneurial society, many of our most promising startups have forgotten the reason they exist. That is to grow. The reason they’ve forgotten how to do this is in part due to the well-meaning but unhelpful gaze of the media.

The changing expectations and ambitions of startups and corporates is a bit like the analogy of the hunter/farmer. Startups are more about hunting while corporations are more about farming.

For years the attention was mostly on the farmer. The City, big advertising agencies, FTSE 100 corporates – that is where the most promising graduates wanted to work – after all, it was where the money was. What made the likes of Lord Browne at BP impressive was the size of the organisation that they ran. But in the past two decades more and more attention has started being paid to the hunters as figures like Anita Roddick and James Dyson become the inspirational role models for the next generation.

In an age of below-trend GDP growth and high unemployment in advanced economies, these risk-taking startup entrepreneurs are today favourably contrasted with the so-called corporate types who are questioned as being much less the free market capitalists they often claim to be. Rather like the question that C.P. Snow asked in 1959 about the divide between Art and Science, are there two irreconcilable cultures here that are increasingly diverging in a world where convergence and collaboration is becoming more commonplace?

My answer is that while we need to celebrate and applaud startups, the new wave of innovative and disruptive thinking is now proving burdensome. Too much attention is now being paid on the ‘S’ of SMEs and not enough on the ‘M’ – the medium sized business, those that survive the startup hype and become scalable businesses. The way I like to explain this contrast is to quote Schramm’s Law: The single most important contributor to a nation’s economic growth is the number of startups that grow to a billion dollars in revenue within 20 years. So we should be talking less about startups and more about how these startups get big.

The works of Blank, Ries and Osterwalder (as well as that of Carl Schramm) should aid both sides to get past this divide and understand the role that both play in a nation’s prosperity. Startups should realise that they are not as successful as they think they are and that they need to plug into the farming culture that large corporations provide for their products to gain mass acceptance. Similarly, corporate types need to understand that startups are experiments and not to analyse them as if they were established companies.

In a world of change, new opportunities and new technology, the way society views, encourages and supports startups needs to focus on metrics like user engagement and not on the overall financials. Let them take risks and validate ideas in a way that would be too slow and too expensive for an in-house team.

Silicon Valley has created the position of Startup Liaison both as a way of identifying potential disruptive innovation but perhaps more importantly ensuring that product managers in large companies do not get distracted. These people, to borrow from Liam Neeson in the film Taken, have a very particular set of skills; skills they have acquired over a very long career. They may be former entrepreneurs who have startup DNA but more importantly the credibility to stare at a self-satisfied millennial and say, ‘You know, when you take someone’s money, you have a responsibility to that customer’.

Too many startups die as they never break out of the realm of being interesting but not essential. Similarly we think of DEC, Sun, BlackBerry, Nokia and Nortel as corporations that got sucker punched. Both sides need to work out a better way to talk to each other. Both sides are now losing out.

REPORT: The Fluid Society. Working without boundaries
Download the full report which takes you through the research methodology, commentary from our contributors and advice for businesses looking to work more effectively in changing times.
  FIVE TOP TIPS: Working without boundaries
Guidance and insights from our experts and contributors to help you and your employees use flexible working more effectively to aid your business.
INFOGRAPHIC: Why working together adds up
The key statistics explaining why shared services in the Public Sector have proved to be a success.
INFOGRAPHIC: Business without barriers
The advantages of flexible working beyond question. So what will it take to make the switch?