Posted by & filed under Corporations, Customers, General, Product development, Startups.

If you’ve dealt with both, you know that startups and big companies behave very differently. You can hear all sort of stories, from people moving from a corporate job to a startup, to entrepreneurs trying to deal with their corporate customers, to the same corporations trying to make business with startups.

What’s considered best practice in startups or in corporations is dramatically different… sometimes contradictory! And all those best practices make sense if you understand the context in which each one of them operates. In this post I try to make sense of the biggest differences between the two:

They are normally on a quest to solve some big problem from their customers. Something is good if it increases that impact — and turns it into a good business. They make quick prototypes or MVPs to show it to customers, to decide about changes.
To beat competition, they need to focus on productivity. They need to be efficient: get the best impact with the least resources. They work with budgets to understand how the company spends. They might calculate the Return on Investment to decide about changes.
Product DevelopmentDIALOGUE
They develop the minimum version of their product —focusing on the core — and show it to customers (a few of them, the early adopters) as soon as it’s possible — sometimes before. Based on customer feedback, they take the next steps.
Investing at the beginning of the product development project makes better products. They normally invest resources in market studies to understand demographics and big market niches. They develop requirements to coordinate big teams.
Everything is uncertain around them, the only way to find out and decide is to test. Data in consulted, but intuition and gut feeling play a big role in decision making. Decisions are kept small and validated with customers.
In big companies, there is much at stake. In-house experts exist and are consulted for decisions. Many people are involved in the decisions. Effects are measured and tracked, and the decision process is as rational as possible.
The most precious resource for startups is time. They have limited runway — the time until they run out of resources — and they have to be quick to figure out a good business model. The shorter the iteration the better: they focus on speed rather than fine tuning.
Predictability and control are seen as positive. Coordinating is difficult, because of the size of the company. Changes might impact many people, who might have their own agendas. It’s important to limit the uncertainty in decisions and changes, and because of that, they take a long time.
Way of workingGET-IT-DONE
Startups have small teams that are not very hierarchical. People tend to be a jack-of-all-trades with some specialisation. Everybody learns a bit about everything since there are no in-house experts. The way of doing things is mostly defined ad-hoc.
People and departments have clear roles and responsibilities. Most of the activities have clear processes that have been optimised. This creates clarity and uniformity in the quality, but can also create bureaucracy. Everyday tasks work well and are predictable.
Communication is mostly clear, short and simple — both inside and towards the outside. New ideas are shared with the outside as much and as quickly as possible, to get feedback. Communication to customers is focused and bold, to validate assumptions.
Communication is very carefully planned. Towards the outside, there is often a specialised department supervising it. Product information is normally kept secret, to keep competitors away. Internal communication is written with generalist terms so that it applies to all stakeholders, and sometimes has an internal political agenda.
“Fail fast” has become almost a mantra among entrepreneurs. They normally pivot their business model several times, so it’s good to test assumptions, and to have them fail as soon as possible. They take risks and learn from the experience. This makes them more likely to succeed at radical innovation.
There is so much at stake for them, that they can’t allow themselves to fail. Plans are made to minimise the chances of any mistake hitting the market. Employees have areas of expertise, in which they’re expected to have the right answers. Risk are detected and managed. This makes them good at incremental innovation, but generally not at radical innovation.

Of course, this doesn’t apply to all startups or to all corporations. Each company is different! But in our experience organising corporate accelerator programs with Nestholma, we have seen a lot of them behave like this.

What’s your experience? Leave us a comment below!

2 Responses to “7 differences between startups and corporations”

  1. Teresita

    As someone that worked on emerging business opportunities at the Corp level, even early business successes needed to scale-up and scale-out before any further consideration to continue innovation.

    • Daniel Collado Ruiz

      Thanks Teresita! Then I think that you agree with my point, isn’t it? In corporations, scaling (or continuing with) an innovation is a very analytical decision, which would typically involve more than one professional in the organisation.


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