The rapidly changing world requires corporations to re-think all aspects of their organizations. They need to renew their strategies, operations and the way they organize their resources. Some of the most successful companies have realized startups are a good tool for fostering organizational renewal. They understand that in today’s world, they cannot only rely on their in-house resources.
By building relationships within a broader ecosystem of organizations, corporations can mobilize relevant expertise and talent to address unexpected challenges whenever they arise. Bill Joy, the co-founder and Chief Scientist of Sun Microsystems once said:
“no matter how smart the people are within your organization, you should always remember that there are a lot more smart people outside your organization”.
Corporations are increasingly confronted with new and unexpected situations. These situations often go beyond the textbooks and operating manuals. It requires leaders to improvise on the spot and to come up with new approaches. They need to develop new knowledge and skills about what works and what doesn’t work in these new situations. This is where startups come handy.
Why startups are the best teachers for corporations
Startups have an agile mindset that they use for business and product development. When startups launch and grow their business, they face an environment of extreme uncertainty and change. But with their agile company culture, they are able to embrace and adapt to market changes. They can turn uncertainty into opportunity, and flourish when other businesses fail. By collaborating with startups, corporations can also learn and adopt this way of working.
Corporations can also develop and learn skills needed in disruptive environments. While the old skills might not become obsolete, but everyone needs to find new ways of using the old skills in the new environments. That is why it is important to include the human resources departments in the collaboration. Then the collaboration will work as a way of building both the company and its employees.
There are a variety of benefits how working with startups can make your employees better and prepared for the rapidly changing world. Here are 7 of them. These can help your organization prepare for disruption and organizational renewal.
1.Better change agents
In order to keep up with the volatile business environment, corporations are trying different ways to foster new innovations. One way how they innovate internally is through the practice of entrepreneurship.
This type of internal innovation requires employees that are called entrepreneurs, or also known as intrapreneurs. An intrapreneur is someone who works within a company. It is someone who takes risks as an effort to solve given problems and to transform innovative ideas into value. They are employees who have many similar attributes as entrepreneurs. A famous example of an intrapreneur is Ken Kutaragi. He was a junior Sony Employee, who spent hours tinkering with his daughters Nintendo to make it more powerful and user-friendly. What came from his work is one of the most recognizable brands in the world today, The Sony PlayStation.
Involve your intrapreneurs
Intrapreneurs have a mindset that helps to drive innovation. It also allows them to discover opportunities in the challenging and ever-changing business environment. Because intrapreneurs are excellent brainstormers and ideas-sharers, they are also the most likely individuals to reach out and engage their peers in problem-solving across the company. That said, they work within the organization as the agents of change. They are the most fundamental component of an innovative and growing company as they help the company to succeed and grow.
When collaborating with startups it is important to consider including also some people with these traits into the process. They are a great tool for further improving internal learning and fostering change. Through allowing them to collaborate with startups, these people can learn the skills needed in disruptive environments. They can learn how to navigate uncertainty and bring ideas forward. The intrapreneurs can be engaged in the collaboration as being mentors or advisors for the startups. And as mentioned earlier, intrapreneurs are great at engaging with their peers. This means that they can further spread the skills they learned while working with startups and be the agents of change.
2. Employees have better transversal skills
T-shape profiles, that describe people with deep knowledge of one topic, and a broad knowledge of other topics have been seen to be better drivers of innovation than I-shape profiles, which in turn illustrate people with highly versed abilities in a specific area of expertise.
When it comes to complex problems that are more difficult to solve, interdisciplinary teams provide the most value. This means that as the world is becoming more and more complex, T-shaped profiles are the way to pull through. The T-shaped skill sets must constantly be developed and broadened in terms of general knowledge. And at the same time, specialized knowledge needs more narrowing down. Being a specialist for one thing and a generalist for a few others gives a really powerful combination.
Startups are known for their agile teams that are both cross-functional and self-organizing. Typically, all members have some specific competencies as well as more general competencies. This allows them to deliver everything by themselves and work together efficiently. In agile teams, there is no room for general project managers.
When working with startups, employees are exposed to different areas of knowledge. For instance customer development, lean innovation methodologies or digitalization. This broadens their knowledge of other areas and contributes to them becoming a T-shape profile. This allows them to become more capable of responding creatively to unexpected situations in uncertain environments.
3. Employees become more aware of the external changes affecting the company
In corporations, it is easy to get stuck in day-to-day activities. As a consequence, big changes in technology and in the industry sometimes become ignored. This might then make it difficult for the company to respond to the changes in an effective way.
In order to stay competitive, companies need to anticipate the most significant technology trends that are shaping their business. And is essential for them to develop innovative ways how to use these technologies. They need to find ways to take advantage of them, both inside and outside the company. And it is important to remember that if it can be done, it will be done. And that if it is not your company, it will be someone else who uses these technologies to create competitive advantage.
Startups are good at navigating these changes. They are also excellent at detecting and unlocking emerging demand. Michael Dell, the founder and CEO of Dell explains that working with startups is a key strategy for building a more entrepreneurial and innovative corporate culture. Similarly, the Dutch multinational bank, Rabobank, presents that working with startups allows them to establish a culture of constant internal learning about future trends and technologies.
Employees know what is happening in the industry & technology, and know how to use it to the company’s benefit
By working with startups and by involving the entire company in the process, employees become more empowered to think about the implications that external change has on the company.
Examples of external change could be changes in government, technology, customer needs and the way how competitors do business. By involving employees in the process allows them to become more familiar with the trends and the opportunities they offer.
Let’s take Big Data as an example. Big data and analytics are hot growth areas, not only for IT organizations but for businesses across all industries. Today’s data can include social media posts, customer journey information, Internet of things (IoT) data, and more. When employees engage with big data startups, they become more familiar with the trend. They also become familiar with the various opportunities it offers for the company.
Through working with startups, employees learn what big data really is. It also makes them think how is big data going to affect their company in the future and how is it already affecting them. They will most likely consider the ways in which their company could also take advantage of the trend.
Startups help corporates create awareness of future trends and the potential of new technologies. Employees become more aware of the environment and the external changes that affect the company. They learn to understand the new challenges that lie ahead of them. As a result, they become more empowered to generate necessary internal innovations.
4. Better contact network among the areas that are potentially disruptive
Henry Chesbrough, the father of open innovation once stated: “external sources become necessary key players in the process of turning ideas into a business”. This points out that, in today’s ever-changing world, companies cannot rely only on their in-house resources. Instead, it is necessary to identify people outside the organization, who can assist in organizational renewal and support all innovation efforts.
The assumption that “most smart people in our field work for us” is no longer valid. Nowadays, companies should to think “not all smart people work for us, so we must find and tap into the knowledge and expertise of bright individuals outside of our company”.
Successful companies have realized that in order to renew their business, they must open their internal processes and interact with other players in the ecosystem. By doing this, they are able to identify new people who can assist them in organizational renewal and support all innovation efforts.
Working with startups is a great tool for interacting and identifying relevant expertise. By collaborating with startups, organizations are able to obtain a large network of entrepreneurs. Not only are the companies exposed to the expertise and skills of the entrepreneurs, but they also become exposed to the entrepreneur’s network of people. Meaning that companies become exposed to an ever larger pool of talent that can be a useful asset when driving internal innovation. The corporation can get access to relevant contacts of startups, venture capitalists, and associations. They can use this network to find the best external resources for the problem or opportunity they are exploring.
5. Better execution capabilities
Today’s business environment is volatile, uncertain, complex and ambiguous. The companies that have adapted quickly, acted with urgency, and continued to innovate are the ones that have been successful. Too often though, companies struggle with these factors. Why?
Well, running a large company is highly complex. Corporations often have strict structures and formal processes restricting fast execution. Ideas go through a long path of managers, boardrooms, and decision-makers. And as you can imagine, decisions tend to move slowly.
In contrast to corporations, startups are known for their execution capabilities. Fast execution is the “secret sauce” that differentiates a successful startup from a failed one. Startups deliberately choose a strategy that favors speed and small iterations over delayed perfection. This is the winning strategy, often spotted in every high-growth startup journey.
Many corporations do a great job at collecting new ideas from employees and other sources. But the difference to startups is that they move too slowly. They lack the ability to experiment, iterate and execute quickly. The good news is that even large companies can imitate the rhythm of startups.
By working with startups, corporations become exposed to the startup’s way of working & learn from them
Corporations can create an entrepreneurial mindset among their employees through exposing them to agile teams, lean approaches, and fresh thinking. This enables employees to identify and learn the required skills to execute faster.
By involving employees in the startup collaboration they are exposed to a more simplified process of decision making. The employees become to realize that speed of execution requires clarity of short term goals, building consensus in urgency, teamwork to execute actions and the willingness to change course if needed. By adopting these skills employees become to feel more empowered and willing to fully contribute to short term goals. They then begin to act with speed and they further communicate the sense of urgency to everyone in the organization.
6. Employees that think in a sharper way
Corporations sometimes fall into using vague expressions and abstract terms when they communicate with their stakeholders (employees, customers shareholders, and partners). They use long, complicated words, abbreviations and acronyms. They fill in sentences with words such as “value-add” or “incentivize”, creating a false sense of urgency. Unfortunately using this type of corporate jargon often leads to misconceptions as this type of language is difficult to understand.
These vague and abstract terms do not only prevent clarity but is also prevents trust. When fuzzy expressions or abstract language is used, listeners are more likely to believe that the speaker is lying. This is because abstract language evades facts and is sometimes intended to confuse. Or even worse, the speaker is trying to hide his or hers lack of knowledge.
Effective communication improves the organization’s ability to engage its’ employees and to achieve objectives
It also influences the effectiveness of change management, company culture, team effectiveness and productivity as well as the overall performance of the business. When communication is done right employees are more passionate about their jobs and have a better relationship with the company.
Startups have effective communication systems. because they have to. They realize that without well-functioning communication it is impossible to react to market dynamics, make quick decisions and delegate correctly. Startups develop fast and it is crucial that the people involved are aware of what is happening. It affects the success of the business as well as the spirit of the team.
Through working with startups corporations expose their employees to understanding new ways of communication. They begin to understand that it is more important to get the message right than getting the message out. Employees learn to avoid abstract terms and instead concentrate on clear communication. This further improves the overall performance of the company.
7. More spin-offs
When corporations and their employees are exposed to working with startups, they become more aware of what being an entrepreneur means. They learn and obtain skills relevant for developing and executing a business idea. And as a result, more employees start considering becoming entrepreneurs themselves.
These employees often want to partner with the corporation they used to work with since a great part of their network is there. This can result in the formation of a corporate spin-off. A spin-off is a new company that is formed from an existing corporation. They are typically founded by entrepreneurs who have already worked in the same company or industry.
Interestingly, studies show that these firms perform often better than others. They are more likely to survive, grow quickly, and earn larger profits. And as a result, they have recently become an important part of every successful entrepreneurship ecosystem.
Clayton Christensen who is the world’s foremost authority on disruptive innovation says that sometimes the culture of existing corporations is so strong that it come in the way of disruptive innovation. He suggests that setting up a spin-off from an organization is a good way to succeed in transformation. Spin-offs offer organizations the opportunity for outsourced innovation. In other cases, it can also make easier workforce restructuring, in which the employees are happy to explore different options.
By adapting to change and by renewing entire business, companies are able to stay competitive in the ever-changing and complex business environment. And in order to achieve this, companies need to focus on renewing their attitude, culture, and skills. Some companies have realized that a great tool for this is to collaborate with startups.
Those companies that choose to collaborate with startups learn how to embrace change. They learn how to be agile, and they learn how to make renewal part of their DNA. Through this, they are able to foster their internal culture and learning.
Through working with startups they learn to understand what’s going on in the volatile business environment. They gain an understanding of future trends and technologies, as well as learn to find new business models. Working with startups can create a culture of constant internal learning. Focusing on this type of impact is the only way how to prepare the organization for actual disruption. It prepares the corporation to disrupt its own business if needed before competitors or new players do.
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