The failure of household-name businesses–like Borders, Kodak and Blockbuster–due to a lack of entrepreneurialism has, rightly, spurred a lot of talk about what big companies can learn from startups. But while there’s a lot to be said for shunning silos and management tiers that inhibit innovation, there’s also plenty that even the most cutting-edge startup founders can learn from the acumen of old-school Fortune 500 CEOs:
Limit the scope of your greatness. It’s tempting to develop your new company as the end-all, be-all solution to a whole series of related consumer or enterprise needs, but the most successful companies are laser-focused on being the best at one very particular thing. Think about Walmart being the best at always offering rock-bottom prices or Apple being the go-to company for beautifully designed devices. This singular point of differentiation is the way the most successful companies attain a dominant market position and earn above-market profits. Rather than trying to be everything to everyone, Google rose to prominence in its startup days by being the best at search and Facebook achieved dominance by being the best at connecting real-life friends online. These market-leading companies have had the clarity to identify their strengths and then structure their organizations to support that, without compromise or distraction. Small business leaders should be thinking hard about pinpointing exactly where they want to be superior–hardest of all, it also means getting over your fear of missing out and admitting that everything else may not be your strong suit.
Don’t just plan–prepare–to make money. Only the leaders of fledgling businesses can get away with measuring their growth in traffic, volume of free downloads or venture capital–no shareholder would buy those metrics. An effective business model is built into every company reporting million- or billon-dollar revenues. However, startup founders regularly struggle with deciding how to make money, which leaves them unprepared when the time comes to do so. This hesitation can be attributed to the prevalent (and arguably reasonable) ethos in digital that crafting an attractive user experience initially trumps asking users for cash or blasting them with advertising. I’m the last person to suggest sacrificing user experience, but every new business does need a revenue generation strategy upfront, in order to be ready to scale accordingly. Whether it’s a particularly lucrative advertising model like Mint‘s, fees on a per-action basis like Airbnb‘s, monthly charges like The New York Times‘, or a viral freemium model like Dropbox uses, a cohesive plan for revenue generation must be identified and incorporated into business development early on.
Be careful with putting people on a pedestal. Startups often become synonymous with their charismatic founders or principal developers or designers, which causes understandable upheaval when they leave (just ask Foursquare, LivingSocial or Pinterest). But the strongest companies are larger than their people; they are not as fallible as any individual. There should never be a situation where if a single person fails or disappears, the show cannot go on–a lesson learned the hard way by companies like Apple, which famously struggled after Steve Jobs left in 1985 but was better prepared in 2011. Startups should build a company culture, training programs and processes that instill the best qualities of its leaders into all of its employees. The mark of a great organization is when it can survive and thrive beyond the loss of a key team member.
Bureaucracy isn’t a four-letter word. The absence of bureaucracy is one of the most significant advantages of startups (and skunkworks projects), allowing them to produce breakthrough products in less time than it can take an advertiser to decide on a new tagline. But bureaucracy is also synonymous with process, and process can be a good thing. To a point, systems of checks and balances that guide progress actually increase efficiency by preventing poor communication, errant management, and the aforementioned over-reliance on any single individual–some might say that Groupon could have benefited from a bit more of the B-word. Bureaucracy, at its foundation, maintains organization. But too many startups avoid the entire concept so wholeheartedly that they suffer the consequences, like individuals wasting precious time on redundant or incompatible efforts.
Avoid coasting on enthusiasm. Leaders of startups tend to eschew measures that systemize employee accountability and performance incentives because they think it’s too bureaucratic. Instead, they rely on the enthusiasm of their new hires to power growth, often stoked by trivial things like office perks. The problem is enthusiasm can burn out from something as trivial and commonplace as a bad day. Large companies, on the other hand, are very good at focusing on what individual team members should be accomplishing, by setting up clear goals and constructs like separate P&Ls, performance-review programs and well-defined bonus structures. Startup founders would be smart to incorporate this type of thinking into their management ethos, too.
All of this advice aside, startups will not be successful unless they stick to the bedrock tenet of business–the essence of what companies do is make people happy by providing solutions to their problems. A business is only successful when consumers find its solution worth more than the price tag or the time and effort required to solve it by themselves. Innovative, free-thinking leaders of startups tend to forget this fact.
One trap is to focus too broadly on solving lofty problems that will change the world, rather than on delighting and satisfying individuals in their everyday lives. Another is to avoid the really tough problems and build yet another me-too social network or video-sharing site. Market leadership is built and sustained only when customers are content enough with a business’ products or services that they don’t want to go elsewhere to have their needs met. No company, big or small, one century or one year old, will succeed if it doesn’t make users and customers happy.
Aaron Shapiro is the CEO of Huge, a global digital agency based in Brooklyn, and author of Users Not Customers. Prior to Huge, he was the founder and CEO of Silverpop, a leading email marketing company, and spent more than a decade as a technology entrepreneur, venture capitalist and management consultant.
[Image: Flickr user Dincordero]