Are Startups Wrong?

Why speed, agility, and the start-up mentality may not be all you need to succeed

Alan is an engineer at Porsche. A company known for making high-end cars, the envy of many aspiring motorists. But Alan wants to do something different. New. Revolutionary. Something that will transform Porsche from a luxury car manufacturer into a leading transportation player in Asia, the fastest growing market for the next 10 years. However Porsche has no expertise in designing motorbikes (you could buy this but I wouldn’t recommend putting an engine on it), can’t bring those people on board quickly enough, and management have no desire to invest in this new product. The market is taken by a small motorbike startup, and Alan ultimately leaves Porsche.

In some worlds, this would be marketed as a dramatic failure of the big enterprise; look how slow they are! They didn’t do anything and let some startup take a market! Porsche will surely fall over and we’ll all laugh at their Hubris now, right?

Most big firms are STILL HERE

This seems to be completely forgotten in the narrative built around modern business, that fetishizes the startup at the expense of everything else. The fact that, in the time that our hypothetical company might enter a new market with a new product, Porsche may have released new and updated versions of scores of products, earning billions in revenue, seems to be glossed over. We focus on the big failures and big successes because the status quo is boring. “Big bank creates incrementally better product, increases revenue by 2%” is not going to move copy. But it’s important. It’s innovation. It’s creating something new, but incremental.

Big firms cannot move as fast as startups. This is obviously true. But is time to market and time to value, for new products, the be all and end all? The lack of legacy estate, processes, mindset, products, and even users makes it easy to bring new things to new people, where startups have to play as they have no existing users or products (if you do you’re not a startup), but incremental, and evolutionary innovation are where the enterprise thrives.

I don’t think that we can use a single yardstick to measure success, as different companies pursuing different kinds of innovation will inevitably require different metrics. Time to market is important if this is your first product, and you need to counteract your burn rate with some initial revenue, but if you already have users, then time to market may be less important than cost of production, and its impact on ROI. (NB, big companies are definitely not forbidden from innovation in the top right quadrant, see: the iPod)

Startups are important, valuable, and have the power to change the world, but lets not forget the companies that already did.