A start-up OR a large company who has better chances of winning?

A start-up OR a large company who has better chances of winning?

Success in business is important for investors who invest their money in start-ups and even big companies.

Let us read about the dynamics of success

Why a Big Bazaar is finding itdifficult to beat a Flipkart despite having crores under their kitty.

It is noticed that big corporates in India as well as worldwide struggle against the agility of a startup, despite the cushion of huge coffers.

Examples

Small divisions under large companies like Oracle, Microsoft, Cisco OR in India’s case a Future Group or the Aditya Birla Group are losing out to young startups and often end up buying these startups by paying a huge fortune.

Microsoft this year acquired Touch Type a keyboard productivity application, which it could have as easily developed in-house.

Cisco acquired Jasper Technologies, a cloud based IoT platform, for over USD 1.4 billion.

In India, Future Group (which also runs Futurebazaar.com) was in talks to buy Jabong.

It lost out the race to Flipkart, which closed a cash deal for about USD 70 million, and even wiredthe money within three days.

Aditya Birla Group is trying to compete with fashion e-tailing startups through its brand Abof.

Despite pumping in millions to fund huge salaries and attract talent from startups themselves, the corporate giantis losing out to young ventures.

Here are 8 reasons which may explain this trend:

1. Processes

Startups move at an unprecedented agility. From designing a new logo, to launching a new product, startups are able to bypass the serpentine loops of permissions and processes which keep a large structure in place.

The same processes which ensure stability of a large organization at times impede its growth too.

The processes become an albatross for a big corporate which ultimately blocks innovation, making it die a slow death.

2. Talent/Marketing/Travel/Admin costs

Startups are able to hire at high salaries, post large funding rounds.

Large corporates can compete with startups for the same talent, but they chose not to as they have to see the parity of the incoming talent withexisting employees and then offer remuneration

This impedes attractiveness of bright highly qualified (e.g.: IIT/IIM) and experienced people to join a big company.

A large company will blow up millions on marketing and travel budgets but invest little in breaking these structures which can divert the same cash to qualified and experienced people.

A startup moves on minimal travel, marketing and administration budgets (even to the point of having minimal office furniture etc.)

This makes its cash free to be invested to hire bright people.

On the flip side, a startup has to also manage perceptions of job stability which a

Large company does not have to bother about.

3. Innovation mindset

A startup mindset gives complete freedom to its employees to make mistakes, even blow up cash.

Everything is fluid — from structures to processes and controls.

This creates a fertile ground for innovation.

A large corporate devoid of an innovation mindset can impede innovation and swift execution because of multiple layers of approvals and bureaucracy.

Tech giants such as Google and Intuit have understood this challenge and thus emphasize on the power of small team’s independent enough to make decisions.

4. Partnerships

Startups enjoy working with startups due to cultural similarities.

The advantage which large companies enjoyed of having piles of cash has been neutralized by the influx of venture capital (VC) funds.

Thus, startups are able to forge critical partnerships fast.

A dream project such as an app or a new product can be launched by a small team of even 3 people in a startup.

Some start-ups follow a practice whereby cash spent during launch on simple stuff such as making standees, marketing collaterals, and foodeven sundry payments is immediately transferred to employee bank accounts.

Startups don’t wait for the monthly reimbursement and salary cycle such as in a large corporate.

5. Founder’s passion / Leadership style

This is the most critical success factor.

Often in large corporates, an employee works for an unknown name or face.

The founder, owner or even the CEO of a large corporates rarely takes time out to meet the junior most employees or simply conduct monthly town halls across location — online or offline.

The employee rarely gets a chance to meet the CEO leave alone the company’s founder.

The employee is left clueless about the strategy that the company wants to take. He or she is given directions by other employees who are several levels down.

The message and the founder’s passion, even if it exists at the top gets diluted or absent at the lowest levels.

The foot soldiers in such corporates fight a mindless war without a goal or direction given by its general.

A soldier fighting a war for a monthly salary cheque hardly stands to win the war.

Now in case of start-ups

The founder/s makes sure to infuse employees with energy daily or in weekly doses.

This keeps the morale high.

There are ample examples of it with InMobi, IndiaMart, Shopclues, PepperFry all having gone through tough times.

Google a giant with over 55,000 people has a monthly town-hall with its founders, the CEO and all employees, to talk on the company’s direction.

6. Pivoting in disruption

Small startups are able to respond to changes better than a large corporate just like an ant is more nimble than a dinosaur and the fact is that ants have out lived dinosaurs.

While a big corporate may take weeks and months to shut down a unit and start a new one, the young startup can do it within a day.

As the market dynamics change, a small division inside a large company will move slower on any given day than a large unit inside a big startup (with less than 100 people).

One97 was able to evolve into Paytm whereas telecom value added services divisions of some large companies died a natural death, after TRAI’s spam regulations.

7. Dealing with failure

While big corporates dread failures, young startups encourage them.

The yearly increment of an employee in a large company can often be dependent upon sales and numbers rather than the innovation he/she might have brought.

A wrong business decision, project, or failed market entry is rarely tolerated by a large company.

There could be leadership changes, more with a view to cover the wounds from a wrong decision.

Young ventures have the agility to cut an infected limb even if it’s painful, than simply dressing it up.

In young ventures, the failed are often promoted to newer important responsibilities.

8. The employee’s desk

An average Indian employee in a large company wastes about 1 hour in a commute working in a big city such as a Mumbai, New Delhi, or a Bangalore.

That’s about a day wasted per month in just commute.

Top it with the energy and productivity loss when an employee arrives at his desk depleted of energy braving the traffic, and the loss to a company’s bottom-line is humongous.

Startups have evolved a culture of work from anywhere without the need for attendance roll-calling.

The concept of co-working spaces and offices near places to live make them agile.

Large companies such as IBM have realized it early on. It encourages its staff both in India and the US to work on projects from home, as long as deliverables are met.

This often makes an employee more productive.

Disclaimer:

Flipkart and Big Bazaar are just nomenclatures for a new age dot com and a brick-and-mortar old company.

Startups here mean young ventures with small teams (less than 100 people) and/orthose which are between 0 to 7 years of age

This is an opinion piece. Certain views expressed are personal.

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