Legacy Companies Must Prioritise Innovation and Disruption Through Startups

An interview with Sandip Das, Ex-CEO Hutchison Essar Telecom, Ex-MD Jio, and Chairman Caret Innovation Labs.

Legacy and technology are often perceived as opposite forces. While many legacy companies have survived competition by leveraging their strong research and development expertise to innovate, these companies represent only a small clutch of the large establishments. On the contrary, young companies that have no legacy are disrupting the whole market due to their agility and forward thinking.

Factors That Prevent Legacy Companies to Innovate

• State of Inertia: Most legacy companies, even those with a significant pie of market share, have got into a state of inertia. They either refuse to acknowledge the need for change or don’t push themselves enough to change outside their periphery.
• Physical Fortress Illusion: The large companies believe that their well-established supply chain network and easy access to capital insulate them from competition. They feel that young and new companies will take years to build or penetrate such a fortress.
• Tropicalisation: Several Iegacy companies source their technology internationally and attune it to suit the Indian markets. They never consider innovation and invention as something they are capable of doing. Hence, they fail to do the fundamental innovation.

However, these drawbacks of legacy companies work in the favour of startups. Startups have an innovation mindset. They are quick to identify customer pain points and market gaps to find solutions or invent something from zero. They can also build a strong online network which can swiftly nullify the physical fortress of large establishments.

Legacy Companies Can Adopt a Startup Mindset

Legacy companies can learn a lot from the attitude and culture of startups.

• Question Rigid Adherence: Legacy companies get their strength from the principles of institutionalisation and repetition. They wait to launch a model till they perfect it. If the model fails, they will struggle to go back and do everything from scratch. Startups question everything they do and continue to change or build the model despite repeated failures.
• Seek Cooperation and Collaboration: Not all startups do innovation or product development. A few of the successful ones focus on the aggregation model by aggregating customer demand and connecting large companies to small companies. This allows them to give a menu-driven offering to customers.

Legacy companies should collaborate with startups and patronise them to make up for their lack of agility and accelerate the speed to market. This collaboration will also enable legacy companies to focus more on their core business instead of getting distracted from doing innovations inside the company, risking failures or facing questions from stakeholders.

This way, legacy companies can take advantage of innovations happening outside the company and introduce them into their system whenever necessary. This will also allow them to take advantage of their institutional strength and the whole juggernaut of their brand, movement, legacy, market share and the trust they build with the consumer.

Rethinking Supply Chain Resilience

Legacy companies were compelled to rethink their supply chain resilience during the COVID-19 pandemic. Their physicality was the biggest impediment to innovating and going online. On the other hand, startups didn’t have any such issues. Their ‘slim and trim’ or lean structure allowed them to introduce new supply chain models and innovations for legacy companies at lower costs.

Since then, legacy companies and startups have realised the benefit of feeding on each other. However, they must understand that semi-urban, semi-rural and rural populations in the bottom pyramid of supply chain infrastructure are still unserviced. So, both legacy companies and startups will need to collaborate more to increase the reach to the unserved population in a much shorter time than they get today.

Conclusion

Legacy companies and startups can’t work in silos. The ecosystem must come together to give them momentum. At the institutional and government level, there is a need to frame policies and provide grants and access to information that private companies can utilise to innovate. There is also a need for a traffic cop — an authoritative body to direct things in the right direction for collaboration between all stakeholders. Everyone can aggregate their individual and collective strengths, resources and complementary skill sets to align with a common ultimate purpose.

Caret Capital (Formerly known as Supply Chain Labs) is a Venture Capital fund that backs category building startups making India’s value chain efficient. Website link — www.caretcapital.in

Caret 360 is the CXO community initiated by Caret Capital to help tech startups and industry discover each other. Collectively, the mission is to make India’s value chain efficient.